macdougall musings

ESG Communications for Biotechs

by Emily Wong

The Rise of ESG

In the last few years, we have been hearing fewer people talk about corporate social responsibility (CSR) while ESG – Environmental, Social, and Corporate Governance – has taken center stage in almost every investor and board meeting, as well as in company town halls. Often considered an evolution of CSR, ESG was brought further into the spotlight in 2020 with companies committing publicly to improve business practices as a result of the pandemic and social unrest. Millennials and younger generations, who in the near future will dominate the workforce, are highly attuned to sustainable investing and are calling for companies to make positive social impacts. ESG has hence attracted the attention of multiple stakeholders – investors, customers, employees, and outside activists[1] as a set of metrics to assess a company’s performance and viability.

ESG Metrics in Life Sciences

For life sciences companies that are accelerating innovation to improve human health, social responsibility has often been at the heart of many companies’ missions. With the increasing prominence of ESG in recent years, environmental impact and corporate governance have been added to the scope of responsibilities that biopharma companies should fulfill and disclose. While the industry is awaiting specific mandates from the presidential administration which may impact the SEC’s ESG disclosure requirements, investors continue to push ahead with ESG-focused investing.

Earlier this year, the investment bank Cowen issued a Sustainable Accounting Standards Board Framework for the investment screening process that takes into consideration a set of ESG-related metrics across five key areas: business model & innovation, leadership and governance, social capital, human capital and environment[2].

The creation of such “scorecards,” which allow investors to quickly filter potential investments and identify outliers through an ESG lens, is adding pressure on companies to increase ESG reporting transparency across topics ranging from business model and product pricing to supply chain and energy management, DE&I and employee engagement. Topics that were often an afterthought, headache or risk are beginning to be recognized by companies as a strategic opportunity to build sustainability, resilience and long-term investment return.

ESG: Not Only Relevant for Big Pharma

We are often asked by smaller, pre-commercial biotech clients whether an ESG program is relevant for their business. The answer is simply “yes”. A recent survey of small-cap fund managers showed the majority would use ESG factors to make portfolio decisions, compared with a minority three years ago[3]. Life sciences-focused venture funds are also beginning to develop their own ESG-based framework for evaluating a biotech’s sustainability.

According to a recent report by Arctic Aurora LifeScience, the sustainability of a smaller biotech depends on three aspects: sustainability of operations, management of material ESG risks and opportunities, and viability to drive long-term valuable impact as measured by the UN’s Sustainable Development Goals[4]. Small- and mid-cap biotechs should begin formalizing ESG initiatives now to avoid potential risks down the road. For example, when a company gets close to late-stage development and commercialization and undergoes a leadership transition from an entrepreneurial scientist founder to an experienced commercial leader, the transition can often result in culture and governance hurdles if ESG has not been an ongoing focus for the organization[5].

Taking the First Steps Through Internal and External Communications

ESG is a process and a whole company initiative. Smaller companies can start by conducting both an internal and investor perception audit to identify weaknesses and assess risks associated with ESG priority topics and discern where the biggest deficits lie – in employee engagement, DE&I or clinical trial practices. Initiating cross-organizational and topic-specific discussions early allows for the formalization of ESG goals and strategy and provides supporting evidence with robust data, both of which are important to investors[6].

Companies communicate technology and business strategy externally via a variety of communications channels and ESG strategy and efforts should be no different. Stakeholders should receive regular, clear and consistent updates in order for a company to attain a good “scorecard.”

Before sitting down with investors for one-on-ones or a roadshow, be prepared for ESG discussions with a few slides on high-priority ESG topics, even if they only reside in the appendix.

Leveraging owned and shared channels to communicate ESG efforts, as well as your vision and long-term strategy on drug pricing and access, will ensure your stakeholders are aligned with where your company is headed, and how it is getting there. Don’t forget that internal communication channels are important too – after all, employees are the core driver of a company’s growth and success.

Are you interested in exploring an ESG program for your company? Contact our team to learn more about how ESG can help you achieve your goals.


[1] Conlin, Bob. (2021, February 10). Why It’s Time To Prioritize ESG Initiatives In Your Business. Forbes.

[2] Cowen Equity Research. (2021, March 18). Cowen’s Best ESG Investment Ideas for 2021 + Video.

[3] Greaves, Raymond. (2020, September 24). Traditionally the Reserve of Larger Firms, ESG Ratings for Small & Mid-caps Are Vital – and Now Accessible. IR Magazine.

[4] Bjerke, Ulrica., Rosenberg, Thea. (2018, August). Responsible Investments in Life Science. Arctic Aurora LifeScience.

[5] Looney, William. (2020, January 22). ESG In 2020: Not A Tick-Box Exercise But A Strategic Opportunity. In Vivo Informa Pharma Intelligence.–Not-A-Tick-Box-Exercise-But-A-Strategic-Opportunity

[6] The Biopharma Investor ESG Communications Initiative. (2020). Biopharma Investor ESG Communications Guidance 2.0. 

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