Corporate partner Julia Forbess and counsel Ron Llewellyn spoke with STAT about findings from their recently authored report “ESG Biotech Crossroads,” which details the common environmental, social and governance (ESG) reporting practices of pre-commercial biotech companies.

Drawing insights from 100 executives at biotech companies with market capitalizations ranging from $100 million to more than $4 billion as well as representatives of investment banks, venture capital firms and hedge funds, the report found that the biotech industry is at an inflection point regarding ESG initiatives.

Tracking moves made by the largest companies is generally easier, partly because their steps are well telegraphed and often resemble what other large industries are doing, Forbess explained. ESG disclosures made by smaller biotech companies, however, can be harder to pin down, even as investor interest increases.

While only 30% of development-stage, publicly traded biotech companies reference ESG topics in their regulatory filings and other disclosures, 76% of those same executives agreed that ESG disclosures should be mandated.

“Everybody knows they need to think about it, but there is no consensus on what to do,” Forbess told the publication. “Different institutional investors have different guidelines about what effects their votes and what they look at as important. It’s fragmented up and down.”

As noted by STAT, nearly 4 of every 5 investors reported that they believe ESG disclosures will become significantly or moderately more important over the next year. And more of half of that group of investors expect increasing pressure from clients to include companies that are focused on ESG issues in their portfolios.

“And regulation is coming out in a piecemeal fashion, so disclosure is partly voluntary, at least in the U.S., at this point,” Llewellyn added. “There are more mandates outside the U.S. So as a result, a lot of companies are trying to figure out what to disclose.”

The report found that much of the real work still lies ahead, but most biotech investors and executives believe that regulators will likely begin requiring companies to disclose certain ESG information—including specific metrics—and most say this is a move in the right direction.

The full article is available on STAT (subscription required).

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