Investments in Times of COVID-19


This article is part of NordSIP Insights – Investing Sustainably in Emerging Markets Read or Download the entire publication here.

Besides the death toll left in its wake, the negative effect of COVID-19 on the global economy was the dominant driver of financial developments in 2020. However, these dynamics vary widely across investment strategies. Given the nature of the crisis, NordSIP was particularly keen to explore the impact of COVID-19 in the healthcare industry, particularly in developing countries where opportunities may be more limited.

According to Patricia Ribeiro, Senior Portfolio Manager for Emerging Market Strategies at American Century Investments (ACI) , a well-defined approach focused on clear impact sectors provides a good guide to tough times.

Patricia Ribeiro, Senior Portfolio Manager, Emerging Markets, American Century Investments

“Unexpected challenges stemming from the COVID-19 pandemic have presented a critical testing ground for ESG investing,” Ribeiro explains. “Our impact approach allows us to invest in companies that contribute to the United Nations’ Sustainable Development Goals (UN SDGs) and demonstrate solid ESG risk management practices. We believe this can be achieved while also generating alpha through our distinct investment philosophy.”

Each stock recommended by an investment analyst must meet specific criteria. As part of idea generation, and throughout the fundamental research process, ACI’s analysts look for companies whose business could generate an SDG impact. Recommendations must also align with ACI’s investment philosophy and process, with the SDGs and in-house proprietary ESG risk assessment.

ACI’s approach to ESG materiality is different for each sector. Environmentally, the approach to healthcare investments focuses on the material impact of carbon and toxic emissions and hazardous waste. From a social perspective, important factors include access to medicines, data privacy and security, as well as product safety and quality. Labour chain concerns are also considered, such as working conditions and controversial sourcing. Governance factors in the healthcare sector such as accounting irregularities, board structure and shareholder rights are also considered.

According to Ribeiro, there are specific challenges involved in investing in healthcare in emerging markets, compared to developed markets. “We must quantify the direct impact of the business,” she says. “In emerging markets, most companies do not yet have sustainability reports and impact measurement can be a challenge.”

“Often, we find that they have the information but have not been required to publish it, so engagement is very important. Measurability is difficult but it’s not impossible. It takes time and effort and requires an understanding of the business to position the questions in a way that supports measurability. Therefore, we believe engagement with a company on SDG issues is an essential part of the investment process,” Ribeiro adds.

To go into more detail into the investment and engagement opportunities available to healthcare investors in emerging markets, Ribeiro discusses her experience with four such companies: Wuxi Biologics, Top Glove, Coway and Hapvida.1

Wuxi Biologics Fights COVID-19

Wuxi Biologics is a contract development and manufacturing organisation (CDMO) headquartered in China, which provides comprehensive services from drug development through drug manufacturing to other companies in the pharmaceutical industry on a contract basis.

“In 2020, the company demonstrated strong execution and achieved strong financial performance, despite having lost two months of productivity in February and March due to the lockdown. It added a record-high of 103 new projects into the pipeline, reaching more than 330 integrated projects, a 34% annual increase. Management estimates that they won 40% of the global new projects last year, including 11 external projects,” Ribeiro says.

Wuxi has been on the front lines of the fight to stop COVID-19, according to the senior portfolio manager. “It enabled 12 COVID-19 neutralizing antibodies (mAbs) with over 20 Investigational New Drug Application (IND) globally and winning more than 80% of its global IND development projects for COVID-19 mAbs. The company had a 100% success rate in its IND enabling services, with an average timeline to approval shortened to 3-5 months,” she adds.

“Wuxi is a global supplier of COVID-19 vaccine to the Top 10 pharmaceutical companies in the world. At the end of March 2021, the company disclosed that they signed another COVID-19 vaccine contract and initiated technology transfer and were in discussions with two other pharmaceutical companies for COVID-19 vaccine manufacturing,” Ribeiro explains. “Apart from COVID-19 vaccines, the company has been planning its expansion into the vaccine CDMO business since 2018 – it signed a US$3 billion long-term contract in 2019 and is building the manufacturing facilities in Ireland dedicated to this business.”

According to the senior portfolio manager, prior to the pandemic, Wuxi had been recognized globally for its business capabilities and execution. “In the wake of the pandemic, the company further solidified its capabilities, winning businesses from both existing and new clients. Its backlog more than doubled to US$12 billion as of March 15, 2021, up from US$5.1 billion at the end of 2019.”

ACI’s engagement with Wuxi Biologics has focused on environmental impact and certification for its manufacturing facilities, talent recruitment and retention and gender diversity, among other issues according to Ribeiro. “The company has increasingly been focusing on ESG-related disclosure and investor communication. The company has established an ESG committee at the Board level that is led by its CEO who acknowledged the importance of ESG during the recent FY2020 results analyst briefing.”

Top Glove and Coway

“In addition to Wuxi Biologics, Top Glove which produces a wide range of medical gloves, also experienced a surge in demand driven by the COVID pandemic and the need for gloves. The COVID-19 outbreak spurred increased awareness of hygiene practices at hospitals, especially in emerging markets where the current penetration is still very low,” Ribeiro says.

Coway, a South Korea-based manufacturer and retailer of environmental home appliances, witnessed increased demand in overseas markets such as U.S. and Malaysia. “In the USA, bidet sales picked up by over 300% year-on-year due to pandemic-driven toilet paper shortage,” she adds. “In Malaysia, the total revenue picked up by over 30% largely due to discomfort of consuming bottled water post lockdown, thereby leading to more water purifier sales.”

“However, given the door-to-door characteristics of the domestic business, performance on the home market was lacklustre during the pandemic,” Ribeiro says. “Moreover, air quality improved as people traveled less due to the pandemic, resulting in lower sales in air purifiers.” Engagement with Coway has centered on product recycling and eco-friendliness, and the company’s practices for supply chain management on raw material and controversial sourcing.

Helping Expand Healthcare Coverage in Brazil

Hapvida is the largest private healthcare provider in Brazil. “Hapvida started operations in the poorest regions of Brazil and has been expanding, mainly through acquisitions into the other regions of the country. It is currently the only healthcare system with its own network present in all regions of the country,” the senior portfolio manager says of the company.

“Hapvida’s business is based on a vertically integrated model, in which care for beneficiaries is primarily done in their own network of hospitals and clinics and with their own doctors,” she adds. This strategy allows Hapvida to offer medical and dental healthcare plans at very affordable and much lower prices than the competition, according to Ribeiro.

“Hapvida has been gaining market share in the very fragmented Brazilian healthcare market. Healthcare coverage is still very low in Brazil, with only 47 million private health care plan beneficiaries covered, equivalent to 24% of the country’s population,” she explains. Ribeiro notes that although Hapvida has increased its health plan beneficiaries significantly faster than competitors its competitors it was only responsible for 7.4% of the Brazilian market in 2019.

“In the North and Northeast regions however, the poorest regions of Brazil where Hapvida is the market leader, their market share was 25% and 30% respectively,” she adds. However, the company is focused on correcting this tilt and has started expanding into the other regions of Brazil. “With the proceeds from its 2018 IPO, Hapvida acquired assets in the Central-West, Southeast and South regions of Brazil, where they are replicating their strategy. More recently, Hapvida announced plans to merge with its peer, NotreDame Intermedica which shares similar verticalized strategy and complementary footprint.”

According to Ribeiro, “Hapvida is very committed to ESG practices and they have been producing Sustainability reports since they became a public company.” Engagements with the company have focused on clarifications of Hapvida’s strategy for managing social risks, including talent retention and development, patient health and safety, data security and privacy controls.

Accepting the Challenge

“Transforming society requires the collaboration of various stakeholders. If we are to find the US$5 trillion to US$7 trillion the UN estimates we must invest annually to attain the 17 SDGs by 2030, governments need to galvanise the necessary public and private resources,” Ribeiro says.

“EMs are particularly in need of investments in infrastructure, technological innovation and education at the same time as they face profound socioeconomic, gender and income inequalities, and some of the lowest living standards in the world,” she adds. “They are also more vulnerable to environmental and health-related issues, including access to clean water and rare diseases. These conditions make investing in emerging markets with an SDG focus especially significant.”

1 Source: 2020 Impact Report.


A strategy or emphasis on environmental, social and governance factors (ESG) may limit the investment opportunities available to a portfolio. Therefore, the portfolio may underperform or perform differently than other portfolios that do not have an ESG investment focus. A portfolio’s ESG investment focus may also result in the portfolio investing in securities or industry sectors that perform differently or maintain a different risk profile than the market generally or compared to underlying holdings that are not screened for ESG standards.

The opinions expressed are those of American Century Investments (or the portfolio manager) and are no guarantee of the future performance of any American Century Investments’ portfolio. This material has been prepared for educational purposes only. It is not intended to provide, and should not be relied upon for, investment, accounting, legal or tax advice. References to specific securities are for illustrative purposes only and are not intended as recommendations to purchase or sell securities.

American Century Investments (EU) GmbH is registered with the German Federal Financial Supervisory Authority (Bundesanstalt für Finanzdienstleistungsaufsicht (BaFin)).

American Century Investment Management, Inc. is not authorised by the German Federal Financial Supervisory Authority (Bundesanstalt für Finanzdienstleistungsaufsicht (BaFin)).

©2021 American Century Proprietary Holdings, Inc. All rights reserved.

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