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Investing in pandemics
As the fight against Covid-19 continues, we need to shift the world onto a more sustainable path
24 Sep 2020 | Ingrid Kukuljan

The world continues to battle the coronavirus pandemic, which is putting a severe strain on health systems and economies. But amid this crisis, there is a chance to build a better future. For responsible investment strategies, Covid-19 has resulted in a paradigm shift: it has put a focus on the critical need to build resilience in healthcare, food and water security, and across supply chains. It has also put climate change and worker rights under the spotlight.

Companies that address these issues – and align with the United Nations’ Sustainable Development Goals (SDGs) – are best-placed to shape a more sustainable, resilient future for all. 

Health and wellbeing

Non-communicable diseases (NCDs), including heart disease, stroke, cancer, diabetes and chronic lung disease, are collectively responsible for almost 70% of all deaths worldwide. These diseases have devastating health consequences for individuals and threaten to overwhelm health systems. In addition, the socioeconomic costs associated with NCDs are immense. Prevention and control of these diseases is therefore a major imperative and is the focus of SDG goal three: ensuring healthy lives and promoting well-being for all at all ages.

One of the highest incidences of chronic diseases, a subtheme of NCDs, is type II diabetes: 463 million adults worldwide are estimated to have the disease. Diabetes is a large-scale healthcare issue that needs to be tackled through both novel healthcare solutions, which can improve treatment, as well as methods to prevent the root cause of type-II diabetes, namely obesity.

We invest in a pharmaceutical group that provides products for all types of diabetes treatment needs, including its new generation of glucagon-like peptide product. It is also developing a portfolio of treatments to help tackle obesity. Another holding – a medical device company – is leading the way in improving the standard of care for blood sugar readings through its continuous glucose monitoring devices.

We have also recently added a fitness chain that is making gym membership more accessible by offering low membership rates starting at US$10 per month.

Water

For six consecutive years, water crises – that is, a significant decline in the available quality and quantity of fresh water, resulting in harmful effects on human health and/or economic activity – has been listed as a one of the World Economic Forum’s top five global risks.

Another impact theme is therefore aligned to SDG goal six (clean water and sanitation): improving access to quality water supply and preservation of the resource is critical to supporting food security. What is more, it is one of the most precious natural resources, so efficient and sustainable management of water is vital, particularly as climate change is expected to exacerbate water scarcity.

Two key holdings in our portfolio develop innovative solutions to enhance the water cycle. One is a global leader in water and sanitation solutions across food service, food processing, hospitality, healthcare, industrial and oil and gas markets. Its cleaning, sanitation products and analytics capabilities, helps to deliver clean water and safe food to its customers while reducing their water use, carbon footprint and waste.

The other company delivers waste-water treatment solutions and it is a pioneer in water technology. Its products include the world’s first wastewater pumping system with integrated intelligence.

Climate change

Climate change is also a defining issue. It is threatening the lives and livelihoods of billions of people around the world, triggering more natural disasters and extreme weather events, which, in turn, destroy crops and deplete fisheries, leaving people without income or food. Since 1998, extreme weather events have resulted in 16,000 deaths and economic losses of US$142 billion every year. 

To respond to a changing climate, resilience must built to its threats, which is why one of core impact themes aligns to SDG goal 13, climate action. Sustainable technologies can be particularly impactful when it comes to addressing the climate crisis, and renewable energy, electric vehicles and energy efficient housing are some of the central pillars in the fight against climate change.

In renewables, production costs have fallen precipitously: renewable wind can now compete with fossil fuels on an unsubsidized basis. As such, double-digit growth is anticipated in the industry for many years to come.

Our current exposure includes a renewables-focused utility to a wind turbine manufacturer; a pioneer in wind technology and bioenergy that is striving to build an entirely ‘green world’. Another recent portfolio addition helps create energy efficient housing. The company is a global leader in insulation and its products not only reduce carbon emissions, but are also largely made from recyclable materials.

Products like these, which can help reduce emissions from buildings, can play a fundamental role in tackling the climate emergency, given that buildings account for about 40% of all global carbon emissions.

Using the UN SDGs as a lens will focus on investing in businesses whose positive impacts are aligned with some of the core long-term economic, social and environmental growth drivers of sustainable development. As the global fight against the Covid-19 pandemic continues, there is need now, more than ever, to be taking the appropriate steps to shift the world onto a more sustainable and resilient path.

Ingrid Kukuljan is head of impact investing at the international business of Federated Hermes.

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