Disruptive impact enterprises working to solve the world's most pressing problems are often underappreciated market opportunities with attractive long-term return potential. Members of our impact investing team share some of the innovations they are seeing from companies and issuers working to improve access to health care, affordable housing, clean water, and nutritious food sources.
Did you know?
Access to affordable housing may be one of the most cost-effective ways to reduce childhood poverty.1
Global demand for fresh water is expected to grow by 70% by 2050.2
Immunization prevents between two and three million deaths every year.3
One in nine people suffer from hunger, and one in three are malnourished.4
Meeting basic human needs like access to health care, affordable housing, clean water, and sustainable food sources may not seem like a compelling thesis for active investors seeking to outperform market indices. But we have found that disruptive impact issuers working to solve the world's most pressing problems are often underappreciated market opportunities with attractive long-term return potential.
Our investment universe includes companies from 11 impact themes, which fall into three broad categories. Life essentials is described here.
Affordable housing
We believe investments in affordable housing can help accrue health and wellness benefits, lead to better educational outcomes, and create economic value for disadvantaged or underserved communities. Within the impact investing universe:
Many companies combat homelessness by building low-cost manufactured homes, refurbishing dilapidated or abandoned structures, or employing efficient modular construction to create inexpensive living spaces.
Issuers are offering debt instruments to provide financing for low-cost or multifamily housing; others offer affordable mortgage financing.
Clean water & sanitation
Advancements in infrastructure and technology that improve water quality or delivery are essential and provide a basic service that can potentially impact health benefits and underpin economic development. Water infrastructure may also be a key to communities' climate-change adaptation efforts.
Impact companies are providing water and wastewater treatment services to municipalities with the stated goal of supporting economic growth and environmental sustainability.
Businesses are manufacturing water-safety and flow-control products, and facilitating water testing, treatment, and filtration.
Bond issuers are financing essential underground water infrastructure improvements.
Health care
Providing affordable, effective health care is a challenge in many countries. Reaching vulnerable populations or delivering multifaceted, long-term treatment for complex diseases is especially difficult. We believe private-sector companies, not-for-profit hospitals, and municipalities can offer needed solutions.
Pioneering health care technology companies are developing precision medical equipment that improves patients' quality of life.
Businesses are specializing in women's health, providing insurance to underserved populations, or developing treatments for age-related diseases.
Lab equipment companies are building tools that facilitate genomic research with potentially lasting benefits for society.
Not-for-profit hospitals are issuing debt to help charity care or advanced research.
Sustainable agriculture & nutrition
With the global population expected to reach 10 billion by 2050 5, the ability to produce more food with less resource-intensive methods may be critical. In our view, enterprises developing solutions for sustainable food production can help reduce food insecurity, improve human health, and mitigate the negative externalities of large-scale agriculture, which has historically been a severe draw on natural resources, as well as a major source of pollution.
Impact companies are helping to improve the quantity and quality of livestock through vaccines and disease-preventing antiparasitics.
Enterprises are helping rural farmers increase crop yields with technologically advanced irrigation systems and forms of precision agriculture.
Companies are developing new sources of plant-based protein, a promising step toward improving human health, ending hunger, and reducing the sector's carbon footprint.
How to access
At Wellington, we have been involved in public impact investing since 2012. Our Wellington Global Impact Fund and Wellington Global Impact Bond Fund aim to deliver competitive returns for clients whilst taking into consideration the positive social and environmental outcomes. Both funds are available on via a range of UK platforms. For more information please visit www.wellingtonfunds.com/sustainable-investing.
1Multiple studies cited in "A Place to Call Home: The Case for Increased Federal Investments in Affordable Housing," Campaign for Housing and Community Development Funding (CHCDF). | 2"Nature-Based Solutions for Water: World Water Development Report," United Nations, 2018. | 3"Leaving no one behind: All children immunized and healthy," UNICEF, July 2019. | 4"Zero Hunger," World Food Programme, 2020. | 5"World's population will continue to grow and will reach nearly 10 billion by 2050," World Bank, July 2019
For professional and institutional investors only. This material and its contents are current at the time of writing and may not be reproduced or distributed in whole or in part, for any purpose, without the express written consent of Wellington Management. This material is not intended to constitute investment advice or an offer to sell, or the solicitation of an offer to purchase, shares or other securities. Investing involves risk and an investment may lose value. Investors should always obtain and read an up-to-date investment services description or prospectus before deciding whether to appoint an investment manager or to invest in a fund. Any views expressed are those of the author(s), are based on available information and are subject to change without notice. Individual portfolio management teams may hold different views and may make different investment decisions for different clients.
Except where registered for public sale, Fund units are offered only to qualified or professional investors on a basis that it does not require the registration of the Fund for public sale. The Fund only accepts professional clients or investment through financial intermediaries. Please refer to the latest Key Investor Information Document (KIID), the Fund offering documents for further risk factors, pre-investment disclosures, and the latest annual report (and semi-annual report) before investing. KIIDs are available in the official languages of each country in which the Fund is registered for sale (please visit www.wellington.com/KIIDs). The UCITS Funds are authorised and regulated as a UCITS scheme by the Central Bank of Ireland.
This material is provided by Wellington Management International Limited (WMIL), a firm authorised and regulated by the Financial Conduct Authority (FCA) in the UK.
