3 min read 30 Apr 20
That many of us today can expect to live longer and healthier lives is largely thanks to medical advances. Some of these innovations have been the product of revolutionary science, while other improvements have been incremental.
All of these advances, however, are the product of investment. It often costs companies millions of pounds to develop laboratory research and to manufacture new devices. It also tends to take years to undertake trials and receive approvals – with no guarantees of success, of course.
Where companies can successfully combat the world’s major health challenges, I believe long-term investors can be rewarded for their patience, with lasting benefits for society.
The importance of addressing these challenges is reflected in the UN Sustainable Development Goals, which articulate the world’s most pressing sustainability issues. Specifically, Goal 3 is to ensure healthy lives and promote well-being for all at all ages.
The importance societies attach to good health is reflected in the amount spent on it. It is typical for better-off countries to spend roughly one-tenth of national income, as measured by gross domestic product (GDP), on healthcare goods and services.
Moreover, the trend is upward. The share of the UK’s GDP spent on healthcare rose from 7.4% to 9.6% between 2007 and 2017, according to the OECD. In the United States, the world’s largest healthcare market, it rose from 14.9% to 17.2% of GDP during this period.
With societies ageing, putting upward pressure on healthcare costs, companies that can deliver healthcare goods and services at better quality, or better value, should not only enjoy commercial success, but also help extend good health to more people around the world.
For investors attracted by the sector’s ability to deliver societal benefits, I believe it is important to gauge the positive impact that a company is having through its activities.
This is not always easy. After all, ‘not everything that can be counted counts, and not everything that counts can be counted’, to borrow a well-known phrase.
Nonetheless, measurability is one of the central tenets of impact investing. Looking at how a company intends to address a specific healthcare challenge and reach those who are in the greatest need, as well as the tangible steps it is taking to achieve this goal, is a sound place to start.
It is also important to consider how replicable its products or services are, and whether they would be provided if it did not exist or was not funded. Crucially, as impact investors, we must also consider the materiality of those products or services – for instance, how does a new drug save lives?
Improving lives can have an equally significant impact. ALK-Abelló, for example, is a pharmaceutical company that specialises in developing products for the more than 500 million people worldwide who suffer from allergies.
Among its innovations have been immunotherapy tablets against some of the most common respiratory allergies – including grass pollen and house dust mites – that allow allergy patients to self-administer from the comfort of their own home. Innovations like this can positively transform lives, helping realise Goal 3 of the SDGs.
When investing for impact, it is important to analyse companies on their own merits. In every sector there will be leaders and laggards.
By providing capital to companies that have a demonstrably positive impact on people’s health, long-term shareholders can help them develop their businesses, and therefore improve the chances of living longer and healthier lives.
Through the investments we make, I therefore believe we can aim to have a positive societal impact over the long-term, alongside potentially sustainable financial returns.
The value of investments will fluctuate, which will cause prices to fall as well as rise and you may not get back the original amount you invested. Past performance is not a guide to future performance.