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Healthcare Technologies | ESG Portfolios | WELL

 

Overview

From William Harvey and the human circulatory system, to Alexander Fleming and the discovery of penicillin to the first heart transplant, medical advances have gone hand-in-hand with a better understanding of the human body.

Medicine has come a long way in the 70 years since the first correct model of DNA was produced at Cambridge University in 1953, and the new age of healthcare sees a confluence of medicine and technology that offers the potential to fundamentally alter how we are diagnosed, treated and supported through illness.

With life expectancies rising, the demand for new treatments that address the needs of aging populations are seeing a surge in demand.

These new frontiers of research are being explored by both traditional ‘big pharma’ companies alongside a swathe of disruptive innovators focused on areas like:

  • Medical Robotics – for example, robotic surgeons or care assistants
  • Nanotechnology – use of microscopic robots or particles for diagnostics and drug delivery inside the human body
  • Genome Sequencing – understanding the unique genetic make-up of an individual to tailor treatments
  • Healthcare Trackers – wearable devices, often internet connected, that monitor the human body
  • Biological Engineering – application of engineering principles to healthcare, including prosthetics, genetic modification and lab-grown organs
  • Bioinformatics – advanced databases of medical data and projects
  • Neuroscience – understanding brain functions
  • Medical Devices – a wide range of new devices, for example, moveable prosthetics

Many of these technologies already in use in hospitals around the world and there are multiple tailwinds driving continued industry growth. The HAN-GINS Indxx Healthcare Technology UCITS ETF provides investors with a convenient way to gain exposure to this sector and, as interest grows, many investors want to understand how to incorporate this nascent sector within an ESG investment framework.

 

Sector Level ESG Risks

Making people well seems to be a straightforward ‘good’ for society, but the sector is not immune from ESG risk. Investors may remember companies such as Theranos or Valeant Pharmaceuticals that were both severely lacking in the ‘G’ of Governance resulting in their collapse and significant losses for investors. 

 Nonetheless, Healthcare is traditionally considered an industry with a low overall ESG risk. The Standard & Poor’s ESG Risk Atlas ranks healthcare as 7th best out of 34 industry categories [1]. Only sectors that deal in mainly in intangibles (development agencies, banks, business services, capital good and asset managers) rate higher.  

Where risks occur, they tend to be focused on cost and accessibility (Social Risks), as well as the how healthcare companies dispose of toxic or infected materials (Environmental Risk) alongside the aforementioned governance risks that occur in every industry.

 

WELL Portfolio ESG Risks

A different approach to assessing ESG risk determines which companies are ESG leader and laggards within their sector. In the table below, we look at the top 10 largest constituents in WELL (as of June 2020) to see how they score.

MSCI publishes publicly available ESG scores [2] for many listed companies and analyses them relative to their peers. From laggard to leader the scores are: CCC, B, BB, BBB, A, AA, AAA.

We ran the top 10 constituents of WELL (that represent 42.3% of the total portfolio) through the MSCI tool to see how they compare to other healthcare providers:

Company

ESG Score

(Sector Relative)

Notes

Weight (%)*

 

Regeneron Pharmaceuticals

BBB

Average

6.15

Biogen

A

Leader

4.97

Dexcom

A

Leader

4.79

Edwards Lifesciences

AA

Leader

4.43

Intuitive Surgical

BB

Average

4.16

Illumina

BB

Average

3.83

Medtronic

BBB

Average

3.73

Agilent Technologies

AAA

Leader

3.55

Boston Scientific

BB

Average

3.37

Zimmer Biomet

CCC

Laggard

3.5

 

 

 

42.36



* Data as of 26th May, 2020

 

Five of the constituents were rated ‘average’, four ‘leaders’ and one ‘laggard’ suggesting that overall, the ESG risks of WELL are lower than the healthcare sector as a whole - which is already low relative to other industries.

Here it is important to note that WELL is not specifically designed to incorporate an ESG screen, but as many of the companies in the portfolio are younger, more innovative providers, they do not suffer as much from legacy practices, business and processes that can carry higher ESG risks and have had the opportunity to embed best/better practicesfrom the get-go.

 

Summary

WELL is positioned to capture the growth of companies at the forefront of technology and medicine as they address the changing healthcare needs of an aging world. The attractive ESG footprint of WELL is an additional benefit for investors who want to reduce ESG risks while gaining exposure to this high-growth potential sector.  

 

About WELL

HAN-GINS Indxx Healthcare Innovation UCITS ETF (WELL) is a UCITS compliant Exchange Traded Fund domiciled in Ireland. WELL tracks the Indxx Advanced Life Sciences & Smart Healthcare Thematic Index (Net Total Return), an index designed to measure the performance of large, mid and small-capitalisation companies primarily listed on an exchange in Developed and Emerging Markets that are involved in the Advanced Life Sciences & Smart Healthcare sector.

 

Please remember that the value of your investment may go down as well as up and past performance is no indication of future performance.


EXCHANGE


BB CODE


RIC


ISIN


CURRENCY

INCOME

London Stock Exchange

WELL LN

HAWELL.L

IE00BJQTJ848

USD

Acc

London Stock Exchange

WELP LN

WELP.L

IE00BJQTJ848

GBP

Acc

Borsa Italiana

WELL IM

WELL.MI

IE00BJQTJ848

EUR

Acc

XETRA

W311 GY

W311.DE

DE00A2PE7K4

EUR

Acc

SIX

WELL SW

WELL.S

IE00BJQTJ848

CHF

Acc

 

Click here to download: "Healthcare Technologies |  ESG Portfolios"

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