Healthcare pain point: Sector lags on ESG disclosure, report finds
Australia’s healthcare sector is lagging other sectors on the ASX 200 for disclosing environmental, social and governance issues, a new report has found, with no top 200 listed health company receiving the highest rating on these issues.
However, almost all ASX 200 companies now disclose to investors how they are managing ESG risks to some degree, with almost three quarters reporting at a comprehensive or detailed level compared with just 31 in 2008.
The Australian Council of Superannuation Investors’ (ACSI) annual ESG Reporting Trends report released on Wednesday found that just 6 per cent of ASX 200 companies provide no ESG disclosure at all.
The majority of ASX 200 companies have good disclosure on ESG issues.Credit:iStock
It found that 104 companies on the ASX 200 were now considered comprehensive reporters, the highest rating given by the group. These included mining giants BHP and Rio Tinto, Telstra, Qantas, the big four banks and both supermarket giants Woolworths and Coles. Casino group Star Entertainment, which has been under scrutiny over its governance practices, also received the top rating.
Just 10 per cent of companies were considered comprehensive reporters in 2008 when the council first starting assessing ESG reporting.
ESG principles have become increasingly important for companies in recent years. Ethical investments have soared as climate-conscious investors pile money into so-called green funds.The Australian Securities Exchange and the Australian Securities and Investments Commission (ASIC) have warned companies they will crack down on “greenwashing” by funds that mislead investors into believing they are investing in accordance with ESG principles.
Utilities, consumer staples, materials and real estate sectors led the way when it came to ESG reporting, while healthcare and IT were labelled “laggards”.
“The healthcare sector has no ‘comprehensive’-rated companies at all, highlighting a sector-wide gap,” the report found. “These sectors have many mid-cap and smaller companies, often more pre-revenue companies than other sectors and can have different ESG risk profiles.
“Nonetheless, it can be expected that these companies will have ESG risks, for example, particularly given the pandemic, workforce-related risks, or modern slavery risks that can be associated with healthcare supplies. However, despite being laggards, some progress demonstrates company awareness of investor expectations on ESG risks.”
ACSI chief executive Louise Davidson said some organisations could fall into the trap of thinking they don’t have a big exposure to climate change and therefore their ESG risks are not as high. “But the range of ESG risks is much broader, of course, than just climate change,” she said.
“Healthcare, for example, is likely to have quite high ESG risk exposure to supply chain issues, for example, and I think we saw quite a bit of that play out over the pandemic. What we would really encourage companies to do is to think more broadly about what ESG risks they might be exposed to. So if it’s in healthcare, are you exposed to modern slavery risk, supply chain risk, and perhaps some workforce risk in terms of health and safety and burnout risk at this point in time?”
ACSI for the first time has released each company’s ESG rating in the report.
Twelve companies on the ASX 200 do not report at all, however ACSI noted that just over half were new to the index and therefore had not previously been considered for the project or had engagement with the council.
The research by ACSI assessed ESG disclosures for the ASX 200 to March 31 this year, analysing publicly available data such as ASX announcements, annual reports and other corporate reports. It doesn’t reflect a company’s performance on ESG issues, only its disclosure of them.
Most ASX 200 companies (64 per cent) report against the United Nation’s Sustainable Development Goals or use them to guide reporting, with climate action the most cited priority.
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