FINANCE TODAY | ISSUE NO.24
SOCIALLY RESPONSIBLE INVESTING
Any investment strategy which seeks to consider both financial return and social/environmental good is known as socially responsible investing (SRI). Some areas that socially responsible investors focus on through their investments are championing environmental sustainability, fostering social justice, and responding to concerns in the community. This strategy is important because it provides a mechanism for investors to align their values with investment objectives. Millennials and younger generations are adopting different investing strategies, and as they are increasingly becoming a larger part of the investing market, their trends could point towards a new future for investing. SRI has been growing rapidly in popularity, with almost all major financial institutions offering sustainable investment solutions. According to fund-tracker Morningstar, in 2017 there were 234 ETFs and mutual funds that utilized SRI strategies. The report suggests that the number of such funds has over doubled since 2012, the assets in these funds have risen by 142%, and the SRI industry was worth over $100B USD in 2018 (Reiff, 2020). While promoting beneficial change, SRI also has the potential to produce a large return for investors. “Over time, SRI strategies achieve similar returns to traditional investments,” says Andrew Lee, head of sustainable and impact investing at UBS Global Wealth Management (Cornfield, 2020). Being able to make a positive impact and align one’s personal values and investments, coupled with the added benefit of competitive returns, SRI appears to be an up-and-coming strategy that is sure to drive change.
An exchange-traded fund (ETF) is a type of security that is a bundle of other securities, like stocks. ETFs are very similar to mutual funds, with the only difference being that ETFs are traded daily on an exchange like a stock is. ETFs are not a new and novel concept, but they have been steadily upward momentum for over 10 years, and their future seems bright as well. More than half of financial professionals who responded to the 2020 Trends in Investing Survey conducted by Janus Henderson Investing said they planned to increase their ETFs usage over the next 12 months (Cherney, 2020). Lower cost, greater transparency and tax efficiency are all factors that have contributed to helping ETFs gain traction among financial professionals and retail investors. The general investing public has also increasingly adopted ETFs because they offer lower costs, more transparent investment vehicles, and allow for a very tailored and nuanced investment strategy. The growth of ETFs parallels and is partially driven by the rise in SRI, as investors can more easily target specific areas of interest. Market volatility and selloffs during the height of the COVID-19 pandemic did not impact ETFs as much, making them an even more attractive option for the unprecedented year ahead.
COMPANION ANIMAL MARKET
Animal shelters worldwide have seen a surge in demand for animals, as people look for “pandemic pets” to keep them company during lockdowns and self-isolation. The U.S pet industry grew dramatically to an estimated worth of $96B USD to $99B USD when comparing between 2019 and 2020 (Puac. et al, 2020). The industry has been steadily growing annually and is expected to continue to expand in the coming years. Owners are spending more money than ever on their beloved pets, and this poses an interesting opportunity for investors. Many companies such as pet health insurer Trupanion (NASDAQ: TRUP), and high-quality pet food producer Freshpet (NASDAQ: FRPT) have benefited from the increase in spending in the companion animal market. It presents a largely unexplored market for investors that has a proven track record of reliable expansion and paw-sitive growth.
TELEHEALTH AND PRECISION MEDICINE
The COVID-19 pandemic has highlighted the importance of health and where the future of healthcare is heading. Precision medicine has seen tremendous growth during the pandemic and is categorized as drugs, devices, and services designed to personalize a previously one-size-fits-all treatment process. Telemedicine provider, Teladoc Health (NYSE: TDOC) saw virtual visits more than triple from the prior year in the last two quarters of 2020 (Insights, 2020). Telehealth offers many benefits since it is typically cheaper for health insurers, is more convenient for both the patients and physicians, and is safer in the COVID environment. The demand for easy access to doctors is likely to bolster expansion in the telehealth industry, with an estimated compounded annual rate of growth of 25.2% and a total market value of $559.52B USD by 2027 (Insights, 2020). The need to maintain social distancing for the foreseeable number of months will also favour growth, with the added benefit of more easily providing healthcare to rural communities globally. The COVID crisis has been a catalyst to accelerating the rate of adoption of telehealth medicine, and it addresses many issues that will continue to prevail even after COVID-19 subsides.
BRIGHT BUT UNCERTAIN FUTURE
The vast volatility and unprecedented events of the past year have helped some investors and hurt others. While the beginning of vaccination programs is a solution to conquering COVID-19, much remains unknown concerning when and if life and the markets will return to normal. However, despite the uncertainty of what is ahead, there are countless opportunities to pivot, adopt new investment strategies, and enter new markets that point to a brighter future ahead.
Cherney, N. (2020, August 18). 2020 Trends in Investing Survey: ETF Usage Poised to Increase – Janus Henderson Investors. Retrieved January 22, 2021, from https://www.janushenderson.com/en-us/advisor/article/2020-trends-investing-survey-etf-usage-poised-to-increase/
Cornfield, J. (2020, July 15). Millennials look to make a social impact with their investing dollar, study finds. Retrieved January 22, 2021, from https://www.cnbc.com/2020/07/14/millennials-look-to-make-a-social-impact-with-their-investing-dollar.html
Insights, F. (2020, October 19). Telehealth Market to Exhibit 25.2% CAGR and Touch USD 559.52 Billion by 2027; Demand for Easy Access to Doctors will Bolster Growth, says Fortune Business Insights™. Retrieved January 22, 2021, from https://www.globenewswire.com/news-release/2020/10/19/2110167/0/en/Telehealth-Market-to-Exhibit-25-2-CAGR-and-Touch-USD-559-52-Billion-by-2027-Demand-for-Easy-Access-to-Doctors-will-Bolster-Growth-says-Fortune-Business-Insights.html#:~:text=Filings%20Media%20Partners-,Telehealth%20Market%20to%20Exhibit%2025.2%25%20CAGR%20and%20Touch%20USD%20559.52,says%20Fortune%20Business%20Insights%E2%84%A2
Puac, S., Says:, R., 22, B., Says:, B., Says:, ป, Says:, I., & *, N. (2020, December 28). 22 Fascinating Pet Industry Statistics & Facts for 2021. Retrieved January 22, 2021, from https://petpedia.co/pet-industry-statistics/
Reiff, N. (2020, November 03). The Rise of the Socially Responsible ETF. Retrieved January 22, 2021, from https://www.investopedia.com/investing/rise-socially-responsible-etf/