Investing Opportunities Created by the Pandemic

Experts discussed how a rise in health care digitalization and increased consumer demand for sustainability could lead to new opportunities.

A Franklin Templeton webinar reviewed investment options in a post-pandemic society, focusing specifically on the future of the health care sector and environmental, social and governance (ESG) investing. The latest edition of the “Mega Trends Accelerate” webcast series also discussed whether the current climate signals the start of a new market and how the pandemic has redefined investing.

Zehrid Osmani, a portfolio manager focused on global equities at investment manager Martin Currie, said technological advances in the health care sector have positioned the industry for long-term growth.

“The medical technology industry across the globe offers attractive opportunities, sucah as the health care software space,” he said during the panel. “We also think tailored software for drug development and commercialization and personalized therapeutics are likely to do well in this space and potentially offer high-growth returns.”

An ongoing trend of more people using telemedicine—in addition to the advent of remote monitoring devices including heart monitors, glucose monitors and other non-invasive tools—has created an increase in the “digitalization of health care,” Osmani said.

“This can take the shape of telemedicine improving the speed of triage, as well as convenience and efficiency in managing low-acuity patients,” he explained. “In addition, the use of remote monitoring devices, which can improve patients’ adherence to treatment and intervene in medical care before expensive exacerbations requiring hospital care occur” could also lead to more opportunities for investing in health care technology.

Osmani said he anticipates a rapid increase of such innovations in emerging markets. “Structurally, it means that emerging markets health care spend could achieve teens level of growth over the next decade, compared to mid-single-digit growth for developed markets,” he added.

Bonnie Wongtrakool, global head of ESG investments and a portfolio manager at Western Asset Management, spoke about the rise of ESG investing and how the pandemic contributed to its growth. Even as interest in ESG investing increases among investors and consumers, Wongtrakool said supportive government policy and regulations will be required to improve standards and implementation.

“Performance still varies quite widely across issuers and across sectors,” she said. “We need reinforcement from policymakers to broaden and accelerate the positive movements we’ve seen post-pandemic.”

Sara Araghi, a research analyst, portfolio manager and head of the consumer sector for Franklin Equity Group, said changing consumer behaviors are also impacting industry trends. For example, she cited a 2019 survey by Hotwire that found 47% of consumers had changed their shopping habits because a company had violated their personal values. “Consumers are increasingly paying attention to sustainability and societal issues, which is reflected in product demand trends,” she said.

Now, she added, to appeal to shifting expectations, more firms are adjusting their processes. “Footwear companies, for example, are reducing their carbon footprint and denim manufacturers are reducing water usage,” Araghi explained. “Manufacturers are reviewing what countries their manufacturing operations are based in, resulting in impacts on supply chain and labor.”

The panelists said another key factor in the changing landscape is the Biden administration’s approach to the climate and racial equity. The administration is generally supportive of implementing policies to address those issues, which aligns with ESG investors’ interests, Wongtrakool said. This in turn could help ESG investing develop further, especially if the government can achieve its 2035 electricity decarbonization goal, she continued.

“We’ll be watching for details on the administration’s clean energy standards and climate finance strategy, which will have ripple effects through the economy—as well as the evolution of carbon pricing both here and abroad,” Wongtrakool said.