How can investors make credible investments into health?

2020 has been a particularly crucial year for SDG3: Ensure healthy lives and promote wellbeing for all at all ages. With COVID-19 sweeping the globe and knocking almost all SDGs off course, killing more than a million people worldwide and blighting developed and developing economies alike, health has found itself firmly at the top of the agenda for everyone, including investors.

“There has been a health impact across the board because of COVID-19,” points out Dana Burduja, Senior Health Economist at the European Investment Bank (EIB). “It has led to situations where mother and child care is not being delivered, vaccinations are not being done, critical care for chronic diseases is not going ahead, and care for the elderly has been disrupted. This has a direct and significant impact on reaching universal healthcare goals.”

The UN says that strengthening health systems to achieve the targets of SDG3, which include preventing future pandemics, will require an additional $371bn per year by 2030 for 67 low- and middle-income countries. And while public funding is available, the UN predicts a funding gap of up to $54bn each year, which may have to be filled with private finance. 

It’s a lot of money, and high-income countries are also facing historic funding gaps. But that doesn’t mean that all private-sector health investments are welcomed. 

In 2018, Virgin Care – the healthcare arm of corporate titan Virgin – faced huge public backlash for suing the UK’s National Health Service because it did not like the way a contract it bid on was awarded. Virgin received a payout from the NHS as a result of the legal challenge, but it also received a petition signed by more than 125,000 people telling it to give the money back and stop meddling in public healthcare.  

In the US, the New York Times wrote an article earlier this year headlined How Private Equity Firms Squeeze Hospital Patients for Profit, calling out investors for being behind ‘surprise’ healthcare bills for patients in an effort to make more money. 

But Burduja says that, despite some public pushback, the enormous funding gaps make “private-sector health investments an important additional source of funding” – especially in emerging and developing markets. The key thing is, she contiues, that investment “needs to benefit the majority and contribute to giving all people universal access to affordable health services.”

SDG3 isn’t just about investing in healthcare, though, says Ellie Chapman, Head of Food & Health at London-based NGO, ShareAction. She says preventing illness is as big a part of achieving the Goal as providing treatment.  

A recent paper by the McKinsey Global Institute found that reducing the global ‘disease burden’ could be achieved through prevention – by creating cleaner and safer environments, encouraging healthier behaviours and addressing the social factors that lie behind them.

In 2019, ShareAction launched the ‘Healthy Markets’ campaign to coordinate investor action on rising childhood obesity levels in the UK. A coalition of investors with around $1trn in combined assets are supporting the initiative, including BMO Global Asset Management, Jupiter Asset Management, Newton Asset Managements, EQ Investors, M&G Investments and pension fund Nest.

UK supermarkets Sainsbury’s and M&S have committed to disclose the proportion of sales from healthy food and drink products, and to set targets to increase this figure over time, as a result of the engagement so far.

“COVID-19 has forced health onto the radar of all sorts of investors, not just those who you would typically associate with being responsible,” reflects Chapman. “There is a lot of pressure on companies to show how they are being responsible when it comes to health and wellbeing.”

Yo Takatsuki, Head of ESG Research and Active Ownership at AXA Investment Managers, is a long-standing advocate of integrating thinking about health into investment processes. He says that above everything, investors should encourage companies to “put themselves under scrutiny when they make claims about their ‘value add’, to show how they’ve made a difference to people’s lives.”

AXA IM has been working with the Access to Medicine Foundation, a non-profit focused on the private sector’s role in helping people in low- and middle-income countries gain access to medicine, since 2003. The partnership aims to create infectious disease and pandemic resilient societies and support engagement between the asset management industry, governments and pharmaceutical companies. 

Takatsuki – a member of the 2019 Expert Review Committee for the Access to Medicine Index – says that as well as discouraging unrealistic impact claims from firms, investors should push companies that work on vaccines and medicines to take a more collaborative approach by sharing their research findings and data in certain circumstances. Finding this balance between public good and private profits is vital, he says. 

COVID-19 has brought about a change in the kind of illnesses that receive investment, Takatsuki observes, pointing out that until the pandemic, there was a disproportionate focus on tackling ‘non-communicable diseases’ – long-lasting, chronic illnesses that aren’t contagious.  

“We should now see a better balance between the flow of money to non-communicable diseases and communicable diseases, because we have all realised the impact that infectious disease-based pandemics can have on the global economy.”

While the pandemic has seriously dented the chances of achieving the SDGs by 2030, it has also turbocharged global efforts on health, with a boom in new technologies offering alternative approaches to managing illness and disease, including telehealth services and at-home testing. 

And there has been another boom, too: so-called ‘COVID bonds’, which offer fixed-income investors a quick and easy way to allocate capital to current relief efforts. 

Many of the deals so far have focused on the economic fallout of COVID – promising to finance initiatives around unemployment and struggling SMEs – but there have been some dedicated to healthcare and testing facilities.

“Our conservative estimate of the market’s potential size is €100bn outstanding by the end of 2020,” said Axa IM in a note on the topic in April, which also stated it had bought around €230m in COVID-19 bonds so far, on behalf of Axa Group and third-party clients. 

The EIB’s Sustainable Awareness Bond programme is one example of this trend. The development bank was the first in the world to issue a green bond, and in 2018 it broadened the eligibility criteria to sustainability more widely, adding health investments in line with SDG3 last year. In April, faced with the pandemic, it announced that it was widening further to cover “financing directly related to the fight against the COVID-19 pandemic, in line with a national/international health emergency response or preparedness plan”. This includes support for national health authorities and hospitals, laboratory facilities, equipment, training, staff costs and much more.   

But even with the spate of new financial products and businesses being created to help investors support SDG3, Chapman, Takatsuki and Burduja all agree that achieving the Goal will be dependent on long-term investment, collaboration between stakeholders and a stronger focus on early illness prevention.

“Governments, investors, stakeholders and health agencies have realised that a better balance needs to be struck,” says Takatsuki. “We all had a blind spot – we didn’t see this coming. We could have done better, and we must do better in the future.”