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
Although the SEC has delayed its climate disclosure rule amid legal challenges, other climate disclosure regulations are positioned to be implemented at the state and federal level in the coming years.
Last year, the California legislature passed two bills that aim to set greenhouse gas (GHG) emissions disclosure requirements for thousands of companies that conduct business in the state. Governor Gavin Newsom has since proposed amendments to this legislation, which would postpone implementation by two years to give the California Air Resources Board (CARB) more time in creating the rules. Across the country, Illinois and New York are following suit with proposed bills that would require certain businesses to disclose their Scope 1, 2, and 3 GHG emissions.
As part of the Biden-Harris Administration’s sustainability plan, the Federal Supplier Climate Risks and Resilience Rule, set to be finalized in 2024, will require major US government contractors to disclose their GHG emissions and climate-related financial risks. Suppliers with $7.5 to $50 million in federal contracts must report their Scope 1 and 2 emissions, while those with contracts exceeding $50 million must also disclose their Scope 3 emissions and set science-based reduction targets.
Despite the SEC’s indefinite delay, this wave of new regulations is set to impact thousands of additional companies under mandatory disclosure requirements.
A Note on ESG Investing
Earlier this month, investment management company Fidelity International unveiled an updated sustainable investing framework in response to changing client preferences and regulatory requirements in the ESG sector.
Fidelity International’s revised framework categorizes funds into three tiers based on their degree of ESG integration: ESG Unconstrained (funds with firmwide exclusions of certain sectors), ESG Tilt (funds promoting environmental and social characteristics), and ESG Target (funds with ESG or sustainability as a key objective).
The framework is more aligned with new regulatory requirements for asset managers, including the EU’s Sustainable Finance Disclosure Regulation (SFDR) transparency rules, the European Securities and Markets Authority’s (ESMA) guidelines on ESG fund naming, and the UK Financial Conduct Authority’s (FCA) Sustainability Disclosure Requirements (SDR) aimed at enhancing sustainability-related disclosures and combating greenwashing.
Jenn-Hui Tan, Chief Sustainability Officer at Fidelity International, emphasized the firm’s commitment to sustainability integration:
“The integration of sustainability into investment research and portfolio construction is part of our fundamental process to identify the drivers of long-term value creation. Our revised framework aims to facilitate the creation and maintenance of a consistent, transparent, and practical range of investment capabilities that meet evolving client and regulatory needs.”
The Healthcare View
Hospitals are beginning to phase out major pollutants in patient care, according to a recent report by Fierce Healthcare.
The healthcare industry is a substantial contributor to GHG emissions in the US, with common medical substances like anesthetic gases and inhalers being significant sources of pollution. To address this, a collaborative led by the Institute for Healthcare Improvement (IHI) has been working with hospitals and municipal health departments to test and implement decarbonization initiatives. This program brings together sustainability professionals, clinicians, and healthcare leaders to develop and implement effective strategies for reducing the environmental impact of healthcare operations.
The decarbonization projects include reductions in the purchase of anesthetic gas, decommissioning central nitrous oxide systems, eliminating desflurane from operating rooms, and reducing the use of high-emission metered-dose inhalers in favor of alternatives. The IHI collaborative approach underscores the growing trend of hospitals increasingly focusing on climate-related issues.
In The Weeds
This month, the Global Reporting Initiative (GRI) launched GRI-ESRS, a new service that helps companies better align their GRI-based reporting with the European Sustainability Reporting Standards (ESRS).
Through this offering, GRI will review a reporting company’s content index, providing feedback on ESRS linkages, areas of alignment and non-alignment, and suggestions for structuring the ESRS sustainability statement. GRI will also identify ESRS data points without corresponding GRI standard disclosures, facilitating a seamless transition to ESRS reporting under the EU’s Corporate Sustainability Reporting Directive (CSRD).
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