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November 2, 2022
David Burda
Economics Policy System Dynamics

Health the Only Bright Spot in Report on ESG Investment Priorities

Like I mentioned in a previous blog post, I didn’t know jack about ESG until someone asked me about it, and I looked it up to appear like I knew what I was talking about. If you read that post, you’d know ESG stands for environmental, social and governance. It’s a proxy for the sustainability of an organization in today’s more environmentally, socially and equity conscious world.

In theory, investors who feel strongly about ESG will prefer to invest their dollars in or do business with organizations that embrace ESG as a core business principle and openly report on their ESG progress in an objective and verifiable way.

In practice, however, return on investment talks, and ESG walks. At least for many investment groups, according to a new report from PitchBook. The PitchBook report is based on a survey of 552 investment groups in five regions around the world. The types of groups included venture capital firms, other types of general partnerships and limited partnerships. Nearly 60 percent of the groups cited North America as their “primary base of operations.”

If you’re all in on ESG, here are some survey findings that may have you pulling back your bet:

  • 42 percent of investment groups in North America said they require their portfolio companies to measure and report ESG. That’s tied for lowest of the five regions with the Middle East/Africa.
  • 35 percent of North American investment groups said they’ve integrated sustainable investment principles throughout their portfolios. That’s third behind Central and South America/Caribbean (44 percent) and Europe (42 percent).
  • 18 percent of investment groups in North American said they have no plans to incorporate any sustainable investment principles in their work. That’s the highest percentage of any region.
  • 19 percent of general and limited partnerships in all regions cited financial performance as the only criteria when evaluating an investment opportunity compared with 5 percent that said sustainability was the only criteria.
  • 42 percent of investment groups in North America cited the lack of clarity in defining and measuring ESG outcomes as their top challenge for sustainable investing.

On the plus side, health finished fourth in a ranking of 17 areas in which all the investment groups said they’re focusing their ESG spending on, cited by 29 percent of the respondents. Energy and climate tied for first at 45 percent. Land and oceans/coastal zones tied for last at 15 percent.

There’s no question ESG is the right way to go for any organization in any industry. The only question is, how long are investors willing to wait for ESG to pay off. It’s always been and always will be about the money. That’s why they call it investing.

Thanks for reading.

About the Author

David Burda

David Burda began covering healthcare in 1983 and hasn’t stopped since. Dave writes this monthly column “Burda on Healthcare,” contributes weekly blog posts, manages our weekly newsletter 4sight Friday, and hosts our weekly Roundup podcast. Dave believes that healthcare is a business like any other business, and customers — patients — are king. If you do what’s right for patients, good business results will follow.

Dave’s personnel experiences with the healthcare system both as a patient and family caregiver have shaped his point of view. It’s also been shaped by covering the industry for 40 years as a reporter and editor. He worked at Modern Healthcare for 25 years, the last 11 as editor.

Prior to Modern Healthcare, he did stints at the American Medical Record Association (now AHIMA) and the American Hospital Association. After Modern Healthcare, he wrote a monthly column for Twin Cities Business explaining healthcare trends to a business audience, and he developed and executed content marketing plans for leading healthcare corporations as the editorial director for healthcare strategies at MSP Communications.

When he’s not reading and writing about healthcare, Dave spends his time riding the trails of DuPage County, IL, on his bike, tending his vegetable garden and daydreaming about being a lobster fisherman in Maine. He lives in Wheaton, IL, with his lovely wife of 40 years and his three children, none of whom want to be journalists or lobster fishermen.

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