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Feb 22, 2022

Many US biotechs lack ESG disclosure, study finds

But biotech executives expect to boost sustainability reporting in coming year

Many US biotech companies have ‘limited or no explicit ESG disclosure’ despite recognizing the growing importance of sustainability to investors and other stakeholders, according to new research by law firm Fenwick.

The study, which reviews 50 development-stage public companies with market caps between $1.3 bn and $4.6 bn, finds just 30 percent mention ESG issues – excluding references to diversity – in their public disclosures.

The amount and location of ESG information varies considerably, Fenwick notes. For example, 10 percent of the sample group produce a full sustainability report while others include only ‘brief statements in corporate governance documents regarding board or committee oversight of ESG.’

Fenwick defines ESG disclosure as where companies discuss ESG topics as a unified risk area or include specific terms such as ‘ESG’ or ‘corporate sustainability.’ The firm decided not to count mentions of diversity, given the large number of companies now reporting on this area.

EXECUTIVE SURVEY

Although many biotechs have not yet embraced ESG disclosure, a separate survey by Fenwick suggests sustainability reporting is a growing priority for the sector. In a poll of more than 100 biotech executives, 74 percent say they expect their ESG disclosure to increase over the next year.

The survey also investigates which actions biotechs have taken in relation to ESG. The most common is to conduct a materiality assessment into risks and opportunities (selected by 42 percent), followed by tracking and/or collecting ESG data (36 percent) and the creation of an internal working group or committee (33 percent).

‘ESG activities vary with no single activity dominating, suggesting that many companies are at an early stage of implementation,’ the report authors write. ‘Similarly, companies that have not yet implemented ESG activities disclose a wide range of measures they intend to take, with tracking and/or collecting ESG information garnering the highest number of selections.’

Fenwick notes that biotechs seem to become more likely to report on ESG the longer they are public companies. ‘Given the number of recent IPOs in the biotech sector, we expect ESG disclosure will accelerate accordingly as these newly public companies mature and expand their governance and compliance functions,’ the report authors write.