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Neville White
By Neville White Head of SRI Policy and Research November 2015
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Summary Our earlier Amity Insights, on healthcare and the pharmaceutical industry, set out our investment views and discussed some key issues for responsible investors. In this new Insight, produced in conjunction with Sustainalytics, our ESG data provider, we revisit and update our thinking. The opinions, both in terms of policy and investments, expressed are those of EdenTree Investment Management. We remain positive on the sector as one of our 9 positive screening pillars, and the funds are well represented across the investment value chain. The sector is unique as it exists exclusively to support human – and animal – wellness. Key to understanding the sector is its commitment to good science, biological and chemical, in the development of new medical treatments.

Global pharmaceutical market

Global pharmaceutical market The market for global spending on medicines is forecast to reach $1.3trn by 2018, a 30% increase on 2013. The US continues to lead developed markets, followed by the 21 pharmerging countries, which are forecast to account for nearly 50% of absolute growth in 2018. China will cement its position as the second largest pharmaceutical market with spending expected to reach $155-185bn in 20181. In terms of per capita, the dominance of North America, Japan and Europe will go unchallenged. In developing markets, over 80% of growth will be underpinned by generic medicines, whilst developed markets will be dominated by speciality medicines, primarily in oncology, autoimmune, respiratory, anti-virals and immunosuppressants.

Issues for responsible investors

Issues for responsible investors This Insight considers some of the very sensitive life ethics issues that concern many investors, sometimes touching as they do on the origins of life itself and the ethical treatment of the unborn. Stem cells, in particular, hold out the prospect of significant therapeutic breakthrough in the treatment of chronic conditions, such as Parkinson’s disease, stroke, spinal cord injuries, retinal diseases, Alzheimer’s and Type 1 Diabetes, but as we show, there is far from universal political consensus on how this should be conducted. Stem cell research remains largely cloistered in academic institutions, tightly regulated at national and EU level, and broadly theoretical in terms of outcomes. Whilst the major pharmaceutical companies are conducting human embryonic stem cell research, this is mostly early stage, very highly regulated and with no designated products as yet.

View from the top

View from the top
We have sought to show that for the major pharmaceutical companies there is little or no direct exposure to the very specific area of birth-affecting treatments, with private and generic companies dominating, in what is a very niche market. We consider each company case by case, but would not seek investment where these treatments are judged to be a material or significant part of the product portfolio.

As with our general approach to new technology, we remain strongly in favour of good science and transparent peer review. We are encouraging of breakthroughs that may over time, alleviate acute suffering in previously untreatable or incurable conditions.

Stem cells hold out the very real prospect of enhancing individual wellbeing and life expectations, although we remain deeply cognisant that the use of embryonic or foetal material as part of this research remains painfully challenging. We consider each company case by case, but currently there are no products near market stage, and all research remains pre-clinical. Whilst from an investment perspective, there is no material involvement in most life ethics issues for the largest pharmaceutical companies; we are cognisant that certain aspects of life ethics remain controversial and sensitive for many investors. In addition, some of these issues are in the very early stages of development and we therefore remain committed to engage with companies and the wider industry.

1. IMS Institute, November 2014.

Download PDF: 'Healthcare: Life ethics explored'

The value of an investment can fall as well as rise as a result of market and currency fluctuations, you may not get back the amount originally invested. Past performance should not be seen as a guide to future performance. If you are unsure which investment is most suited to you, the advice of a qualified financial adviser should be sought. EdenTree Investment Management Limited (EdenTree) Reg. No. 2519319. Registered in England at Beaufort House, Brunswick Road, Gloucester, GL1 1JZ, UK. EdenTree is authorised and regulated by the Financial Conduct Authority and is a member of the Investment Association.