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Health and well-being: An opportunity for investors

April 6, 2022

reading time: 10 minutes

by Malte Stiel, LGT

Invest in health

For investors, the health and well-being megatrends offer exciting long-term prospects, especially if they are interested in sustainable investments.

“Who wants to live forever?” Eternal life may not yet be within our reach, but for more  and more people, a longer life certainly is.

Considerable progress has been made in recent decades with regard to medical treatment options and technologies. In addition, more and more sick people around the world are gaining access to these services and treatments. This has brought humanity a major step closer to the United Nations’ goal of ensuring healthy lives and promoting well-being for all at all ages (Sustainable Development Goal Nr. 3). 

Mortality rate
The global mortality rate sinks, the life expectancy rises - but still, the number of preventable deaths remains high. © World Bank

For example, between 2000 and 2019, the global mortality rate for children under five halved from 76 to 38 cases per 1000 children. At the same time, the average life expectancy of newborns has risen from just under 68 years to almost 73 years over the same period.

So is all well in the global health sector? Yes and no – despite many far-reaching improvements and successes, the number of preventable deaths remains staggering. Mortality rates may have halved from 2000 to 2019, but the numbers remain alarmingly high: in 2019, more than 5 million children died before their fifth birthday, and UN targets to combat tuberculosis, the leading cause of death from a single infectious agent in 2019, were missed by a wide margin.

The pandemic’s impact on the health sector

At the same time, the Covid-19 pandemic has relentlessly exposed the weaknesses of current healthcare systems and inequitable access to such systems, threatening to reverse many gains that have been made.

More anxiety during pandemic
Indirect consequences of the pandemic on the health sector include rising numbers of anxiety. © OECD

According to a WHO study, the pandemic has stalled or even reversed progress made in reproductive and maternal health, as well as medical care for premature infants, babies, children and adolescents. Approximately 90% of participating countries still report one or more disruptions to key parts of their healthcare system – for example, sick people not receiving their medication due to supply shortages.

Indirect consequences of the pandemic can also be felt, with an estimated 1.4 million fewer people receiving the treatment they need for tuberculosis in 2020 compared to 2019 – especially in India and Africa. But developed countries are also experiencing significant repercussions, such as sharp increases in suicide attempts and a greater prevalence of anxiety and depression.

An opportunity for investors: Structural changes in the healthcare sector

In addition to the acute, pandemic-related problems that exist in healthcare systems, the health and well-being industry is also facing a structural transformation that will give rise to far-reaching changes in the medium to long term:

  • Demographics: The global population is expected to grow by 50% by 2100. By the end of the current decade alone, there will be approximately 8.6 billion people in the world.
  • Prosperity: By 2030, 5.3 billion people are expected to be in the middle class. Together with increasing life expectancy, the massive increase in wealth will create significantly higher but also changing demand for well-being and health-related services.
  • Lifestyle: This increased prosperity is leading to healthier lifestyles, including a greater awareness of healthy eating, better hygiene and more exercise, and thus a greater demand for digital and mental health services.

For investors, these upheavals translate into attractive opportunities: with the right investments, they can benefit from global megatrends and at the same time create value for society – namely through the further development of medical solutions and access to medicine for all.

Invest in health

Are there any corresponding health-related ETFs that investors can invest in?

At present, there is no ETF that can holistically track this issue, meaning that an active manager is needed to individually cover the various issues contained in this broad segment.

Social Bond of the Year for 2021

In 2021, the Swedish project “EIT Health” received the social bond of the year award, reflecting the current attractiveness of investments in the area of prevention.

Social bond market
Covid-19 has made social bonds more attractive for investors.

As part of a private issue by the insurer Skandia, 21'000 people with an increased risk of diabetes will receive financial support for diabetes prevention. In the event of illness, part of the costs will be covered. However, if it turns out that the patient has been able to reduce the likelihood of becoming diabetic as a result of the program, the local government pays Skandia up to 10% on the investment.

Overall, the Stockholm government saves money by having fewer diabetes patients  – a return on investment of up to 100% is expected  – and Skandia receives additional premiums if it helps at-risk patients through preventative measures.

The pandemic is making social bonds even more attractive: after the first social bond issues in 2016 and 2017, the Covid-19 pandemic led to a surge in issues in 2020. At approximately 150 billion US dollars, the volume of such bonds has increased nearly tenfold year on year. Over time, the social bond market is therefore evolving from a small niche market to an established sub-asset class.

Title image: © GettyImages, Tom Werner / GettyImages, Morsa Images / GettyImages, Marko Geber

Key takeaways:

  • Despite global progress in the health sector, the number of preventable deaths remains high. In addition, the Covid-19 pandemic is threatening to reverse many gains that have been made.
  • Global trends such as an increasingly ageing and wealthier world population and the associated healthier lifestyles are bringing about structural change in the health and wellbeing sector.
  • This structural change offers opportunities for investors.
Invest in health

Interested in sustainable investments?

Our portfolio management mandate “Focus Sustainability” provides a forward-looking investment solution.

Learn more here.

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