Welcome to the latest edition of Gilmartin Group’s ESG newsletter and our first update for 2022. 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
Hologic started the new year with a number of ESG developments. ESG was a key focus of Hologic’s presentation at the J.P. Morgan Healthcare Conference, where CEO Steve MacMillan described how the company’s growth has enabled them to fund initiatives like the Hologic Global Women’s Health Index. MacMillan was also interviewed for William Blair’s inaugural “ESG Conversations” series, where WB’s Medical Technology and Diagnostics Equity Research team asked how focusing on ESG improves Hologic’s business. MacMillan said that investing in ESG initiatives like the Women’s Health Index helps “broaden access to healthcare and reach more patients, which in turn drives more revenue and profit, kicking off another cycle of investment.” MacMillan added that ESG efforts help the company attract and retain talent amid a highly competitive labor market. Hologic recently published its 2021 Sustainability Report, titled “A Global Force for Good,” detailing ESG achievements in 2021. Since the launch of Hologic’s first sustainability report in 2020, we have noted steady improvements in the company’s ESG scores from several ratings firms, and we continue to closely monitor Hologic’s activity in the ESG space.
Illumina is another healthcare company that has increasingly gained attention for ESG leadership in recent years. In November 2021, Illumina hosted its first ESG investor event, utilizing a presentation and fireside chat format to share more about the company’s ESG program and how its ESG strategy is linked to long-term value creation. ESG investor events have emerged as a leading practice for companies wishing to periodically engage with investors, analysts, and other interested parties on ESG topics.
THE HEALTHCARE VIEW
In the first report published by the Federated Hermes Innovation Lab, the investment manager examined the role that the biotechnology industry plays in accelerating the transition to a more just and self-sufficient society. The report acknowledged the potential for biotechnology to address many of humanity’s greatest challenges, as aligned to the United Nations’ Sustainable Development Goals (SDGs). Federated Hermes emphasized, “It is small- and medium-sized biotechnology companies that are at the forefront of sustainable health and wealth creation,” particularly because these companies develop a wide array of innovative products ranging from gene therapies to sustainable alternatives to petrochemicals. Noting that the biotech industry is criticized for disproportionately funding treatments that affect Western populations, Federated Hermes believes that health equity and access are key ESG focus areas for biotech companies to address, along with workforce diversity and product lifecycle management.
IN THE WEEDS
As we wrote in our last newsletter, the International Sustainability Standards Board (ISSB) officially launched in November. Since then, Emmanuel Faber, the former CEO of Danone and outspoken corporate sustainability advocate, was appointed as the organization’s first Chair. In an interview with The Economist, Faber called for “an end to the alphabet soup” of different ESG standards and frameworks and said that ISSB’s standards “would be used as a baseline to meet investors’ needs.” Moreover, Faber said that standardized sustainability disclosures should be viewed as an opportunity for companies to differentiate themselves and that investing in ESG expertise gives companies “a chance to get an even more efficient cost of capital.”
ISSB’s first ESG reporting standards, expected to be published by the end of 2022, will likely be consistent with the widely used standards from the Sustainability Accounting Standards Board (SASB).
A NOTE ON ESG INVESTING
State Street Global Advisors (SSGA) CEO Cyrus Taraporevala, who plans to retire later this year, recently published his annual letter outlining the firm’s proxy voting agenda for 2022. SSGA will focus stewardship activities on climate change and diversity. Noting that one-third of S&P 500 companies do not make climate-related disclosures aligned with the Task Force on Climate-Related Financial Disclosures (TCFD), Taraporevala said SSGA “will start taking voting action against directors across applicable indices should companies not meet these disclosure expectations.” For the 2022 proxy season, SSGA also expects all portfolio companies to have at least one female director on their boards, and in 2023, they expect boards to be comprised of at least 30% women for companies in major indices. SSGA pledged to vote against the Chair of a company’s Nominating Committee for failure to meet these diversity expectations.
ONE BIG THING
In January, BlackRock CEO Larry Fink published his highly-anticipated 2022 Annual Letter to CEOs. Defending BlackRock’s push to integrate sustainability into investment decisions, Fink said, “We focus on sustainability not because we’re environmentalists, but because we are capitalists and fiduciaries to our clients.”
Fink emphasized that divesting from carbon-intensive companies and sectors “will not get the world to net zero” and that businesses “cannot be the climate police.” Rather, Fink called for “governments to provide clear pathways and a consistent taxonomy for sustainability policy, regulation, and disclosure across markets” and proclaimed that the combined power of the public and private sectors is needed to achieve net zero.
Addressing the “Great Resignation” and high employee turnover, Fink pointed to BlackRock’s own research, which showed that “companies who forged strong bonds with their employees have seen lower levels of turnover and higher returns through the pandemic.” He warned, “Companies not adjusting to this new reality and responding to their workers do so at their own peril.”
SAVE THE DATE – MARCH 17
Gilmartin Group Webinar: Demystifying ESG Reporting for Healthcare Companies
We want to invite you to join our upcoming ESG webinar on March 17, where we will convene a panel of leaders from healthcare companies to discuss expectations, considerations, and best practices for ESG reporting. Details will follow in a separate email. Stay tuned!
QUESTIONS ON ESG?
Our dedicated ESG team has deep institutional knowledge and experience in ESG and healthcare, which enables us to assess, inform, and guide healthcare companies at every stage of their ESG journeys. If you are interested in learning more about how to navigate your own internal ESG polices, practices, data, and disclosures, feel free to contact our team today.
Managing Director, Head of ESG
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