Institutional investors’ sustainability policies and the outcomes for the healthcare sector portfolios

Abstract

The article reviews policies with respect to responsible investment in health as well as actual portfolio holdings in drug development firms by five large public pension funds in the US, Japan, Norway, the Netherlands and Canada. In spite of commitment to “sustainable corporate value”, no discernible tilt towards companies conducting research in the areas of high disease burden and unmet medical need is observed. Rather investments very closely track the size (market capitalisation) of the portfolio firms. A representative drug development company in portfolios of large public pension funds is constructed by taking a weighted average of product track records of individual companies included in those portfolios. The weights are based on the share of the fund's portfolio allocated to individual companies. According to this calculation, only 1 in 10 new medicines brought to the market by a representative drug development company makes a substantial contribution to illnesses they target compared to the existing treatments. Nevertheless, developing and sharing best practices for sustainable investment is a relatively new agenda pursued by large public and quasi-public asset owners worldwide, which presents an opportunity for the medical research community to contribute to meaningful guidelines for responsible evidence-based investment into commercial medical research.