Materiality Assessment 2021 Kickoff Webinar - Dialogue matters - support us to spur positive impact February 8, 2021 - Novartis
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Novartis or Organizational Unit
Business
Franchise
ESG Management
or Department
Office
Materiality Assessment 2021
Kickoff Webinar
Dialogue matters – support us to spur positive impact
February 8, 2021
Agenda
Welcome
Why it’s important?
What have we achieved?
Where are we heading?
We would like to hear from you
Jeff Sturchio
Open Q&A
2 Novartis Materiality Webinar | 08.02.2021
Welcome
Duration: 1 hour
At any time, we invite you to
type your questions in the Q&A box
If you are struggling to connect:
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mobile line than computer audio
Close other applications not in use, especially
those that take bandwidth
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Connect to the internet via cable rather than
wireless, if possible
3 Novartis Materiality Webinar | 08.02.2021
Moderator & Speakers
Jeff Sturchio Dr. Patrice Matchaba Dr. Lutz Hegemann Samir Shah Carrie Scott
Chairman Head US Corporate Group Head Corporate Affairs Head Investor Relations Head ESG Management
Responsibility and President and Global Health Office
Rabin Martin Novartis US Foundation Novartis Novartis Novartis
4 Novartis Materiality Webinar | 08.02.2021
Agenda
Welcome
Why it’s important?
What have we achieved?
Where are we heading?
We would like to hear from you
Dr. Patrice Matchaba
Open Q&A
5 Novartis Materiality Webinar | 08.02.2021
Agenda
Welcome
Why it’s important?
What have we achieved?
Where are we heading?
We would like to hear from you
Dr. Lutz Hegemann
Open Q&A
6 Novartis Materiality Webinar | 08.02.2021
Novartis
Our Purpose
“ Our purpose is to reimagine medicine to improve
and extend people's lives. We use innovative
science and technology to address some of
society's most challenging healthcare issues.
We discover and develop breakthrough
treatments and find new ways to deliver them to
as many people as possible.
We also aim to reward those who invest their
money, time and ideas in our company.”
7
Patients
Listening to our Peers
stakeholders to
understand Regulators we are
embedded in
what matters
Novartis Materiality Webinar | M&E 8| 28.10.2020
a complex
health Investors
most for our ecosystem
mission Customers
Suppliers
Materiality Assessments at Novartis
have shaped our approach
4.0 Drug (pr oduct) safety and transpare ncy
Br ibery and corruption
Compliance with laws and r egulations
Significance to NOVARTIS Stakeholders
Senior management commitment: "walk the talk"
Societal perception of patents and intellectual property
Drug pricing
MA21
Employee attraction/re tention
3.0
Genetic engineer ing, biote chnology, cloning, stem cells
Access to health
Innovation for societal health nee ds: preventive vs.
re active
Clinical data transparency
Animal Te sting
Human Rights
2.0
2.0 3.0 4.0
Impact on NOVARTIS Business
2000 2001 2006 2008 2013 2014 2015 2017 2019 2020 2021
Demonstrating outcomes
Preparing to
transform
Moving from reacting
to healthcare system
Sole donor to Antimalarial Healthy Family Local innovative Novartis Novartis Access New strategy ESG Bond challenges to
WHO of Coartem® brands in LMIC Access Principles for SS Africa proactively shaping
multidrug (no-loss systems and solutions!
therapy for strategy)
leprosy
9 Novartis Materiality Webinar | 08.02.2021
Stakeholder input from the materiality
assessment informs our core actions
MA results will inform:
Divisional & Functional Processes
Enterprise Risk Management
Annual Corporate Strategy Review
Ownership:
Novartis Executive Committee
Board of Directors
10 Novartis Materiality Webinar | 08.02.2021Agenda
Welcome
Why it’s important?
What have we achieved?
Where are we heading?
We would like to hear from you
Samir Shah
Open Q&A
11 Novartis Materiality Webinar | 08.02.2021How can a healthcare company
increase its value?
Novartis share price dependent on:
Increase
cash flows
Reduce
the cost
of capital
1 Driving top line
excellence in launches
Firm
value 2 Driving bottom line
operational excellence
Increase
expected
Increase length
of growth
3 Pipeline
delivering on innovation
growth period
4 ESG
Source: Aswath Damodaran: Value Enhancements: Back to Basics, Vontobel Equity Research
12 Novartis Materiality Webinar | 08.02.2021ESG principles in Novartis
1 Materiality Analyses
2 ESG needs to be integrated into functions
e.g. sustainability bond
3 Great ESG scores are not the direct objective
13 Novartis Materiality Webinar | 08.02.2021Consensus Materiality Analyses are fundamental to determining relevance of ESG factors (e.g. company, or investment decision) 14 Novartis Materiality Webinar | 08.02.2021
Novartis also uses Materiality Analyses for this
Key first step to defining the ESG strategy
Most relevant ESG factors ESG pillars
External Ethical Standards Pricing & Access
stakeholders Patient health Access to
and safety healthcare
Ethical business
Increasing importance
Innovation
practices
Others including
governance, Global Health Challenges Corporate Citizenship
people,
environment
Internal
stakeholders
Increasing importance
1. Interactions with 200+ stakeholders from academia, fin. markets, governments, healthcare providers, NGOs. Materiality assessment webinar series: https://www.novartis.com/investors/environmental-social-and-governance/materiality-assessments
15 Novartis Materiality Webinar | 08.02.2021But materiality… Is about answering what the purpose is of using ESG data Depends on stakeholder (IR world, asset manager, investor, hedge fund, pension fund) Depends on geography Changes with time 16 Novartis Materiality Webinar | 08.02.2021
... which explains why materiality is the most
and least consensual term in ESG investing
Relevance of a
sustainability factor Pose direct financial
Any fact, describing to a company's risks, may be
an asset, that helps financial regulated, drive best
Information that is
you decide whether performance3 practices, raised by
important, relevant
or not you should stakeholders,
and critical to
invest in this asset1 opportunities for
long-term value
creation2 innovation / growth4
1. JPMorgan research March 2020: What Happened to ESG, Hecker et al 2. WEF Measuring stakeholder capitalism September 2020 3. https://www.robeco.com/en/key-strengths/sustainable-
investing/glossary/materiality.html#:~:text=The%20relevance%20of%20a%20sustainability,margins%2C%20required%20capital%20and%20risk. 4. SASB’s approach to materiality for hte purpose of standards development staff bulletin no.
SB002-07062017 July 2017
17 Novartis Materiality Webinar | 08.02.2021Robust methodology is important
Novartis approach: varied inputs from stakeholders, geography, time-relevant
1 2
Local Materiality
Secondary research Primary research Analyses
(desk) Quantitative & qualitative
Medical journals
(interviews) Forward-looking
Analyst reports - externals scenario analysis
Research - internals
~180 articles
18 Novartis Materiality Webinar | 08.02.2021It’s not ESG per se, but the focus on material ESG
issues that is correlated to improved share price
Performance on material ESG issues
HIGH
Ethical Standards Pricing & Access
+6% +2%
Global Health Challenges Corporate Citizenship
-2.9% +0.6%
LOW
LOW HIGH
Performance on immaterial ESG Issues
1. Serafeim, George et al. (2015): Corporate Sustainability: First evidence on materiality. HBS Working Paper 15-073. Other sources: Cheng, Ioannou and Serafeim (2014); Dhaliwal et. al (2011); Dhaliwal et. al (2012); Grewal, Riedl and
Serafeim (2017); Khan, Yoon and Serafeim (2016); Grewal, Hauptman and Serafeim (2017).
19 Novartis Materiality Webinar | 08.02.2021First sustainability-linked bond in the industry
An open accountability to our ESG commitments
“Driving purpose,
Novartis Sustainability linked bond
stakeholder value; happens
when at center of systems,
integrated, targets Treasury issued (ESG) linked bond
mandatory & conditional” 1 Materiality Analyses
bases of Targets
“Creating symbiotic (access/patients reached with medicines)
innovation ecosystem
2 Conditional
requires new methods, Step up
metrics, and indicators”
3 Mandatory
Mariana Mazzucato Targets included in CEO balanced scorecard
4 Symbiotic
Bond buyers partnership with company
20 Novartis Materiality Webinar | 08.02.2021Operationalized Materiality Analyses into strategic
pillars and then into management targets
See Novartis in Society
ESG Report 2020
21 Novartis Materiality Webinar | 08.02.2021Agenda
Welcome
Why it’s important?
What have we achieved?
Where are we heading?
We would like to hear from you
Carrie Scott
Open Q&A
22 Novartis Materiality Webinar | 08.02.2021A systematic stakeholder engagement follows a robust methodology https://www.youtube.com/watch?v=IqFLSV6Hnms&feature=youtu.be 23 Novartis Materiality Webinar | 08.02.2021
Process Overview
1 2 3 4 5 6
Q3 Q3 2020
2020 Q12020
Q3 2021 Q1 2021
Q2 2021 Q2 2021 Q2 2021Q2 2021 Q3 2021
Desk Management Materiality Stakeholder Analysis & Management
Management
Research Survey Surveys Discussions Interpretation Report
Report
Assurance
Manual review Via function & Quantitative Qualitative Ranking of Informing
of key division to online survey interviews and cluster and business
stakeholder define internal among internal workshop with issues, strategies,
sources to contact & external internal & correlation management
create impact owners of stakeholders external analysis and processes and
and external stakeholders scenario decision
dependency list stakeholders analysis making
https://www.youtube.com/watch?v=IqFLSV6Hnms&feature=youtu.be
24 Novartis Materiality Webinar | 08.02.2021Process Overview
1 2 3 4 5 6
Q3 Q3 2020
2020 Q12020
Q3 2021 Q1 2021
Q2 2021 Q2 2021 Q2 2021Q2 2021 Q3 2021
Desk Management Materiality Stakeholder Analysis & Management
Management
Research Survey Surveys Discussions Interpretation Report
Report
Assurance
Manual review Via function & Quantitative Qualitative Ranking of Informing
of key division to online survey interviews and cluster and business
stakeholder define internal among internal workshop with issues, strategies,
sources to contact & external internal & correlation management
create impact owners of stakeholders external analysis and processes and
and external stakeholders scenario decision
dependency list stakeholders analysis making
https://www.youtube.com/watch?v=IqFLSV6Hnms&feature=youtu.be
25 Novartis Materiality Webinar | 08.02.2021Agenda
Welcome
Why it’s important?
What have we achieved?
Where are we heading?
We would like to hear from you
Jeff Sturchio
Open Q&A
26 Novartis Materiality Webinar | 08.02.2021Dialogue matters
– why should you support us?
Jeff Sturchio Dr. Patrice Matchaba Dr. Lutz Hegemann Samir Shah Carrie Scott
Chairman Head US Corporate Group Head Corporate Affairs Head Investor Relations Head ESG Management
Responsibility and President and Global Health Office
Rabin Martin Novartis US Foundation Novartis Novartis Novartis
27 Novartis Materiality Webinar | 08.02.2021Thank you for your attention! For more information 1. Visit our site: www.novartis.com 2. Read the CR Materiality Assessment Results Report 2017 3. Read the Novartis In Society Report 2020 Any feedback, send an email to cr.materiality@novartis.com 28 Novartis Materiality Webinar | M&E | 28.10.2020
Backup
Materiality Assessments highlight our impacts
from the perspectives of our stakeholders
across all dimensions of Environment, Social and Governance
Strategic Build Reporting
insights stakeholder
relationships Structure and
Align with societal prioritize reporting;
expectations, Intensify dialog with highlight impact
business needs and key stakeholders on measuring needs;
market a systematic basis validate current
developments; tease to strengthen impact valuation
out white space for relationships and indicators and
competitive enable stakeholder contextualize their
advantage and specific relevance
leadership communication
opportunities
30 Novartis Materiality Webinar | 08.02.2021Novartis’ corporate responsibility
“materiality” definition
Social, environmental or economic issues are being considered
to be material for Novartis if they have a substantial likelihood
to influence the judgment and decisions of key stakeholder groups
and a significant impact on Novartis performance and business overall
Key sources
31 Novartis Materiality Webinar | 08.02.20212017 Results at a glance show each topic‘s relative importance How to read the chart Outer circle Priority topics Middle circle External stakeholders perceive as more important Internal stakeholders perceive as more important No significant difference in perception Inner circle Material issue clusters 32 Novartis Materiality Webinar | 08.02.2021
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