Gilmartin ESG Newsletter | August 31, 2023

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Welcome to the latest edition of Gilmartin Group’s ESG newsletter. With a special focus on the healthcare sector, this newsletter sheds light on the latest trends in the rapidly evolving ESG space, covering developments with companies, investors, regulators, and policymakers.

In The Spotlight

BlackRock and Vanguard recently published their investment stewardship reports for the 2023 proxy season, which revealed that both asset managers supported far fewer ESG-related shareholder proposals compared to last year. BlackRock said it supported approximately 7% of these proposals, while Vanguard only supported 2%.

Rather than backing away from their ESG principles, BlackRock and Vanguard maintain that their approach to stewardship on ESG issues has remained consistent over time. Both firms attributed their lower level of support this year to an increase in the volume of ESG proposals, most of which they determined were too prescriptive or redundant.

For example, 65% of the proposals that BlackRock voted against were rejected because they made requests that the company had already fulfilled. While BlackRock voted against over 200 climate-related proposals, they noted that they have observed “steady improvements” in climate-related reporting by relevant companies since 2021.

The Healthcare View

Although the Inflation Reduction Act (IRA) is known primarily for its clean energy and climate provisions, a separate piece of the law enabled Medicare to negotiate the prices of prescription drugs.

One year after the law’s passage, the Biden Administration selected the first ten drugs that will be subject to price negotiation. These include:

  • Eliquis (Bristol-Myers Squibb and Pfizer)
  • Enbrel (Amgen)
  • Entresto (Novartis)
  • Farxiga (AstraZeneca)
  • Fiasp and NovoLog (Novo Nordisk)
  • Imbruvica (Johnson & Johnson and AbbVie)
  • Januvia (Merck & Co.)
  • Jardiance (Eli Lilly and Boehringer Ingelheim)
  • Stelara (Johnson & Johnson)
  • Xarelto (Johnson & Johnson)

The recent announcement may not lower the prices of these drugs by much – the Wall Street Journal noted that pharmaceutical companies already offer discounts for many of these drugs and that a number are about to lose their patent protections. According to Raymond James, the IRA’s overall impact on the pharmaceutical industry is expected to be minimal.

Despite the potentially limited effects of the IRA, drugmakers should expect stakeholders across the political spectrum to continue to scrutinize drug prices. We recommend that biotech and pharma companies familiarize themselves with SASB’s industry-specific guidance on the affordability and pricing of medicines, as well as the Biopharma Sustainability Roundtable’s recommended disclosure metrics on this issue.

In The Weeds

The Science Based Targets initiative (SBTi) announced that it validated greenhouse gas emissions (GHG) reduction targets for over 1,000 companies and financial institutions in 2022. The 2022 total nearly doubled the previous year and exceeded the total of the last seven years combined.  

Interestingly, small and medium-sized enterprises (SMEs) drove the SBTi’s growth last year, with SMEs representing 58% of all organizations that set targets. Although the SBTi is the gold standard for GHG reduction initiatives and the organization sets a high bar for companies, the uptake from SMEs shows that SBTi verification is attainable for companies of any size.

A Note on ESG Data

MSCI, one of the most prominent ESG ratings and data providers, announced it has partnered with Google Cloud to incorporate AI capabilities in its portfolio and risk management solutions. Specifically, MSCI and Google Cloud will work together to develop AI tools for investors to better measure and assess climate-related data.

MSCI has already developed a model to estimate carbon emissions from individual companies, and the partnership with Google Cloud may make these estimates more accurate and insightful.  

To learn more about how Gilmartin strategically partners with our clients, please contact our team today.

Authored by: Patrick Smith, ESG, Gilmartin Group & Tamsin Stringer, ESG, Gilmartin Group

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