More healthcare investors need an ESG focus
The bottom line continues to drive investment in healthcare but a few providers and investors are starting to be a bit more vocal about creating other value. Congratulations to them, even if it is a bit of marketing spiel, more should follow their lead.
Environmental, social and corporate governance (ESG) refers to three factors in measuring the sustainability and societal impact of an investment in a business. Janus Henderson, the British-based investment firm, describes it as the “bedrock of sustainable and responsible investing”.
On the surface, it can appear as a nice front to appease a weary public or a PR tactic to set a business apart from its supposed gas-guzzling, unethical, bad-employer competitors. But in a market like healthcare, which can be plagued by accusations of price-fixing and overtreatment, there is value in incorporating ESG into investment KPIs.
Synlab has put ESG front and centre of its efforts to woo investors in its upcoming IPO, telling journalists that it aims to be carbon neutral by 2025, has new programmes to engage employees and believes in responsible procurement practices.
“Another view of our leadership is a different one but a key one,” Synlab CEO Mathieu Floreani told journalists. “I strongly believe in the level of ambition that we’ve put forward for ourselves.”
Businesses taking investment from a new $178m Brazilian fund must also have an ESG focus and Orpea has gone public with its first €500m sustainable bond issue, which was more than twice oversubscribed. Meanwhile in the UK, ‘Green hospitals’ are often bumped to the top of private insurer’s provider lists if they have proper accreditation. ESG is also increasingly factored into credit ratings and the environmental side especially is something that workforces, if not LPs, care about.
Going forward and with increased consolidation in most sectors, the social aspect of ESG will likely takeover environment as the most important, due to healthcare’s relatively small impact on emissions. Consolidators, and those who invest in them, will need to properly assess the way that their businesses impact pricing and leverage with payors to control malpractice.
Even if a focus on sustainability and positive impact is a bit of a marketing spiel, having those ideas at the forefront of discussions means that more might started to take it seriously. And those who just don’t care won’t be able to hide away.
We would welcome your thoughts on this story. Email your views to Rachel Lewis or call 0207 183 3779.
