Access to healthcare - more important than ever The link to Climate and Planetary Boundaries The role of pharmaceuticals and the funding of There is a real risk that climate change and reduced healthcare biodiversity could worsen the problem. Emissions According to the OECD, pharmaceuticals are the third and pollution could raise the incidence of respiratory largest healthcare expenditure item after in-patient diseases, heavy rains and higher temperatures could and out-patient care, accounting for 16% of average raise occurrence of fevers (e.g. Dengue, West Nile), while health spend, even before including in-hospital 17 challenges to food availability and affordability could pharmaceuticals costs . These are costs predominantly impact healthy nutrition. covered by government financing or compulsory insurance schemes. However, the WHO estimates that Healthcare costs are escalating quickly as over 800 million people are spending over 10% of multimorbidity worsens household budgets on health for themselves, a sick child Historically there has been a focus on the link between or family member – these can result in “catastrophic 18 health and mortality, but there is now a heightened expenses” that can lead to severe poverty. awareness of multimorbidity which is defined as the The situation is particularly acute for innovative remedies presence of two or more long-term health conditions. and solutions. A survey by our Grassroots Research® team Multimorbidity is a major contribution of the sustained showed around 40% of US diabetes educators surveyed increase in healthcare costs as a share of GDP in OECD highlighted that new oral (not injected) diabetes drug countries. Among OECD Member countries, the United were very attractive but could be prohibitively expensive States has the highest percentage of GDP spent on without insurance. healthcare – 16.8% in 2020. For context, US Military expenditure was 3.7% of GDP in the same year. While The UK is an example of where private health insurance lower than US, the figures for UK, France and Germany are is not standard due to its broad and free access to 14 still above 12%. healthcare. However, the UK Healthcare system is While life expectancy has risen in recent decades, this has underfunded, preventing every new therapy being not been aligned to higher life quality or health, but an supported and a divide has developed where those with ability to address or delay terminal disease. Age is a driver better financial means can go externally for better or of health spending which is partly due to the prevalence quicker treatment. 15 of multimorbidity also rising with age. Investing in Health A combination of an ageing population and an increase Investors could play a critical role by contributing in long-term conditions means multimorbidity is set to rise. to Inclusive Capitalism via investing in health. In the Costs increase significantly with each additional condition US alone health spending is projected to grow at an and a near exponential relationship between the number average annual rate of 5.4 percent for 2019-28 and to 16 19 of conditions and costs will play out. reach USD 6.2 trillion by 2028. Healthcare and military expenditure as a percentage 1. For investors there are potential opportunities to invest in health via the following themes: 18.0% – Biotechnology and Pharmaceutical companies could 16.0% provide innovative drugs to treat diseases like diabetes, 14.0% HIV and heart diseases for example to improve life 12.0% quality and life expectancy 10.0% – Medical technology with companies providing 8.0% pacemakers, stents or dental implants 6.0% – Health tech and data driven solutions with examples 4.0% being telemedicine to contact doctors via a video 2.0% conference or apps to address diseases like obesity and depression; digital tools are able to serve a greater 0.0% number of patients more effectively and at lower cost FranceSweden anada Korea ssia – High-quality and affordable nutrition with low fat and Germany enmar sugar United States Netherlands – Solutions to provide education on health and well- United Kingdom being to a broad population ealthcare ilitary of GDP in select countries worldwide in 2020 2. Materiality of non-financial information For investors seeking unconstrained universes, it will be Source: Healthcare vs military expenditure comparison select countries important to identify evolving material ESG risks relating to 2020 | Statista 3