Shareholders request Gilead issue an annual sustainability report. The report should be prepared at a reasonable cost, omit proprietary information, and be made available to shareholders by June 2015.
Managing and reporting environmental, social and governance (ESG) business practices helps companies compete in a global business environment characterized by finite natural resources, changing legislation, and heightened public expectations. Reporting allows companies to publicize and gain strategic value from existing sustainability efforts and identify emerging risks and opportunities. ESG issues can pose significant risks to business, and without proper disclosure, stakeholders and analysts cannot ascertain whether the company is managing its ESG exposure.
The link between strong sustainability management and value creation is increasingly evident. A 2012 Deutsche Bank review of academic studies found 89% of studies demonstrated that companies with high ESG ratings also show market-based outperformance, and 85% of the studies indicated that these companies experienced accounting-based outperformance.
The majority of large corporations recognize the value of sustainability reporting. As of December 2012, 53% of the S&P 500 and 57% of the Fortune 500 published a corporate sustainability report. In contrast, Gilead does not publish any sustainability metrics while industry peers like Amgen, Celgene, and Biogen Idec have identified relevant ESG factors and address them through sustainability reports.
The effects of climate change could substantially impact a company’s business operations, revenue, or expenditure. Similarly, Gilead acknowledges in its 10-K that “we believe that our primary risk related to climate change is increased energy costs.” However, Gilead’s response to date on how it is managing climate related risks and opportunities falls short. Gilead declined to participate in the 2014 Carbon Disclosure Project (CDP) and has not publicly set carbon emissions reductions.
Investors with $92 trillion in assets have supported the CDP which received responses from 81% of companies in the Global 500 in 2013. Presently, 60 percent of Fortune 100 companies have greenhouse gas (GHG) reduction commitments, renewable energy commitments, or both. A report published by WWF, CDP, and McKinsey & Company, The 3% Solution: Driving Profits Through Carbon Reduction, found that companies with GHG targets achieved an average of 9% better return on investment than companies without targets.
More than 1,200 institutional investors managing more than $33 trillion have joined The Principles for Responsible Investment (UNPRI), acknowledging that ESG issues can affect the performance of investment portfolios. Some of Gilead’s largest shareholders are UNPRI signatories. Consistent with fiduciary duties, signatories publicly commit to seek corporate ESG disclosure and incorporate it into investment analysis and decision-making processes.
We believe a company report substantially implementing this shareholder proposal would address relevant ESG policies and practices; and should include quantitative and time-bound goals on topics such as, for example: GHG emissions, water use management, waste minimization, energy efficiency, and other relevant environmental and social impacts. We recommend Gilead consider using the GRI Sustainability Reporting Guidelines to prepare the report.