Rights (and wrongs) of sustainable healthcare investment
The global trend towards sustainable investing may be unstoppable, but investors who let conventional ESG (environmental, social and governance) benchmarks guide their decisions are going to miss some important dynamics in the sector. While environmental themes garner most of the headlines in the financial pages, important though they are, they are not the most important facet of sustainability in healthcare, says Dr Michael Schröter, co-head at the Global Equity Sustainable Healthcare Fund.
In this emerging era of squeezed healthcare budgets and growing demand for care, it is the S, not the E of ESG that matters most. In short, ensuring the broadest possible access to healthcare across a given society within tight financial constraints is going to become a central theme in Europe, the US and beyond.
In many cases, companies routinely increase prices for their products twice a year in the most important healthcare market – the US – without adding any new value, says co-head at the fund, Dr Nathalie Flury. Such an approach will meet with increasing resistance, she adds. “It is not sustainable from an affordability point of view.”
This is a blind spot for a number of healthcare investment funds with a sustainability label, which do not give value and affordability its due weighting, says Flury. “They invest in large cap names and add their ESG filters – but if you look at their pipeline and pricing, there are no sources where you can receive more details on the social part of the ESG equation for healthcare companies,” she says.
A new approach
This is central to Global Equity Sustainable Healthcare’s approach. “We could not buy this data in; we had to build out ourselves,” says Flury. “You have to complete data by talking to healthcare management and key opinion leaders, going to the literature to assess the value of a product and what makes health economic sense – and what it brings to society.”
Things are changing slowly. Big pharma has started to address this issue, and is starting to focus more on demonstrating better outcomes and their value to payers. However, it is in the mid market where much of the innovation in value, efficacy and outcomes is happening. A therapy that reduces a hospital stay and returns a patient to work, saves on the cost of care and gets that individual back contributing to economic growth and to the tax base, for example. “When a new product is brought to market, increasingly the developer will look to show the health economics data and the cost implications to the system,” says Flury. “If you price a therapy at a fair price that makes sense on a health economic level, payers will pay."
An increasing number of biotech players are conducting such research. Independently the US Institute for Clinical and Economic Review (ICER) also analyses products and calculates an optimal and fair price for each of them, boosting the chances of reimbursement in the US if the institute attests positive health economics, says Flury. Global Equity Sustainable Healthcare applies such an approach broadly in conventional biotech, and beyond pharmaceuticals, as well, looking for innovation across products, business models and services that help make health budgets go further or that improve healthcare access equity.
Clinical and cost benefits combined
The fund is interested in drugs that offer clinical efficacy and competitive pricing to health systems, either by simply coming in cheaper than rivals or, more often, by offering to save payers other costs. Such products could obviate the need for adjacent therapies, prevent the progression of a disease to a more complex and expensive stage, or prevent rehospitalisation. “We identify companies that offer that clinical benefit along with cost savings,” says Schröter.
The fund also pursues investments beyond the molecule in areas including medical devices, services, diagnostics and digital, which integrate technology into care pathways to drive better outcomes and save costs. One example is diagnostic services paired with medical devices, such as insulin pump/continuous glucose monitor combinations that can dramatically improve diabetes care management and patient lifestyles.
Innovators that work out how to bring “big” data to bear to improve outcomes by identifying optimal treatments, or ways to target follow-ups for the most at-risk patient groups to ensure they receive timely interventions are another example. Wearables that help patients work with clinicians to manage their conditions better, and digital therapeutics – for example, apps that help patients to change behaviours and manage their mental health – are further exciting areas of promise.
It is an investment approach that offers a clear win by identifying opportunities that innovate beyond the conflicting trends of rising drug costs and constrained healthcare budgets. Along with the more sustainable health systems that such products will help to create, a sustainable stream of profits for investors will be established over the long term.
- Capital loss risk: It is important to remember that the value of investments and any income from them can go down as well as up and is not guaranteed
- Equity risk: Funds that invest in securities listed on a stock exchange or market could be affected by general changes in the stock market. The value of investments can go down as well as up due to equity markets movements
- Discretionary management risk: Discretionary management is based on anticipating the evolution of different markets and securities. There is a risk that the fund will not be invested at any time in the most efficient markets and securities
- Foreign Exchange risk: Where overseas investments are held, the rate of exchange of the currency may cause the value to go down as well as up. Variations in exchange rates between currencies can have a significant impact on the performance of the products presented
- Small & Mid cap risk: Please note that the fund is invested in securities issued by companies which, due to their small or mid-market capitalization, are less liquid and may present higher risks
This document is only intended for professional investors as defined by MIFID, in Switzerland by HSBC Asset Management (Switzerland) AG and is only intended for qualified investors in the meaning of Art. 10 para 3 of the Federal Collective Investment Schemes Act (CISA). All non-authorised reproduction or use of this commentary and analysis will be the responsibility of the user and will be likely to lead to legal proceedings. This document has no contractual value and is not by any means intended as a solicitation, nor an investment advice for the purchase or sale of any financial instrument in any jurisdiction in which such an offer is not lawful. The commentary and analysis presented in this document reflect the opinion of HSBC Asset Management on the markets, according to the information available to date. They do not constitute any kind of commitment from HSBC Asset Management (France). Consequently, HSBC Asset Management will not be held responsible for any investment or disinvestment decision taken on the basis of the commentary and/or analysis in this document.
If necessary, investors can refer to the complaints handling charter available in the banner of our website.
Please note that the distribution of the product can stop at any time by decision of the management company.
Tax treatment depends on the individual circumstances of each client and may be subject to change in the future. Capital is not guaranteed. It is important to remember that the value of investments and any income from them can go down as well as up and is not guaranteed.
Past performance is no guarantee of future returns. Future returns will depend inter alia on market developments, the fund manager’s skill, the fund’s level risk and management costs and if applicable subscription and redemption costs. The return, the value of money invested in the fund may become negative as a result of price losses and currency fluctuations. There is no guarantee that all of your invested capital can be redeemed. Unless stated otherwise, inflation is not taken into account.
Synthetic Risk and Reward Indicator (SRRI): 6 out of 7. Do not run any unnecessary risk. Read the Key Investor Information Document. The fund invests in instruments of high level of volatility. The value of investments can go up as well as down. The rating is based on price volatility over the last five years, and is an indicator of absolute risk. Historical data may not be a reliable indication for the future. The scale varies from 1 (least risky) to 7 (most risky). The rating is not guaranteed to remain unchanged and the categorisation may shift over time. The lowest rating does not mean a risk-free investment. Do not run any unnecessary risk. Read the Key Investor Information Document.
Important information for Luxembourg investors: HSBC entities in Luxembourg are regulated and authorised by the Commission de Surveillance du Secteur Financier (CSSF).
Important information for Swiss investors: This document may be distributed in Switzerland only to qualified investors according to Art. 10 para 3, 3bis and 3ter CISA. The presented fund is authorised for distribution in Switzerland in the meaning of Art. 120 CISA. (Potential) investors are kindly asked to consult the latest issued Key Investor Information Document (KIID), prospectus, articles of incorporation and the (semi-)annual report of the fund which may be obtained free of charge at the head office of the representative: HSBC Asset Management (Switzerland) AG, Gartenstrasse26, P.O. Box, CH-8002 Zurich. Paying agent in Switzerland: HSBC Private Bank (Suisse) SA, Quai des Bergues9-17, P.O Box 2888, CH-1211 Genève 1.
HSBC GIF Global Equity Sustainable Healthcare is a sub fund of HSBC Global Investment Funds, a Luxemburg domiciled SICAV. Before subscription, investors should refer to Key Investor Document (KIID) of the fund as well as its complete prospectus. For more detailed information on the risks associated with this fund, investors should refer to the complete prospectus of the fund. The shares of HSBC Global Investment Funds have not been and will not be offered for sale or sold in the United States of America, its territories or possessions and all areas subject to its jurisdiction, or to United States Persons.
Any forecast, projection or target where provided is indicative only and is not guaranteed in any way.
Allocation is as at the date indicated, may not represent current or future allocation and is subject to change without prior notice.
These examples are historical and contains information that is not current and should not be construed as an advice, an offer to sell or solicitation of an offer to purchase or subscribe to any investment.
Swing pricing and Gates: Yes.
“Swing pricing” is a price adjustment mechanism intended to protect the unitholders, or shareholders, of a collective investment undertaking (UCI) against the transaction costs borne by this UCI due to new subscriptions or new buyouts. These transaction costs include, but are not limited to, broker commissions (for equities), the spread between the bid and ask prices (for interest rate products), taxes on financial transactions, fees transactions taken by the depositary, etc.
The fund has a redemption threshold (gate), the level at which the manager of an undertaking for collective investment in transferable securities can stagger the redemption of securities instead of proceeding immediately.
Article 8 SFDR =The product promotes environmental or social characteristics, or a combination of those characteristics, provided that the companies in which the investments are made follow good governance practices even if this is not its central point, or the central point of the investment process.
More information on our ‘Responsible Investment’ Policy and ‘Implementation Procedures’ can be found on our website. The decision to invest in the promoted fund should take into account all the characteristics or objectives of the promoted fund as described in its prospectus.
HSBC Asset Management is the brand name for the asset management business of HSBC Group. The above document has been produced by HSBC Asset Management (France) and has been approved for distribution/issue by the following entities:
HSBC Asset Management (France) - 421 345 489 RCS Nanterre. Portfolio management company authorised by the French regulatory authority AMF (no. GP99026) with capital of 8.050.320 euro, in Italy, Spain and Sweden through the Milan, Madrid and Stockholm branches of HSBC Asset Management (France), regulated respectively by Banca d’Italia and Commissione Nazionale per le Società e la Borsa (Consob) in Italy, the Comisión Nacional del Mercado de Valores (CNMV) in Spain and the Swedish Financial Supervisory Authority (Finansinspektionen) in Sweden. Offices: HSBC Asset Management (France)
Immeuble Coeur Défense - 110, esplanade du Général Charles de Gaulle - 92400 Courbevoie - La Défense 4 – France.
HSBC Asset Management (Switzerland) AG: Gartenstrasse 26, P.O. Box, CH-8002 Zurich. Paying agent: HSBC Private Bank (Suisse) S.A., Quai des Bergues 9-17, P. O. Box 2888, CH-1211 Geneva 1 In respect of the units distributed in Switzerland, the competent courts shall have exclusive venue at the registered office of the Representative in Switzerland. The official documents as per Art. 13a CISO as well as the (Semi-)Annual Report of the Fund may be obtained free of charge at the office of the Representative in Switzerland.
Non contractual document
Copyright : All rights reserved © HSBC Asset Management (France), 2021.