If the risk of poor health on investment portfolios wasn’t clear before the pandemic, it should be now, say Kieron Boyle and Jessica Attard
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The pandemic saw the FTSE 100 drop 14.3% in 2020 – its worst performance since 2008. According to the International Monetary Fund, the global economy is estimated to have shrunk by 4.4%, and in the US unemployment rates rose to 8.9% in 2020 compared with a pre-pandemic rate of 3.7%.
Poor health leads to poor economic outcomes. This has obviously been true during the pandemic, but it applies at all other times, too.
Nonetheless, it is the pandemic that got us talking about the fact that health is not all that different an issue to climate change. It requires a systemic response, poses high financial risks to companies and investors, and is attracting increasing regulation across the world.
Yet we were struck by the contrast in how the two issues are treated by the investment community. Most large asset managers have a dizzying array of strategies, policies and funds purporting to address climate change; but health gets little more than a passing mention in their annual responsible investment report.
ShareAction, with funding from the Health Foundation and support from Guy’s and St Thomas’ Charity, is developing a health programme for responsible investors. It will support investors to consider health across their portfolios and improve responsible investment standards on health, with a focus on specific topics where corporate engagement by investors can have an impact.
For many, health is understood as healthcare or pharma, while the ‘S’ or ‘social’ dimension of ESG is seen as concerning human rights (if recognised at all). This needs to change. Health outcomes are significantly determined by our social, economic and environmental contexts. And these contexts are shaped by companies and their investors.
A recent report by Impact on Urban Health and the Yunus Centre for Financial Inclusion and Health showed that poor financial health – influenced by lenders, landlords and employers, amongst others – can reduce people’s ability to manage their physical health. 90% of those involved in the study agreed that their finances affected their health, including conditions such as diabetes and heart disease.
This illustrates one way in which investors and companies can support better public health, for example by implementing responsible lending practices or paying the Living Wage.
To take another example, 90% of the world’s population live in environments where poor air quality threatens their health, while an estimated 8.2 million premature deaths each year are linked to indoor or outdoor air pollution.
Clearly business has a role to play here – not only in reducing industrial pollution but also in constructing buildings that support clean air flow. We have already seen the power investors can have in encouraging companies to transition to more climate-friendly processes; this same pressure needs to be brought to bear to accelerate progress on wider health issues.
As an asset owner with £1bn invested in shares and property developments, Guy’s and St Thomas’ Charity is already making efforts to ensure these investments support better health outcomes. The guiding principle is the belief that it is both the right thing to do and a way to make investments more resilient in the longer term. The charity is not the first asset owner to evolve in this way, and the hope is that others will continue to build on this momentum.
To support this ambition, ShareAction, with funding from the Health Foundation and support from Guy’s and St Thomas’ Charity, is developing a health programme for responsible investors. It will support investors to consider health across their portfolios and improve responsible investment standards on health, with a focus on specific topics where corporate engagement by investors can have an impact.
The new programme, called LIPH – Long-term Investors in People’s Health – will articulate a clear business case for why investors should include health factors within their investment decisions and corporate engagement. It will also provide clear guidance on how investors can do this, given the limited and often variable data made available by companies.
Most importantly, with a coalition of investors, it will make evidence-based, practical asks of target companies that improve people’s health and boost resilience across investors’ portfolios. These will build on existing investor action on health, such as the recent campaign to encourage Tesco to sell more healthy food by filing the first health-related resolution at a FTSE 100 company.
With the pandemic shining a spotlight on health and its impact on the economy, now is the time to develop health as a responsible investment theme. A healthier society leads to healthier returns. For the benefit of populations and portfolios, 2021 must be a turning point for the investment system.
Kieron Boyle is the Chief Executive of Guy’s and St Thomas’ Charity and Co-Founder of Impact on Urban Health
Jessica Attard is Head of Health for ShareAction. She is on secondment from Guy’s and St Thomas’ Charity, where she is a Portfolio Manager