ESG momentum accelerates as medtech companies champion APAC initiative

MedTech & Diagnostics News: Environmental, Social, and Governance (ESG) regulations are accelerating across the Asia Pacific (APAC) region. It is now an impending reality that all corporates and asset managers must face, confronting new material cost considerations, an urgent need for up-skilling and potential valuation implications for stocks.

APACMed, the industry association for the medtech sector in the APAC region, has joined forces to place ESG at the forefront of strategic priorities. To comprehensively understand the challenges faced by key stakeholders in navigating the ESG landscape, the organisation brought together nominated representatives from 15 member companies, including Abbott, BBraun, Boston Scientific, Cardinal Health, Fresenius Medical Care, Johnson and Johnson, Karl Storz, Medtronic, Olympus, Roche Diagnostics, Siemens Healthineers, Steris, Stryker, Teleflex, and Thermo Fisher Scientific.

As a first step, the initiative introduced a dashboard providing a view of evolving ESG regulations in six key APAC markets, including Australia, China, India, Japan, South Korea, and Vietnam. To gain stakeholder insights, a survey was conducted among personnel from large hospitals and healthcare groups across the six APAC markets. Additionally, employee perspectives were gathered through surveys and one-on-one interviews encompassing various functions within member companies.

In understanding the relevant ESG themes within the APAC region, research from Goldman Sachs highlighted significant aspects that are relevant to this region.

APAC’s ESG policy development, mirroring the strides in Europe, has led to improved corporate disclosure. Over the past five years, APAC ESG policies have doubled, now constituting 20% of global ESG policy, significantly closing the gap with Western Europe (44%) and surpassing North America (4%). These policies are addressing crucial aspects such as climate/carbon, supply chain, and ESG disclosures, in line with European trends.

Significant shifts are expected, particularly in asset management decisions, with carbon likely to represent an increasing weightage. Emerging ESG fund requirements across various APAC countries necessitate asset managers to disclose the integration of ESG into the investment process, potentially widening valuation premiums for low carbon emitters.

Already, established carbon pricing schemes are in place in mainland China, Japan, New Zealand, South Korea, and Singapore, albeit with varying applications and scopes. The outlook predicts a tightening of these schemes in the medium term, aligning with national net zero targets.

Looking ahead, global ESG standards are anticipated to be launched this year by the International Sustainability Standards Board (ISSB), promising improved corporate disclosure across the region. As investors gain access to more ESG data, the focus should shift towards measuring actual performance, emphasising the clear links between ESG metrics and return on capital.

However, APAC corporates are faced with the challenge of being unprepared for impending international supply chain due diligence demands. Given the region’s unique position as a global supply chain hub and the current lack of robust supply chain-related policies, APAC corporates face significant challenges in compliance.

Unlike Europe, APAC countries lack a centralised regulatory body to implement and enforce ESG policies, potentially resulting in unharmonised standards and varied adoption timelines. This raises concerns regarding compliance and creates challenges in assessing the full impact of incoming ESG regulations on APAC capital markets.

The insights and learnings from the APACMed initiative will culminate in a comprehensive report, slated for release at the end of October 2023. This report will not only present findings but also offer strategic recommendations for the medtech industry on how to navigate the evolving ESG landscape in the APAC region.

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