Phoebe Stone, Head of Sustainable Investing
The problems highlighted by COVID-19 demonstrate some of the systemic issues evident within the fabric of our global ecosystem, both social and environmental. It is clear that, going forward, economic growth and progress needs to look and feel different. It needs to be more equitable, and with more recognition of society and care for the environment. The pandemic has demonstrated the vulnerability of our global population, as well as the intrinsic link between our healthcare systems and the economy. Before COVID-19, progress had been made in improving the health and wellbeing of millions of people across the world, increasing life-expectancy, reducing mortality rates and eradicating a significant number of diseases.
COVID-19 has not only reversed much of this progress, it has disproportionately affected the world's poorest and most vulnerable communities. According to United Nations estimates, 71 million people have been pushed back into extreme poverty over the course of 2020. COVID-19 has quickly become the largest crisis to threaten current and future generations. At the same time, we are warned that, through the risk of climate change, we are heading for mortality rates equivalent to the COVID-19 crisis every year by mid-century unless action is taken.
In response to the pandemic, global fiscal stimulus topping $15 trillion was announced (more than three times the amount spent following the 2008 financial crisis). Given the context of the crisis we face, capital is directed at healthcare and support for those in need, alongside significant levels of financial backing for major environmental commitments across the globe. Together with government support, there is renewed focus and real momentum from the investment community behind investment in healthcare and the green economy. This makes these two sectors both attractive from an impact perspective and one that we believe will generate good returns over the medium term.
The vital nature of the healthcare sector to the global economy and society is undeniable, especially in a post-pandemic world. The opportunities for investors in healthcare are compelling if care is taken to select well-run companies that are able to manage their risks, and create long-term growth by developing and implementing innovative solutions. Investing in health not only saves lives but is also a crucial investment for the wider economy. A healthy populous leads to increased productivity, better job prospects and benefits human capital development more widely.
Transitioning to green
What sets the start of this economic cycle apart is the environmentally directional approach taken by policy makers. The majority of governments now explicitly reference climate change, and are directing significant portions of the stimulus towards tackling environmental issues. We view this as part of the paradigm shift brought about by the pandemic. Whilst awareness and momentum for investment in the transition to a low carbon economy has been building for several years, it has now become a necessary element of government policy.
A sustainable future
What we have been focusing on at LGT Vestra for some time has now become more widely acknowledged: there should not be a trade-off between profit and progress or between profit and purpose. We acknowledge that we can't solve every problem with financial market capital. For some of the challenges that we face, philanthropy, supranational funds and collaboration need to play a significant role. But what we do know is that for us to have a sustainable future we need to rethink growth, reframe investment and promote conscious capitalism.
Each year, we publish our 'Sustainability 360' report to provide our clients with an insight into the themes and investment ideas running through sustainably run portfolios at LGT Vestra. In what continues to be a challenging period for all of us, we are delighted to announce the publication of 'Sustainability 360, 2021: Rethinking growth,' which delves into more detail on the subjects of healthcare and the green transition.
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