The Social Impact of Investing in the Healthcare Sector

CBRE’s newHealthcare Market Sentiment Surveyreveals that 79% of investors prioritise Environmental, Social and Governance (ESG) issues when making investment decisions. Disruption caused by the Covid-19 pandemic, climate change and increased recognition of social responsibility has driven ESG investing. In this article I investigate what is the social impact of investing in healthcare and the benefits this could bring to the sector.

What influence does ESG have on your investment decisions?

With theUK government’s target to reach net-zero by 2050having huge prominence, investors’ priorities have to date largely been focused on tackling Environmental factors rather than Social and Governance factors. As CBRE’s healthcare Market Sentiment Survey points out, Social and Governance matters can be hard to quantify. Nevertheless, healthcare organisations have been implementing ESG-related changes throughout their businesses - from environmental footprints, supply chains and recruitment - to achieve the targets set out in the NHS’s ‘Healthier Planet, Healthier People’ staff campaign.

Healthcare providers who prioritise social factors such as employee pay, training, working conditions, and staff mental health - whether it is a care home, hospital or GP surgery - will arguably experience fewer disruptions such as employee absence and high employee churn rate. The overall absence rate across NHS England was5.1%with anxiety, stress, depression and other psychiatric illnesses consistently the most reported reason for sickness absence. ButNHS trusts with high engagement levels among staff have lower spend on agency and bank staff, and a drop of 0.9 per cent in spend on agency staff can save an NHS trust an average of £1.7 million.

一个共同的感知的大力投资social welfare of staff is that it may have a negative impact on profit. However, if investors focus on employee engagement and wellbeing, there is no need to make concessions for lower profits because it arguably sets the healthcare sector up for longer-term profitability.

The healthcare sector can mitigate costs such as employee absenteeism with investments in mental health; staff who have a positive, fulfilling, work-related state of mind are more likely to deliver high-quality care for patients, according toNHS England. Investing to secure strong financial returns and promoting positive social change creates a win-win scenario for investors.

CBRE’s survey also highlighted that investors and developers are bringing buildings up to the standards required byminimum EPC ratingsand targeting BREEAM rating of ‘Very Good’ as minimum. Leading healthcare investors are now in a prime position to bring facilities up to this standard which would improve the quality of healthcare stock and reduce energy usage.

One area where investing in healthcare could bring social benefits is investment in elderly care and housing.Global demographic trends such as an ageing population are being compounded by lack of suitable long-term housing. Significant resources are now being directed to the healthcare sector to offer housing solutions that can be adapted at different life stages. If healthcare providers implement a drive towards zero carbon homes, capable of adaption, this is one step in offering long-term, sustainable housing solutions to elderly care rather than providing short-term solutions.

Investing in the S of ESG within healthcare seems likely to improve both social value and financial value.