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
As the 2023 proxy season draws to a close, the number of ESG-related shareholder proposals filed at U.S. public companies is on track to surpass the previous record set in 2022, according to a report from the Sustainable Investment Institute (SII). The number of climate change-focused proposals continued to grow, accounting for 23% of all ESG-related proposals filed. These proposals primarily focused on pushing companies to disclose their greenhouse gas (GHG) emissions and set net-zero GHG targets. The next largest category of proposals focused on corporate political activity and lobbying disclosures.
Despite the increase in their number, average support for ESG-related proposals fell year-over-year in 2023 to just 21.5%. Some attribute this decline to the rise of the anti-ESG movement. However, anti-ESG proposals have not fared any better this year, with approximately 3% of shareholders supporting these resolutions on average. BlackRock announced ahead of last year’s proxy season that they planned to support fewer ESG proposals because many were too prescriptive and constraining, particularly with respect to climate issues. Analyzing 100 different ESG resolutions, Morningstar found that BlackRock actually supported a majority of these proposals. However, Morningstar cautioned that the Big Three passive asset managers – BlackRock, State Street, and Vanguard – do not vote uniformly on ESG proposals and should not be seen as a monolith.
In The Weeds
While many companies disclose ESG information with their investors in mind, large companies are also starting to monitor and assess the ESG performance of their key suppliers and business partners. A recent report from EcoVadis, a leading sustainability ratings provider, found that a growing focus on supply chain due diligence is driving more companies than ever to seek assessments on their platform. The EcoVadis platform allows companies to report not only their own ESG data, but also to request ESG data from key suppliers and business partners. EcoVadis found that more companies were working with their suppliers to improve their ratings and disclosures, as evidenced by the significant improvements in the “Sustainable Procurement” scoring category across all companies.
The Healthcare View
Promoting access to healthcare in underserved regions and communities is often a key scoring category that ESG ratings firms use to evaluate healthcare companies. Many healthcare companies address this criteria by donating products and services as part of their corporate philanthropy programs. For example, Organon, a women’s health focused pharmaceutical company that recently spun out of Merck, described in their latest ESG report how they donated essential medicines to Haiti as part of disaster relief efforts after an earthquake in August 2021.
In June, Organon announced a “first-of-its-kind collaboration” to take the company’s access to healthcare program even further. Organon signed an agreement with the Development Bank of Latin America (CAF) to finance programs focused on improving the health and autonomy of women and girls in Latin America and the Caribbean. Organon states that health-focused social impact investments can mobilize capital “towards initiatives that might not otherwise receive adequate support,” such as services related to sexual and reproductive health. Both Organon and CAF hope that such investments will not only help improve women’s health in Latin America, but also ultimately contribute to economic development in the region.
Last week, the SEC disclosed that it will consider finalizing its climate-related disclosure proposal in the Fall. The proposal was initially floated in March 2022 but was delayed as a result of pushback from companies and investors – nearly 15,000 comment letters were submitted to the SEC about the rule. It remains to be seen whether the commission will soften its proposal, particularly with respect to Scope 3 GHG emissions.
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Authored by: Patrick Smith, ESG, Gilmartin Group