ClearBridge – UnitedHealth: Strengthening Overall Corporate Sustainability

Summary:

• UnitedHealth Group has been making important governance changes in response to investor feedback, with sustainability a growing priority.
• As sustainability has increased in importance, UNH has revamped and elevated board oversight of ESG.
• The establishment of a corporate sustainability function that collaborates with the core business functions represents important progress on sustainability at UnitedHealth over the past year.

The following segment was excerpted from this fund letter.

Governance Can Strengthen Overall Corporate Sustainability

Governance also provides a direct link to developing strong sustainability practices at a company. Managed care company and ClearBridge holding UnitedHealth Group (NYSE:UNH), for example, has been making important governance changes in response to investor feedback, with sustainability a growing priority. The company has historically faced criticism, from ClearBridge and other investors, for the long tenure of its board of directors. In response, it has turned over seven board seats in the past five years and split the chairman and CEO roles.

A related change is that, as sustainability has increased in importance, UnitedHealth has revamped and elevated board oversight of ESG. Now the Governance Committee of the board is charged with oversight of UnitedHealth’s ESG initiatives and progress. The company also appointed a corporate Chief Sustainability Officer who is part of the office of the CEO, reports directly to the CEO and attends and presents at each Governance Committee meeting.

Part of UnitedHealth’s existing strong ESG profile has been a focus on “health equity” as it seeks to raise the standard of care in underserved communities in the U.S. This focus includes screening Medicare members for basic social needs such as nutrition and housing, establishing local pharmacies, improving mortality and life expectancy for African Americans, especially women, and addressing mental/behavioral health, with a heightened focus on teenagers. UnitedHealth has also made a $100 million commitment to improving the diversity of the U.S. health care workforce and to enhance what it views as “culturally competent care.” It expects to train 5,000 new minority clinicians and provide “upskilling” for an additional 5,000.

Another recent governance change at UnitedHealth has been the placement of its health care equity goals, in addition to its clinical policy, under the oversight of the board’s Health and Clinical Practices Policy Committee. Also, the Audit Committee will review the quality and accuracy of all ESG disclosures.

Overall, the establishment of a corporate sustainability function that collaborates with the core business functions represents important progress on sustainability at UnitedHealth over the past year, and is a good example of how the voice of ClearBridge and others calling for governance improvements can help improve sustainability practices as well.