The importance of investing in healthcare
The second you put the words “shareholders” and “health care” in the same sentence, many Canadians within and outside of the care industry will understandably bristle. Canadians are rightly proud of our effective, equitable – if flawed and over-burdened – health-care system, and wary of any attempts to introduce or expand corporate influence in such a critical part of our social structure.
But let me use the words “shareholder” and “health” in a positive context. Many health-related institutions – hospital foundations, health-care worker pension plans, benefits providers and others – are themselves shareholders. And this position as institutional investors actually gives these actors an indirect but powerful ability to positively influence health outcomes.
I’ll start with an example: For several years, I was the co-chair of Investors for Opioid and Pharmaceutical Accountability (IOPA) – an international coalition of 67 institutional investors with more than $6 trillion in assets that focused on challenging pharmaceutical companies – as their shareholders – over the kind of poor governance, lack of accountability and risky behaviour that fuelled the opioid epidemic.
The effects of executive decisions pushing risky, addictive drugs helped lead to more than 700,000 deaths in the U.S. alone between 1999 and 2022, along with untold devastation for families and communities. It also led to those firms agreeing to multi-billion-dollar legal settlements, which ultimately affect shareholders. At Johnson & Johnson, for example, a US$5 billion legal settlement wiped out a third of the company’s net income.
There is no equivalency between the loss of shareholder value and the devastating personal losses borne by families and communities. But what I learned during my work with the IOPA coalition is that shareholders can have both an interest and power in promoting better prevention and accountability –crucial factors in creating better health systems and health outcomes. That’s how our coalition acted effectively to change incentive systems and oversight at nineteen major investee firms.
Outside of focused coalitions like IOPA, health-sector pension plans, foundations and others have also engaged with pharmaceutical companies to address drug pricing and access to medicines globally. That includes calling out some of the aggressive lobbying done by the industry that has prevented wider distribution of life-saving drugs. Responsible investors understand the difference between fair returns made from developing and distributing vital medicines, and returns realized from artificially limiting the ability of poorer patients or countries to meet their basic needs.
Shareholders in long-term care companies have advocated for better working conditions for the people that deliver patient care, noting that companies face regulatory and legal risks where decent work and, in turn, decent care are not provided. Short-term returns to shareholders are not as promising as a well-run organization whose reputation for quality care provides long-term security for residents and investors alike.
Even outside of directly health-related sectors, institutional investors can play a role in one of the most important areas of a well-functioning health ecosystem: prevention.
For example, citing legal, regulatory and reputational risks, shareholders in industrial manufacturing firms that emit heavy air or water pollutants have advocated for better detection and clean-up of potentially harmful emissions that affect environmental and community health, as well as executive and board accountability for problems that stem from their decisions. Air pollution alone is credited with causing more than 15,000 premature deaths in Canada each year.
Shareholders across the whole economy are also collectively engaging hundreds of firms on better workplace mental health performance, in an effort to limit the damaging effects on people and productivity of psychologically unsafe workplaces. Poor mental health protections are estimated to cost the Canadian economy $50 billion every year – and those losses are clearly not good for investment returns either. But shareholders have power to focus management’s attention on delivering improvements within those companies that reduce negative effects on workers, improve results at those companies and reduce overall strain on our health-care system.
Health-related pension plans, insurance providers, hospital foundations and other institutions in our health systems that hold substantial investments may have a clear, mission-based affinity with promoting better preventative measures and a well-functioning health ecosystem. That those types of institutional investors might participate in coalitions to advocate with investee companies for change may seem obvious.
But investors needn’t have a health-related background or mandate to care about social and environmental health.
We all have an interest in the economic outcomes that flow from a strong health ecosystem and accountability across the economy for promoting better workplace practices, better governance and better executive decision-making.
As foundations and pension plans consider how to invest in better portfolios, considering investment and stewardship decisions through a health lens – and promoting that lens with investee companies as they make decisions about their strategies, policies and workplace protections – can help build a healthier population, a healthier economy and healthier returns.
Kevin Thomas is the CEO of SHARE, a Canadian leader in responsible investment services, providing shareholder engagement, advisory services, research, leadership development, and policy advocacy for a growing network of Canadian pension plans, universities, foundations and other institutions.
