As the last two years of the global pandemic have shown, health overrides almost all other concerns for people and Governments. The vaccination effort, at least in developed countries, has been unprecedented, as has the state support for sectors hard hit by restrictions. Health, often taken for granted, is now much more widely appreciated as a key enabler for everything else, including prosperity and productivity. Health really is wealth.
Yet even before the pandemic, there were stark health inequalities in the UK, with a growing gap in life expectancies between rich and poor, and life expectancy in the poorest groups is now declining. Poorer groups have also been hardest hit by the pandemic, including because of underlying poor health. Hence the UK Government’s renewed focus on reducing the disparities between rich and poor and to tackle preventable disease.
Of course it’s not just public health systems and personal choices that have an impact on health, companies have a huge role too - through the quality of the work and the working environment they provide, and the consumer products they make and sell.
So it’s not a surprise health should also increasingly feature as a consideration for investors. Following pressure by a group of investors led by ShareAction, supermarket group Tesco agreed last May to increase its share of healthy food sales from 58 to 65% of total sales by 2025 (1).
And in December 2021, it was reported that a coalition of investors managing $4.1trn are pressing the world’s biggest chemical companies to phase out the production of “persistent chemicals" which degrade slowly and are linked to illnesses after getting into water supplies (2). Investors are concerned about the prospects of these companies given increasing litigation risk and plans in both the EU and the US to toughen legislation against hazardous materials.
An even more eye-catching heath development was New Zealand’s ban of cigarettes for future generations, also announced in December. Anyone born after 2008 will not be able to buy cigarettes or tobacco products in their lifetime, under a law expected to be enacted in 2022 (3). If enacted, this would join a wide range of Government health interventions around the world: Forty-two countries now have sugar taxes in place – more than have implemented carbon taxes.
So Governments as well as investors are starting to tackle the health implications of commercial and consumer products. Yet the wider investment system does not currently take the health impacts of companies into account in a consistent way. For example, British American Tobacco recently received the third highest ESG rating in the FTSE 100 from a leading data provider. Given that the overwhelming majority of BAT’s revenue continues to come from conventional tobacco products, this suggests the overall health impact of their business was not a factor in this ranking (4).
To tackle this lack of a systemic approach, ShareAction has proposed a framework to help investors make progress on this issue which takes inspiration from the three-scope approach to categorise corporate greenhouse gas emissions. I was delighted to be a member of the Steering Group for this programme.
The framework delivers an excellent structure to enable investors and asset owners to consider companies’ health impacts: through the lenses of workers’ health, consumer health and community health. It then pinpoints which sectors to focus on.
For example, the quality of work provided is one of the main ways that companies can influence health. A focus for investors could be on whether companies are paying living wages which have been shown to be associated with improvements in life expectancy and lower levels of illness, while poor worker health tends to be concentrated in lower paid and precarious jobs. Relevant sectors here include essential retail (including supermarkets), delivery and logistics, construction, facilities management, social care, warehousing, and food production.
When it comes to consumer health, as much as one-third of all deaths worldwide are attributable to overconsumption of alcohol, tobacco, and food and drink products. Leading manufacturers and large retailers of these products are highly concentrated global businesses, to which many investors are exposed via listed equity.
Finally, companies can also impact health by shaping the environments we live in, through air pollution and other environmental side-effects from business activities with health implications, such as endocrine-disrupting chemicals and antimicrobial resistance caused by using antibiotics in the food supply chain. Agriculture, pharmaceutical, and healthcare companies are most closely involved in shaping patterns of anti-microbial resistance.
Of course, a framework alone is not enough. Investors also need data and disclosure to put this framework into action. ShareAction found that high-quality, comparable data in this area is lacking. Company disclosures are particularly poor in relation to health, and data providers often omit health data from their indexes as a result.
But as my fellow Steering Group member Alvise Munari from MSCI put it, if we can estimate the rise in average temperatures likely to be caused by corporate carbon emissions, we should be able to measure the number of years of life lost to poor health per million dollars of revenue (5). This would allow investors to see how their capital connects to health effects that can undermine shareholder value, and tailor their engagement with company boards and their capital allocation accordingly.
And the current absence of data does not prevent investors from incorporating health-related topics into their engagement and investment practice in the short-term – for example by joining investor coalitions, such as ShareAction’s Healthy Markets Initiative.
Finally, taking action goes with the grain of what savers want: 70% of UK savers said that improving health was the top Sustainable Development Goal of interest to them (6), and another survey found 33% of pension savers want their pensions to be divested from companies that don’t pay the living wage (7).
Health really is an untapped asset – by factoring it into their ESG approaches, asset managers and asset owners have an opportunity to drive better outcomes for society as well as end investors and pension savers.
1 Reuters article, 5 May 2021
2 Reuters article, 13 December 2021
3 BBC report, 9 December 2021
4 Share Action, Health – An untapped asset, p. 34
5 Alvise Munari (MSCI) blog, 20 October 2021
6 UK Aid. UK Aid, Investing in a better world report and UK Aid Survey results
7 PensionBee news release, 21 April 2021