The sustainable investor for a changing world

Covid-19 taught us important lessons on pandemic preparedness. How can we plan for the future, and how can investors help bolster resilience against future pathogens? Alexander Bernhardt and Delphine Riou explore.

According to officially recorded World Health Organization (WHO) figures, Covid-19 has, so far, claimed 6,460,000 lives. The true number may be much higher – potentially up to 22 million. The International Monetary Fund estimates a cumulative economic loss of USD 11 trillion over 2020-21, with an additional USD 12.5 trillion expected through 2024.

Given this cataclysmic impact, it is critical the knowledge gained from combatting Covid-19 is utilised to prevent a similar-sized outbreak in the future. Particularly as climate change is expected to increase the distribution and transmissibility of certain pathogenic diseases. According to a recent study, 58% of infectious diseases are aggravated by climate hazards ­– such as warming, floods and drought – and their associated impacts on, for example, vector-borne and water-borne disease transmission.

Our increasingly interconnected world and the climate impacts we are set to experience mean investors and wider society should think carefully about future pandemic resilience.

Lessons learned?

Covid-19 left us with some clear lessons on pandemic preparedness.

It is key to ensure equitable access to vaccines in the future – a global pandemic needs a global solution. While the COVAX programme was set up to achieve this, it has had its problems.

This means asking difficult questions about patents. For a given pharmaceutical company, waiving patent and intellectual property (IP) rights for vaccines (or other treatments as the case may be) over the duration of a pandemic may be economically unattractive in the short term. But doing so would enable quicker local production at scale and could thus dampen pandemic impacts and produce tremendous macro- and socio-economic benefits whilst bolstering the firm’s reputation.

The World Trade Organization has recently approved a vaccine patent waiver aimed at addressing inequity in Covid-19 vaccine access globally. There is much debate over whether this will actually improve production or access and others criticize the move as being “a day late and a dollar short” given Covid-19 has already run rampant and supply-side constraints for Covid-19 vaccines have lessened considerably since 2021. However, this could prove beneficial for IP sharing in response to future pandemics.

Whether these and other lessons on government messaging and public response have been learned is questionable. The current spread of monkeypox offers a test case. It is certainly worth highlighting that monkeypox appears to be a lesser threat compared to Covid-19. It is so far less virulent (the disease spreads primarily through skin-to-skin contact), there is a related vaccine already available, it appears to have a lower death rate, and the number of people affected and the economic impact are likely to be much smaller. But, even with these lower stakes, our collective response to the outbreak has proven inadequate, exposing continued weaknesses in global health systems.

For instance, the US’ response to the virus has been seen as lacking, with accusations of inadequate urgency in setting up testing capacity and a vaccine distribution strategy. In Europe, there has been unequal access to monkeypox vaccines.

What can investors do?

Investment in broad capabilities for future disease outbreaks, and continued investment in healthcare innovation and health infrastructure between pandemics, is critical. Our interconnected world can cause diseases to spread quickly, meaning cold chains for future vaccine distribution and local vaccine manufacturing capacity need to be improved. It also means investing in better capabilities to track the spread of disease.

McKinsey estimates that spending USD 85 billion to USD 130 billion over two years, followed by USD 20 billion to USD 50 billion per year after that – the equivalent of USD 5 per person per day – would substantially reduce the likelihood of future pandemics. It recommends investing in emergency response systems that are “always on”, together with healthcare systems that are ready for surges; improved infectious disease detection capabilities at global and local levels; and accelerated R&D on infectious diseases.

Immediately, there is an opportunity to invest in monkeypox vaccine production, which the WHO is calling for, particularly in Africa. This will be key to effectively tackling the disease in an equitable manner.

Generally, investors looking to strengthen the “S” portion of their ESG strategies can look to tap into the rise in social bonds following the pandemic. Social bond issuance jumped dramatically in 2020 to USD 165 billion, due to pandemic-induced investments in healthcare, up from around USD 20 billion in 2019, according to data from Environmental Finance. Figures for 2021 show the trend continued with USD 205 billion raised through over 1,000 social bond issuances.

Exhibit 1: Social bonds formed a substantial prorportion of sustainable bond issuance in 2021 (USD millions)

Source: Environmental Finance Sustainable Bonds Insight 2022

Interconnected resilience investing

Investment opportunities in sustainable infrastructure, such as the clean energy capacity required for the energy transition, could also be attractive from a pandemic resilience perspective. This is mainly because such investments will help to tackle climate change which, as we have learned, can increase the incidence of or aggravate pathogens.

As the OECD specifically outlines in relation to Covid-19, planetary health and human health are closely interlinked. Investing in climate-friendly activities to “build back better” from the pandemic will limit climate-induced factors that can aid the spread of disease.

Understanding and reducing the biodiversity impact of investments, which BNP Paribas Asset Management has started to take action on, will also be key. As we have previously explored, deforestation and further encroachment on the natural world could trigger another pandemic as humans come into contact with more novel zoonotic viruses.

Social determinants of health

Investing in clean energy also improves various social determinants of health. If bringing a solar array online means a coal plant comes offline this creates health benefits for the community previously exposed to said plant. This in turn reduces co-morbidities associated with pandemics like Covid-19.

More broadly, the UNDRR’s Principles for resilient infrastructure offer guidance on infrastructure investment in line with the UN’s Sustainable Development Goals and introduces the concept of “net resilience gain” to enhance the holistic systemic resilience of future infrastructure.

Sustainable investment strategies that address the above factors will aid pandemic resilience – while having the additional benefit of also tackling other planet-scale risks. Moreover, as the transition to a more sustainable economy accelerates with the support of incentives such as those included in the US Inflation Reduction Act, sustainable investors should expect improved returns.


Please note that articles may contain technical language. For this reason, they may not be suitable for readers without professional investment experience. Any views expressed here are those of the author as of the date of publication, are based on available information, and are subject to change without notice. Individual portfolio management teams may hold different views and may take different investment decisions for different clients. This document does not constitute investment advice. The value of investments and the income they generate may go down as well as up and it is possible that investors will not recover their initial outlay. Past performance is no guarantee for future returns. Investing in emerging markets, or specialised or restricted sectors is likely to be subject to a higher-than-average volatility due to a high degree of concentration, greater uncertainty because less information is available, there is less liquidity or due to greater sensitivity to changes in market conditions (social, political and economic conditions). Some emerging markets offer less security than the majority of international developed markets. For this reason, services for portfolio transactions, liquidation and conservation on behalf of funds invested in emerging markets may carry greater risk.