Where is the H in ESG?

Health is typically thought of as one component of the “social” pillar of ESG. But in practice, how much does health – in particular, the health impacts of consumer products and services – factor into a company’s ESG performance? This session will explore how health currently fits within ESG investing and will engage the audience in exploring how it could be made more salient.

Companies outside of the health industry – notably in industries such as entertainment, food, housing and transportation – have significant impacts on the health of their customers. Products and services in these industries influence people’s diets, how much physical activity and sleep they get, how much time they spend interacting with other people, and time spent outdoors. These behaviors, in turn, can significantly impact the risk of chronic conditions like obesity, diabetes, heart disease and depression. As such, they represent significant – and generally unaccounted for – economic externalities.

Building H, a nonprofit research organization, recently examined the degree to which companies whose products have negatively rated health impacts are represented in the holdings of the major ESG and socially responsible investing funds and indices and in ESG risk ratings. The results suggest that the impact of products and services on customer health is not a major factor in ESG ratings or portfolio screenings. This is a lost opportunity for ESG.

Steve Downs, co-founder of the nonprofit Building H, will discuss the findings from this analysis with Kelly McCarthy, head of impact for the investment firm Vistria Group. The conversation will touch on Building H’s work to document how consumer products and services impact the health of their users; the ways that the socially responsible investing / ESG community currently accounts for health impact in fund composition, index development and risk rating methodologies; and the opportunity to improve people’s health through socially responsible investing.