ESG is Now Relevant to the Not-For-Profit Healthcare Sector? Legal Counsel Should Assess and Advise

*Originally published by Health Law Weekly

A series of new developments combine to make the broad topic of Environmental, Social, and Governance (ESG) investing, disclosure, and regulation more relevant to the not-for-profit healthcare sector (Sector). In general, these new developments emphasize the interest of government in regulating the “E” factors across industry sectors and without regard to an organization’s ownership status, with particular focus on climate change and environmental justice.

To date, ESG concerns have not attracted widespread attention in the Sector because its members are not publicly traded companies, and have neither shareholders, nor institutional advisors who are responsive to the social responsibility interests of investors. Rather, Sector executives and their advisors have generally pursued activities deemed consistent with non-profit, charitable, and tax-exempt principles with the expectation that they would be roughly consistent with ESG concepts and expectations. But as the focus on climate change in healthcare sharpens, and as legal and public scrutiny of ESG increases, Sector leadership should consider placing more focus on this topic.

In-house counsel for Sector organizations should play a key role in helping the governing board and executive team understand what ESG means, how the law and public perceptions related to ESG are changing, and whether oversight and communications regarding ESG should receive more internal attention and resources. While attention to ESG should be placed in proper context and should not be overemphasized, the time has come to consider evaluating the relationship between ESG factors and Sector organization governance and oversight.