What does it mean for a company to promote health and wellness?
At first blush, many investors may think it means maintaining physical health. But the question raises far more discussion about a company’s role in creating positive health outcomes for its customers, workforce, and society. In this Tuesdays with Travis, we dive into our “Health and Wellness” Cause to uncover just how expansive this topic can be.
Comments have been edited and condensed for clarity.
We cast a pretty wide net, but the focus is on the different ways companies threaten physical wellbeing and bodily integrity. We look at a company’s effects on its customers, workforce, and members of society in general. For that last category, we’re referring to situations where people may be harmed by your business even if they’re not consuming your product – companies that put out a lot of air pollution, for example.
Companies that are contributing to climate change will get flagged for health and wellness concerns because we think it’s likely that climate change will have a lot of negative health effects. High-emitting oil and gas companies, for example, are contributing to a process that is beginning to impact food insecurity, global conflict, and disease-carrying animal migration. We also flag companies that make products that are addictive or otherwise harmful for consumers – think tobacco companies, gambling facility operators, and firearms manufacturers. And then lastly, drug companies are under special scrutiny because responsible drug marketing is a unique component of health and wellness. Those companies that recklessly market their drugs can create serious health risks for consumers, not to mention financial risks for the companies themselves – we saw this recently when Johnson & Johnson was fined $572 million by the State of Oklahoma for irresponsibly marketing opioids.
We wanted to make it clear that we’re not just speaking about the narrowest definition of physical health. For example, we’re highlighting companies that have been flagged for recent violations of employees’ human rights, like companies running sweatshops or using forced labor. It might not be as straightforward to estimate the impacts of these companies’ operations in deaths or life-years lost as it would be for, say, a handgun manufacturer, but we still believe that mental and emotional wellbeing is worth including in a health-focused investment strategy.
That’s a question beyond just the scope of health and wellness – it’s a question about subjectivity, and there are a couple of different ways we can think about it. First, as providers of a sustainable investing model, we have to make decisions about what we believe are good proxies for the topics we want to cover. Since most clients think in terms like “combating pollution” rather than “reducing chemical oxygen demand of wastewater,” for example, it’s our job to translate these low-level data points into higher-level concepts that people can relate to. No matter how many thousands of data points we gather in our effort to make the most informed characterizations, we’re never going to get to a point where we can say we’re “objectively” capturing the full scope of something as complex as “combating pollution.” Clients may disagree with the proxies we choose, and that’s OK. But at least we can be transparent about our process.
The second point, and the one I think is more fundamental, is that demarcating between what data points are “objective” and which ones are “subjective” is misleading. Assuming we can even agree on a shared definition of “health,” behaviors that we think are good or bad for health might still be totally context-dependent. Is increasing access to medicine good for developing countries? Probably, but maybe not if we’re talking about irresponsibly marketed opioids.
There are no objective definitions for any of these abstract concepts. And that’s a good thing; if there were one score that gave the “objective” measure of health and wellness, companies would figure out how to game it. We strive to be as transparent and evidence-based as possible, but creating a sustainability framework requires judgment. If anyone tells you otherwise, they’re selling snake oil.
One thing that I didn’t fully understand is how extreme the health effects of air pollution can be. There’s a growing body of scholarship looking at how air pollution affects everything from educational attainment to maternal mortality and low birth weight. I remember seeing one paper that measured air pollution levels before and after some municipality installed automated toll payment systems – those systems reduced the amount of emissions from engines idling at toll booths, and they were able to detect substantial reductions in low-birth-weight babies in the local population. We find that air pollution is generally on the radar of investors as a component of environmental protection, but we’re increasingly learning that it’s one of the most sinister mechanisms by which environmental concerns begin to have social implications.
One thing that’s not always as obvious is how broad of an issue health and wellness is in terms of all the other company behaviors it touches. It encompasses climate change, water, pollution, employee treatment, product safety – the list goes on. It is an important reminder that all of these causes we talk about don’t exist in a vacuum. The E and the S and the G are all related, and contribute in different ways to one another. Health and wellness isn’t just about selling products that are healthy. There are so many other ways that companies can positively or negatively affect the health of their consumers, workforce, and society in general.
Travis Korte is the Data Science Lead at Ethic. Previously, Travis organized civic-minded technologists at Hack for LA and advised a wide range of clients on data science, data policy, and quantitative methods. You can follow him on Twitter at @traviskorte.
Melissa Mittelman creates content at Ethic and is an alumna of Bloomberg News, where she covered private equity & deals. Melissa previously worked at Deutsche Bank, providing institutional, cross-asset sales coverage for ultra-high-net-worth investors.
Jay Lipman, a co-founder of Ethic, is driven by the need to address climate and environmental risks with the resources to which we each have unique access. He has been ranked among the Forbes 30 Under 30: Social Entrepreneurs. Born in the UK, he now lives in San Francisco. Previously, he managed the capital of ultra-high-net-worth investors in Deutsche Bank's cross-asset capital markets structuring and sales team.