The global response to COVID-19 has been nothing short of a technological revolution in the healthcare sector. My colleague Ty Lee wrote recently about developments in diagnostics, therapy and vaccination technologies. Perhaps most remarkable has been the speed with which innovations in these technologies have come about, pointing to the scale of human ingenuity.
These ‘wins’ are important to recognise as we continue to face the on-going COVID-19 pandemic. Especially where technological developments have also provided a response to existing global challenges. For example, net zero carbon commitments now cover more than two thirds of the global economy as governments look to rebuild economies at a national level. However, significant challenges have also emerged surrounding the governance and ethics in the use of new technologies as they are adopted.
Global vaccine rollout
Only a few countries are capable of manufacturing vaccines on their own. Effective global governance of the equitable distribution of the vaccine has, however, been lacking. Indeed, national self-interests have come to the fore. This means that where you live has become the most important determinant of vaccine accessibility . Ethics aside, certain other consequences are now becoming apparent, such as the emergence of new virus mutations that are hindering efforts to control the pandemic.
Equitable distribution has been a challenge at a national level too. The Centre for Disease Control (CDC) indicates that Hispanic and black Americans are receiving vaccinations at a significantly slower rate than white Americans, despite being almost twice as likely to die from COVID-19. Technological advances alone are not expected to overcome these geopolitical factors or structural biases. Without good governance, the impact of the vaccine rollout may be undermined, and negative impacts exacerbated for those who are already vulnerable.
The spread of misinformation has significantly threatened global public health during the pandemic. Social media platforms and messaging apps, such as Facebook, Twitter WhatsApp, have been key enablers of the spread of false information. Despite this obvious governance failure, some have prospered. Facebook, for example has seen a 39% rise in advertising impressions in Q1 2020.
It is both saddening and frustrating to see the technology that has helped such platforms become so successful has also enabled large negative impacts on society. Especially where the same technology has the potential to help in the fight against infections, as demonstrated by the successful contact-tracing programmes in South Korea, Vietnam, Japan and Taiwan.
Unintended environmental consequences
The sight of discarded face-masks has become commonplace around cities. It is therefore little surprise that the environmental impact of personal protective equipment (PPE) waste is receiving growing attention. Protection is, of course, a priority. However, it is also adding to the carbon burden. PPE is not the only by-product from the healthcare sector, which has been amongst the highest growing during the pandemic. Vials, syringes and cartridges have also seen greater demand. Healthcare, alongside FMCG and e-commerce, has therefore been major contributor to a projected compound annual growth rate of 5.5.% in the plastic packaging market, mostly in response to COVID-19.
Good governance in times of crisis
The thematic nature of WHEB’s positive impact strategy means that we have little or no exposure to certain sectors, including the mega cap consumer technology names. Our approach also results in an overweight in health and industrials. As a result, the strategy is not directly exposed to some of the major governance issues outlined above, such as the infodemic enabled by the social media firms which often find their way into many ‘green’ funds. Nevertheless, we remain acutely aware of the risk that poor governance will significantly undermine progress by positively impactful companies held in the strategy, harming sustainability outcomes, and investors’ returns.
As we have previously written, environmental, social and governance (ESG) research is essential to our understanding of the fundamental quality of a business. We integrate robust sustainability and financial analysis of companies at every stage of our analytical process. Additionally, as long-term investors we take stewardship seriously, and engagement and voting are both an output of and input into our investment process.
As the pandemic has unfolded, we have scrutinised reactions from companies in the portfolio, particularly focusing on the pharmaceutical sector. WHEB has been pleased to see how companies such as Hikma, which supplies 11 out of the 13 most widely used injectable medicines needed to treat COVID-19 patients, have worked to ensure that resources remained available across the industry.
Beyond this, through our support to industry initiatives such as the Institutional Investors Group on Climate change (IIGCC), WHEB has also actively supported on public policy issue. This included urging the UK Government to deliver a clean and just recovery from the pandemic.
There is no doubt that the pandemic has accelerated the deployment of a variety of healthcare technologies that would otherwise have taken many years to achieve scale. The pace of vaccine development and the magnitude of successful vaccinations are perhaps the most remarkable. But for these advances to achieve their full potential, good governance remains an essential foundation.