By Florian Sommer
Tens of millions of people are getting ready for their vaccination against swine flu. We are in the midst of a new pandemic, as officially announced by the WHO back in June.
What does this mean for sustainable investors? First of all, pandemics have historically only occurred every 30 to 40 years. However, we have recently experienced an increasing number of epidemics that nearly reached pandemic status. Remember SARS and Avian flu.
The risk of pandemic outbreaks is increasing. In our modern world, people live closer together in urbanised centres, travel more, and eat more meat. Farmed animal populations have grown exponentially. For example, China’s poultry population has grown from 12 million in 1968 to 13 billion in 2005, while its human population only increased from 790 million to 1.3 billion. Increased proximity between animals and humans is a key risk factor, as most emerging infectious diseases originated from a species jump of a virus from animals to humans.
What little investment research on the topic exists is dominated by a short-term focus on sectors of under- or outperformance during epidemic / pandemic events. For example, airlines were hit hard during SARS but then recovered quickly. Betting on one-off pandemic/epidemic events that are by nature quite unpredictable is not a very attractive strategy for investors. A longer-term perspective is more rewarding, such as the growing markets for disease prevention and pandemic preparation. For example, bio-surveillance of animals is viewed as key to prevent the “species jump” from animals to humans. There are new diagnostics and testing technologies that offer more rapid and reliable disease detection. The market for molecular diagnostics has been growing between 10 and 20 percent in the last 5 years and is expected to reach USD 7 billion by 2011. Finally, governments have begun to dedicate longer-term funding to the development of more effective vaccine production infrastructure and new technologies (e.g. cell-based production methods), in order to overcome earlier problems in producing sufficient vaccines during epidemic / pandemic events.
We do not know yet how severe the swine flu will turn out to be. However, we do know that the drivers of pandemic risk are increasing and that this is fuelling a growing demand for solutions that help to prevent the emergence and spread of infectious diseases. These technologies offer attractive longer-term investment opportunities.
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