Investing with Purpose: Aligning Financial Returns and Social Impact in Health Equity Initiatives

How fortunate we are to live in a world that offers us incredible scientific and medical advancements to alleviate our anxieties and ailments and yet, how unfortunate it is that not all of us have access to quality healthcare. There’s no doubt about it:? The urgency of fighting for health equity, especially in the United States, has become crystal clear.

However, achieving equitable access to quality healthcare requires collaboration from different sectors and individuals. Rather than looking to traditional corporate social responsibility (CSR) or philanthropy to temporarily bandage social and health inequities, the time has come for a stronger, more concerted, and more purposeful way to bridge these gaps and enable resilient, sustainable healthcare systems and solutions for all.

The Covid pandemic revealed a few hard truths. It put a spotlight on health inequities in the U.S., in respect to disproportionately high rates of infection, hospitalization, and death among Black Americans. According to the Black Coalition Against Covid, one in 310 Black children lost a parent or caregiver, compared to one in 738 White children between April 2020 and June 2021.

The pandemic also made it even more evident that achieving equitable access to quality healthcare requires collaboration across the government, corporate, nonprofit (charitable) sectors. But as the chart below illustrates, the corporate sector has devoted significantly less resources to addressing health equity issues.

Total investment in health equity?

One of the best ways to change that and spur more collaboration is through impact investing.?

Instead of just relying on donations and grants, we witness a growing movement of impact investors who actively seek out opportunities that align with their values while still yielding significant financial returns.

The Rise of Social Impact Funds

When it comes to impact investing there are two primary forms of funds. ESG (environmental, social and governance) funds consider 16 criteria when choosing which companies to invest in–considering everything from labor relations, board membership, and conflict risks to environmental impact, carbon emissions, and diversity. Because it takes an in-depth view of each company the fund invests in, ESG funds avoid many red-flag issues that more traditional investment funds may miss, which generally results in far lower risk and therefore a long-term higher rate of return. Social responsible investing (SRI) is a type of ESG investing that generally takes a more active role in that investors not only opt out of certain investment opportunities that fail to make a positive social impact but by buying stocks in individual companies that have socially or environmentally responsible missions or practices.?

Numerous studies and research reports show that SRI investing can generate returns similar to or even better than conventional investment strategies. According to Investopedia, over the past 10 years, the MSCI KLD 400 Social Index, one of the oldest indexes that tracks socially responsible investment funds, has delivered a 14.18% annualized return,?

It’s important to note that while there lately has been a significant amount of noise voicing huge opposition to ESG and SRI funds, most of those objections are based on political beliefs rather than on financial data. Indeed, reports from trusted institutions like Morgan Stanley, NYU Stern Center for Sustainable Business, Barclays Research, demonstrate that SRI does not result in lower investment returns and can even provide downside protection during economic crises.?

While pharmaceutical investing is not for the risk adverse or for those who seek a quick rate of return, the industry as a whole performs well and is more consistent than many other industries. According to bankrate.com, the iShares U.S. Pharmaceutical ETF (IHE), which tracks the performance of the U.S. drug industry, has returned nearly 11 percent annually over the past decade and has generated positive returns in 8 out of 10 years.

In the healthcare sector, social impact funds have catalyzed groundbreaking advancements. They have fueled the development of life-changing medical technologies, supported community health clinics in underserved areas, and boosted research into neglected diseases that affect millions worldwide.?

To date, however, Syridex Bio is one of a very few SRIs to focus exclusively on investing in companies which develop medical therapies to serve underserved populations.?

Addressing Health Equity: A Win-Win for Investors and Communities

The beauty of investing with purpose in health equity initiatives lies in its win-win nature. On the one hand, investors can enjoy financial returns from successful ventures, ensuring the sustainability of their investments. On the other hand, communities benefit from improved health outcomes, access to healthcare services, and reduced disparities.

By prioritizing health equity, investors are investing in a healthier and more productive society, which, in turn, can lead to stronger economies and increased consumer demand for products and services.

And today the convergence of healthcare and technology has further accelerated the impact investing landscape. Startups and companies focusing on digital health solutions, telemedicine, and data-driven diagnostics have received substantial support from impact investors.

These innovative solutions have the potential to revolutionize healthcare delivery, making it more efficient, affordable, and accessible to all, irrespective of geographic or socioeconomic barriers.

Conclusion

While impact investing in healthcare has gained significant momentum, it still faces challenges. I am however optimistic for a brighter and healthier future for all, as this transformative approach continues to shape the landscape of health equity initiatives and confident that, together, we can transform lives, enhance communities, and drive positive change on a grand scale.?