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Why the UN's Sustainable Development Goal No 3 offers a roadmap for corporate growth and profitability.
The UN's Sustainable Development Goals (SDGs), adopted in 2015, were a historic call to action to secure peace and prosperity for people and the planet by 2030. Developed alongside the 2015 Paris Agreement on climate change, the 17 ambitious SDGs challenge governments, multilateral agencies, and businesses to address the enormous issues facing the world through a series of interlinked, measurable milestones.
SDG 3, which puts the spotlight on good health and well-being, has specific targets that provide extensive development opportunities for companies in the pharmaceutical, medical technology, and sports and nutrition industries. At the highest level, these targets focus on increasing life expectancy, providing better protection against disease, and developing access to universal healthcare.
Improved medical care, combined with rising prosperity, has led to a general increase in life expectancy, which in turn has fuelled the rapid growth of the global population. Whereas there were just 2.5 billion people on the planet in 1950, today there are over 8 billion, and the population is expected to exceed 10 billion by the end of this century. This rapid increase is a stark reminder of the need to maintain a sustainable lifestyle and use Earth's precious resources sparingly.
The pandemic shows how better access to medicines can be achieved.
"In the context of SDG 3, though, it is the changing demographic distribution that poses new challenges," says Tilman Dumrese, a senior equity analyst at LGT Private Banking. The proportion of people aged 65 and over is expected to rise from around 10 per cent today to 16 per cent in 2050. "That means the number of people with diabetes, cancer, cardiovascular disease, and other chronic conditions will also increase, providing incentives to companies in the healthcare industries to develop effective and affordable treatments," he continues.
An important tool for investors is the Access to Medicine Index, an assessment of how the pharmaceutical industry is improving access to medicine. It analyses how 20 of the world's largest pharma companies in 106 low- and middle-income countries regulate access to medicines to treat 82 conditions and pathogens.
The pandemic jeopardised some of the progress towards meeting SDG 3 targets, while also demonstrating how better access to medicines can be achieved. The pharma industry ramped up its efforts to develop new vaccines and other treatments, and worked hard to minimise disruption to supply chains, providing a case study on the complexity of logistics networks.
Innovative medicines developed by the pharmaceutical industry have already made valuable contributions to improving the quality of life and increasing life expectancy, despite more people receiving chronic diagnoses. Examples of successes include the development of anti-hypertensive medications that reduce the risk of stroke, and cholesterol-reducing statins.
In addition to the use of new drugs, early detection is crucial for successful treatment.
New drugs to treat type-2 diabetes and obesity, like Semaglutide, also offer long-term ways to reduce the risks associated with living with these conditions. Similarly, new therapeutic agents continue to play a key role in the treatment of various types of cancer.
"Against this background," explains Dumrese, "it is not surprising that current estimates suggest that the global pharma market could grow by 6.4 per cent per year, from about USD 1.5 trillion to USD 3 trillion in 2033."
In addition to using new drugs, timely detection is crucial for successful treatment, especially for certain types of cancers. Medical technology companies provide everything from surgical instrumentation, through imaging diagnostics, to monitoring equipment, and respiratory support. Diagnostics companies are under particular pressure to continue to innovate. "We see this as one of the main drivers in the medical tech and diagnostics market, which is expected to generate global sales of USD 610 billion this year and achieve USD 1 trillion by 2033," predicts Dumrese.
It isn't just drug manufacturers and diagnostics firms contributing to the achievement of SDG 3 targets. Increasing prosperity means that exercise, a healthy diet, and wellness are now more achievable than ever for rising numbers of people. As a result, the global sporting goods market is expected to grow from USD 500 billion today to nearly USD 800 billion in 2033. Meanwhile, the health and wellness market could more than double to USD 124 billion in 2033.
"We are convinced that efforts to achieve SDG 3 offer investors excellent long-term investment opportunities," concludes Dumrese. Since any equity investments is linked to typical risks, he suggests that it is important to focus on companies with certain characteristics. These include a clear strategy to gain market share in one of four identified industries: pharma, medical tech, sporting goods, and nutrition and wellness.
In addition, the company must have a high sustainability rating. "We attach a particular importance to the 'S' in the ESG (environmental, social and governance) rating," says Dumrese. "That's because the social dimension is closely linked to SDG 3." The way a company prioritises human and workforce rights, as well as supply chain responsibility, is a good indicator of its approach to overall sustainability.
The conclusion: when considering where to invest, SDG 3, with its focus on ensuring healthy living and well-being for all age groups, can provide investors with a useful blueprint for a thematic investment strategy.
LGT’s experts analyze global economic and market trends on an ongoing basis. Our research publications on international financial markets, sectors and companies help you make informed investment decisions.
