Investing for Health: Reshaping the notion of the materiality of health and ESG investing

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Like the peaks and valleys, loop-de-loops and corkscrews of an amusement park, the volatility of the current stock market is enough to make your head spin. But markets have a way of realigning themselves as shareholders rethink their investment strategies, assessing both the immediate circumstances and their long-term impacts. So what will the future of investing look like after 2020?

Because of the COVID-19 pandemic’s economic impact, the links between population health and the economy have never been so clear. Once considered the invisible H in environmental, social and governance (ESG) reporting, health now is the pivotal piece that underpins all of ESG, and it will play a key role in how companies and shareholders assess where to invest in the years to come. From where we stand, the future of investing is investing for health.

ESG investing is moving mainstream
Just a few years ago, ESG investing on the fringe, considered a less traditional way of directing investment dollars. That’s no longer the case, according to Mona Naqvi, Senior Director of ESG, S&P Dow Jones Indices.

“What’s changed in the last five years is the level of interest from the mainstream community in health investments—there’s more data, disclosure, information and insights than ever before. For the first time we have the ability to integrate ESG information with traditional investor analysis in a way that allows us to expand our risk management toolkit,” Naqvi says, “making ESG much more accessible.”

As ESG investing has seen a rise in popularity, the COVID-19 pandemic has further crystallized the way business and health are connected, notes Amit Bouri, CEO of the Global Impact Investment Network (GIIN).

“As we’re in a health crisis that’s spurring a financial crisis, this has put a spotlight on our health system and its vulnerability. We’re seeing the interconnectedness of our systems: we’re appreciating a more holistic view of what contributes to human health—our food and agricultural systems, our supply chains, the importance of the built environment and how critical shelter is to health,” Bouri says.

At the GIIN, Bouri and his team are answering more questions about investing than ever before. Many shareholders, CEOs, and business leaders are already looking past the pandemic to recovery and the future.

“We’re already seeing a much stronger intentionality as we think about how we’re going to recover from this crisis,” Bouri says. “We’re asking, ‘How do we build back better?’ And in doing so, how do we think about a more integrated way of investing to provide better healthcare and, more importantly, better health across the board. Investors will play a critical role in driving that future.”

Health and wellness are good for the bottom line
In the past, some professionals incorrectly equated ESG investing with a tradeoff for traditional returns—sacrificing profits for sustainable investment choices. That’s simply not the case, says Alison Omens, Chief Strategy Officer of JUST Capital.

“We’re consistently seeing—and there’s early evidence—that companies that are performing well on ESG frameworks tend to be outperforming their peers. Through a recent assessment, we found that companies that have performed well on JUST Capital’s worker/stakeholder assessment are outperforming companies in the lowest quintile by 7.3%.”

Investing with a focus on health and well-being isn’t just a boon to workers and individuals, it benefits a business’s bottom line. Companies that prioritized health in past financial crises saw lower employee burnout, increased productivity and higher job satisfaction that allowed them to successfully weather the storm.

“We’ve been tracking corporate performance on COVID-related issues: Have companies announced new or more flexible paid sick leave policies? Have they created financial assistance in some way? Have they created an emergency relief fund? Are they extending or being flexible on hours? There’s a body of evidence from the 2008 recession that suggests that companies who were good on shareholder issues and good on operational issues tended to perform better than their peers and survive than those that didn’t,” Omens says.

Looking to the future
As companies and businesses look beyond the COVID-19 crisis, the market will eventually stabilize. It’s through this global crisis that new investment priorities will come into focus.

“Companies are being put under the microscope like never before regarding public health issues and the way they treat their employees,” Naqvi says. “The COVID-19 issue is providing us the roadmap and the blueprint to better integrate a more systemic and holistic understanding of health as it relates to the markets. This crisis has demonstrated the materiality of public health.”

One thing is clear: investing for health means investing in the well-being of a business’s best resource—its people. Global markets are focused on the importance of human health and how wellness impacts economies around the world—there’s no going back from that. Investment strategies must account for health or they’ll be left in the dust.

“Having this new lens on what companies are doing, how they’re treating employees, if they have mental health policies in place – these are all going to be part of the conversation going forward—without a doubt,” Naqvi stresses.

As the future of health and investing unfolds, IWBI is committed to supporting the development of spaces and workplaces focused on human wellness and safety. The WELL Building Standard—a free resource from IWBI—can help guide businesses, corporations and organizations in implementing the strategies necessary to promote health and wellness within their institutions.