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
Last week, 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.
The Climate Corporate Data Accountability Act (SB 253) will require both public and private companies that operate in California with annual revenues of at least $1 billion to disclose their Scope 1 and Scope 2 GHG emissions by 2026, as well as their Scope 3 GHG emissions by 2027. The second bill, the Climate-Related Financial Risk Act (SB 261), will require companies with more than $500 million of annual revenue to prepare annual climate-related financial risk reports.
Ceres, an investor advocacy group focused on sustainability, estimates that SB 253 will apply to more than 5,300 companies, while SB 261 will apply to around 10,000 companies. California Governor Gavin Newsom has already indicated his intent to sign both bills.
California’s new legislation serves as a preview of the SEC’s proposed climate disclosure rules, which are rumored to be finalized later this Fall.
A Note on ESG Reporting
A coalition of investors representing over $1 trillion in AUM recently issued a joint letter calling on the International Sustainability Standards Board (ISSB) to design international reporting standards covering human capital and worker rights issues.
ShareAction, an NGO that works to promote responsible investing practices, coordinated signatures from twenty-four asset managers from six countries. The group asserts that investor demand for workforce data is at an all-time high and that ISSB, which published its sustainability reporting standards in June 2023, is “perfectly placed” to push for human capital and human rights disclosures from companies.
SASB – the precursor to ISSB – has already included human capital-related disclosure topics in its industry-specific reporting standards. However, it remains to be seen how ISSB will go about updating the existing SASB standards, and whether they will issue a general standard covering human capital topics.
The Healthcare View
Novo Holdings – the largest shareholder of Danish drugmaker Novo Nordisk – announced plans last week to invest $290 million into a new energy transition fund. Riding off the success of its blockbuster obesity and diabetes drugs, Wegovy and Ozempic, Novo Nordisk’s stock has more than quadrupled since the end of 2018 and the company overtook LVMH as Europe’s most valuable company. Novo Holdings is using some of these profits to support the new fund, Glentra Fund I, which will invest in companies focused on renewable energy development and deployment. Glentra also has a robust Sustainable Investment Policy that outlines its commitment to integrating ESG into its investment process.
In The Weeds
According to new research from Bloomberg and Adox Research, demand for ESG data is increasing with 92% of portfolio managers and executives surveyed planning to increase their spending on ESG data. The top three areas in which firms are prioritizing their spend are ESG benchmarks and indices (29%), company-reported data (23%), and ESG scores (20%). While a majority of survey respondents believe that they are ahead of their competitors in terms of their ESG capabilities, 30% said that they felt somewhat or significantly behind.
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Authored by: Patrick Smith, ESG, Gilmartin Group & Tamsin Stringer, ESG, Gilmartin Group