As is being increasingly highlighted, including in this space, what constitutes sustainable investing means much more than just eco-friendly companies and strategies.
In fact, the expansion of sustainability and related investment applications is a plus for advisors and clients. Doors are opening beyond merely allocating to environmentally friendly firms and providers of renewable energy. That's to advisors' benefit because it expands the menu of ideas that are credibly sustainable. For clients, accessing disruptive growth under the sustainable umbrella offers multiple perks, including appeasing the virtuous side of portfolios, tactical diversification and the potential for significant long-term upside.
One way of accomplishing those goals is via the healthcare sector. Healthcare has a reputation, perhaps more than many clients realize, for disruption and innovation. However, its role in sustainable portfolios many not be getting the credit it deserve.
Healthcare's potential benefits as pieces in the sustainability being overlooked is the bad news. The good news is that status affords advisors an opportunity to add value for clients, particularly those in the risk-tolerant column.
Going With Genomics
Genomics investing usually isn't for the faint of heart, indicating it's best reserved for a younger client base or those that can handle the risk. However, concepts such as DNA sequencing and gene therapies are important parts of the broader sustainability investing equation.
Think about the genomics/sustainability combination through the lens of cancer screening and treatment, though it's applications are more widespread. Doesn't improving cancer outcomes and treatment jibe with sustainability? Yes, it does.
“Cancer is the cause of roughly 17% of deaths globally. In 2020, cancer accounted for almost 20 million diagnoses and roughly 10 million deaths. For every two people diagnosed, another cancer patient died,” according to ARK Invest research. “If diagnosed early, cancer often is manageable. In the US, more than 80% of the deaths occur in patients whose cancer already has metastasized prior to the diagnosis, Researchers estimate that blood tests that diagnose early-stage cancer could reduce the overall cancer mortality rate by more than 25%.”
Adding to the case for genomics as a sustainable investment is that costs for technologies such as next generation sequencing (NGS) are declining, make those advancements easier for healthcare professionals to deploy and more palatable for insurance providers to sign off on. That leads to better outcomes – a key component of sustainability.
“Paired with advances in machine learning and synthetic biology, cost declines in next generation sequencing are likely to make such blood tests a reality,” adds ARK. “Traditional imaging diagnostics, such as CT-scans and bronchoscopies, require significant capital expenditures but are useful only for the diagnosis of certain cancers.”
Not a Tough Sell
Some clients are likely already familiar with genomics investing to some extent. They've probably heard about the astronomical gains to be had on positive Food & Drug Administration (FDA) news. They're also probably aware of the punishing losses some genomics stocks deliver when they falter in clinical trials.
Still, it's hard to ignore the fact that the ARK Genomic Revolution ETF (CBOE:ARKG) nearly tripled over the past three years while the S&P 500 Health Care Index is up just 58.4% over that span. It's also getting hard to ignore genomics' role in sustainability and cancer is just one example of that growing prominence.
“ARK believes detecting it early will be key to transforming cancer from a killer into a chronic disease,” according to the issuer. “A pan cancer liquid biopsy promises not only early detection but also access to life-saving diagnoses. Moreover, the cost declines and improvements in blood-sample-based cancer detection are likely to continue well beyond 2025.”
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