Skip to main content

INVESTMENTS 

Three healthcare investments for a more sustainable future

Ethical investing isn’t just about excluding negative companies; it’s also about actively looking for ‘future-building’ investments that will create a sustainable economy while delivering strong returns.


4 August 2022   |   5 min read



At Australian Ethical all our investment decisions are guided by the Australian Ethical Charter, which has been in place unchanged since 1986. The Charter is made up of 23 principles – 12 positive and 11 negative – and we develop ethical frameworks that interpret these principles so that we can apply them to our investments.

The negative screening process eliminates companies that cause unnecessary harm. That means we do not invest in fossil fuel companies1, weapons manufacturers, gambling companies or logging companies (to name a few). On the other hand, we proactively seek out positive sectors that are enabling the transition to the new economy – such as renewable energy, education and IT. Healthcare is another positive sector because it enables people to live longer, healthier lives. We invest in healthcare companies that will benefit from society’s rapidly ageing demographic. As a result, it’s a key overweight in our Australian Shares Fund and Australian Shares SMA Portfolio, where it makes up 17 per cent of the portfolio2.

Healthcare is a sector with a huge demographic tailwind at its back. Like most developed countries, Australia is undergoing a ‘greying’ of its population as the ratio of older people continues to rise. As at 30 June 2020, 16% of Australians (approximately 4.2 million people) were aged 65 or over. That number is expected to increase to between 21 per cent and 23 per cent of the population by 2066.3 Australians are also living longer: by 2061, life expectancy at birth is projected to be 86.8 years for men and 89.3 years for women.4

 

Before we invest in any healthcare company we look at a wide range of issues, including whether the company has inappropriate sales and marketing practices (e.g. misleading or inappropriate advertising or inducements to doctors).


We also consider whether the company is undertaking research responsibly, which includes its approach to trials and testing.



EquityInvesting_Pic1-1655434218166.jpg



Three ethical healthcare companies we invest in:

  1. Cochlear is an innovative company within the Australian Shares SMA strategy that designs, manufactures and supplies hearing devices. The devices are designed to bypass the damaged parts of the inner ear by electrically stimulating the hearing nerve. This sends a signal to the brain, where it’s interpreted as sound. Cochlear has a long runway of growth based on the ability of its technology to make a difference to a greater share of the world’s population over time.
  2. Fisher & Paykel Healthcare has been a long-term holding of the Australian Shares Fund. The company, which was spun out of its household appliances parent in 2001, specialises in ventilation hardware and consumables for intensive care patients. FPH has also developed innovative oxygen therapy technology that has been widely utilised in the treatment of Covid. This technology has wider application in multiple healthcare settings that positions FPH well for the future.
  3. Healius, formerly known as Primary Health Care, is the second largest pathology player in Australia with associated radiology and day hospitals businesses. The company has now exited its medical centre business, which was a drain on capital. The pathology industry has played a major role in COVID diagnosis which has supported recent earnings. As Covid rolls off, we expect to see improved BAU revenues as referral patterns normalise and elective surgeries pick up.

We will continue to invest in companies that are helping build the healthy, renewable economy of tomorrow.


Art-Headshot-MarkWilliams-1659412433337.png

   Mark Williams
   Equities Analyst






1. Our investment exclusions include some exceptions and tolerances. While we don’t invest in companies whose main business is fossil fuels we may, as an example, invest in a diversified company which earns some fossil fuel revenue but is having a positive impact in other ways such as producing renewable energy, providing its fossil fuel revenue is assessed by us as low (a maximum of between 5% and 33% depending on the activity), relative to its overall revenue. For more information on our ethical criteria including examples of revenue tolerances, visit australianethical.com.au/why-ae/ethics/ethical-criteria/
2. At 30 June 2022
3. Australian Institute of Health and Welfare (2021) Older Australians, AIHW, Australian Government 
4. Josh Frydenberg MP, Treasurer of the Commonwealth of Australia (2021) Intergenerational Report

Australian Ethical acknowledges the Traditional Owners of the country on which we work, the Gadigal people of the Eora Nation, and recognise and celebrate their continuing connection to land, waters and culture. We pay our respects to Elders past, present and emerging and thank them for protecting Country since time immemorial.