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
Environmental media group Trellis recently examined what the healthcare sector must do to achieve long term success in sustainability, as part of their final article in a series focused on sustainability and decarbonization practices in the health care industry.
Trellis emphasizes that while the adoption of ESG strategies has led to improved patient care and better organizational reputation for some companies, a “more comprehensive approach to sustainability is needed for the sector to become truly climate-conscious.” Healthcare companies need evaluate how well they are meeting sustainability targets and take concrete steps to improve.
In the wake of Hurricanes Helene and Milton this fall, healthcare facilities must be prepared to withstand extreme weather events with climate-resilient design and strategies, by increasing critical supplies and implementing backup power systems to protect product and ensure continuous care. At the same time, there needs to be a focus on visible decarbonization efforts, as U.S. healthcare facilities consume vast amounts of energy due to their 24/7 operations and the use of energy intensive medical equipment. GHG inventory efforts are gaining momentum, with MassHealth, Massachusetts’ Medicaid and CHIP program, now requiring a majority of their acute care hospitals to track and report their Scope 1 and 2 emissions, but tangible reductions are needed to stay on track with limiting global temperature increases to 1.5 degrees.
The article concludes by highlighting the need for decisive leadership within the healthcare sector, from participating in broader sustainability programs at national or global levels to working together with peers to share best practices.
The Healthcare View
Last month, California Governor Gavin Newsom signed the Toxic Free Medical Devices Act into law, placing a ban on certain IV bags and tubes in health care.
The new law, which passed in the California Senate and Assembly unanimously, states that by 2030, IV supplies in the state can no longer contain Di(2-ethylhexyl)phthalate (DEHP), a chemical used to soften polyvinyl chloride (PVC). DEHP is a phthalate known to cause cancer.
Healthcare companies are already transitioning to safer alternatives such as polyolefins, made from either polypropylene or polyethylene. B. Braun, a major IV bag supplier, phased out DEHP from their IV several years ago. Stephanie Pitts, B. Braun’s vice president of strategic programs innovation, explains “B. Braun has invested more than $1.2 billion over the last several years to establish a manufacturing infrastructure in the U.S. that can help healthcare systems comply and meet the demand for non-DEHP IV bags now that AB 2300 is signed into law and will take effect”. Kaiser Permanente’s health network based in Oakland, California also cut toxic IV bags out of their supply chain after developing environmental criteria for rating medical supplies by “eco-friendliness and lack of toxicity”.
California’s ban is expected to spark similar legislation across the United States, and aligns with global efforts, as evidenced by the European Union’s similar ban set for 2030. The legislation reemphasizes the growing need for companies to assess their supply chains and evaluate the safety and toxicity of the plastics they use.
A Note on ESG Regulations
Earlier this month, the Canadian Department of Finance announced a plan to advance sustainable investment guidelines and mandatory climate-related financial disclosures for large, federally incorporated private companies.
Canada’s sustainable investment guidelines will act as a voluntary framework for investors and stakeholders to accurately identify “green” and “transition” economic activities, enabling the flow of private capital investment into credible sustainability initiatives. The Canadian taxonomy will be created and overseen by an external, third-party organization.
In addition to sustainable investment guidelines, the government will mandate climate-related financial disclosures for large private companies. These disclosures will provide investors with insights into how these businesses assess and manage climate risks. The Canadian government plans to amend the Canada Business Corporations Act to make disclosures mandatory and will launch a “regulatory process to determine the substance of these disclosure requirements and the size of private federal corporations that would be subject to them.”
Small and medium-sized businesses are not included in the requirements, but will be encouraged to voluntarily disclose on climate risks.
In The Weeds
Last week, Morningstar Sustainalytics unveiled significant improvements to its EU Sustainable Finance Action Plan platform, designed to help investors and companies navigate the complex ESG regulatory environment in the EU.
The three key enhancements include:
- A new data offering that aligns Sustainalytics’ existing data with the emerging Corporate Sustainability Reporting Directive (CSRD) requirements, helping companies prepare for compliance with this new regulation, which will be implemented January 1, 2025 and will impact approximately 50,000 companies in the EU, including 10,000 companies globally.
- A solution to assist investment funds in meeting the European Securities and Markets Authority’s (ESMA) new Fund Naming Rules, ensuring that fund names accurately reflect their ESG characteristics. ESMA guidelines will require ESG funds to have a minimum of 80% of investments that meet environmental or social characteristic or sustainable investment objectives to use specific ESG terms in their names.
- An updated version of its EU Taxonomy solution, which improves the breadth, quality, and presentation of ESG data to better support clients in understanding and reporting on their alignment with the EU Taxonomy.
To learn more about how Gilmartin strategically partners with our clients, please contact our team today.
Authored by: Tamsin Stringer, ESG, Gilmartin Group