6 min read 15 Apr 20
Summary: Investing with the intention to generate positive societal impact alongside a financial return is still often perceived as a ‘nice to have’, or something which is really only appropriate for the ‘responsibly minded’. However, as COVID-19 severely disrupts markets and society, priorities are being reset, and viewpoints reframed, out of sheer necessity. This shift in focus could see impact investing move into the mainstream, as a world in lockdown focuses on the problems we are facing, and the need to find solutions.
While environmental challenges have started to capture mainstream public attention in recent years, the pandemic has framed the vast scale of the world’s social challenges, and demonstrated how intertwined both environmental and social challenges actually are.
Perhaps most visibly, in a matter of weeks the virus has laid bare the sad reality of inadequate health provision. The World Health Organisation estimates that at least half of the world’s population does not have access to essential health services (see chart below), and around 100 million people are pushed into extreme poverty because they need to pay for healthcare.
While developing countries are the most exposed to poor provision, this also affects some of the world’s richest nations. In the US, in particular, the Census Bureau has estimated that some 27.5 million people went without health insurance in 2018, in a country with the world’s most expensive healthcare system.
The social and human costs of the pandemic have made it obvious that more resources must be deployed in many areas targeted by the Sustainable Development Goals (SDGs) as a matter of urgency; not least of which is SDG 3 – Good Health and Wellbeing. However, it has also highlighted that extracting ourselves from the current crisis will require more than government intervention. Industry at large must step in to fill the gap. While industry can provide much needed capital, its ability to innovate and deliver immediate relief to those suffering, as well as long-term solutions to systemic challenges, will be just as meaningful.
This is where we believe impact investing can really make a difference, supporting companies who have at their core the intention to make a positive impact on society and the environment. This is not to say that these are philanthropic organisations – on the contrary, they will be judged on their ability to produce financial returns, aligned with the positive impacts they are producing. As these impactful companies are creating solutions for some of the world’s biggest challenges, at times like this many of them will display a more inclusive version of capitalism by putting in place special measures to support their employees, their customers and the wider community.
A number of impactful companies are ramping up efforts to offer solutions, either leveraging their expertise or, in some cases, developing brand new products.
On the healthcare side, a leading diagnostic company in the US has managed to perform more than 400,000 COVID-19 tests since 9 March. In less than four weeks, it grew its testing capacity three-fold from 10,000 to 30,000 a day, with testing performed across 12 different sites. This was made possible by the company using invitro diagnostic testing equipment from a Swiss healthcare company, which allowed it to test a larger number of samples at once.
Another company that manufactures similar state-of-the-art equipment is adding to the resources. It has developed a diagnostic kit which shortens the processing of COVID-19 testing to four hours after samples have reached the lab. Its products have been approved for use throughout Europe and it is planning to ramp up its production of testing kits from two million to five million a week.
On the research side, a number of companies are bringing their know-how into the fold to participate in the search for a treatment to fight against COVID-19. A plasma specialist firm is collaborating with the US government to establish if the plasma therapy it successfully developed during the Ebola crisis can be used effectively to treat COVID-19. By collecting plasma from patients who have recovered from the virus, it can process it into hyperimmune globulin in a purpose-built facility, and determine if it can be a viable treatment for the disease. This is a great example of cooperation between the state and private sector that should help to speed up the research process and, if proved successful, could validate a therapy to treat COVID-19 and any future outbreaks.
Solutions are not just confined to the healthcare sector. One company that specialises in recycled packaging has collaborated with food retailers across Europe to design and produce emergency provisions or essential boxes that can be delivered to the doorstep of the most vulnerable. These boxes can easily be stacked in delivery vans, quickly dropped and are fully recyclable. From first design to production, the idea became reality in less than a week, providing instant support to those who cannot make it to the shops.
Many companies we are familiar with have also introduced welcome financial relief schemes to their customers. For example, a telecommunications company in Kenya has announced a broad range of support measures to help its customers over the next three months, including waiving the fees it normally charges on its mobile payment system to help reduce the risk of virus contamination via cash transactions, suspending charges for calls to hospitals and dispensaries throughout the country, and doubling the bandwidth of its home fibre for customers to use at no extra cost. To directly support the government in their efforts to contain the spread of the virus, it has also set up a toll-free emergency line which Kenyans can call to get immediate assistance. Positive actions like these demonstrate that impactful businesses can materially help and provide innovative solutions in times of crisis. In fact, it is their capacity and willingness to adapt quickly that will likely make them more resilient in the long run. Ultimately, climate change, pollution and inequality will still be with us on the other side of COVID-19, and the commitment of impactful companies to combat the effects of these will remain firmly in place.
The immediate effects of this pandemic are daunting, from a humanistic, as well as an economic, point-of-view. Amidst the turmoil, we continue to look for a silver lining. We certainly hope that this will be a timely reminder of how important it is to have a well-functioning healthcare system. How nice it would also be to see the canals of Venice remaining clear and people in cities from Beijing to Los Angeles to London able to breathe the air without fearing for their health. We hope that governments and industries step up their efforts to find much-needed solutions to these diverse, yet all-too-present, societal challenges.
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.