Life better, virtually

Last year 40k people died in the US while driving; 1.3m worldwide died in car accidents.  Productivity is lost and fossil fuel is wasted during commuting, a creaking infrastructure must be maintained and cars that are hardly used must be manufactured1. Then there is the impact on our mental health: The Office for National Statistics (ONS) reported that feelings of happiness and life satisfaction decrease with every successive minute of commuting.

This is the focus of academics like Stanford University Professor Jeremy Bailenson:   “My dream is for us to look back at my dad’s hour-long commute each way in a row of boxes the way we look back smoking in hospital beds”.

Better roads, public transport solutions, hyperloops and flying cars are solutions to these problems… maybe. But other things will contribute too.

One of these may be VR.  Mark Zuckerberg, talking to Kara Swisher co-founder of ReCode in July:

“One of the biggest issues economically today is that opportunity isn’t evenly distributed. You get all these people who have to move to cities, and then the cities get to be way too expensive, and if you have a technology like VR where you can be present anywhere but live where you choose too, then I think that that can be really profound.”

I can hear big yawns of “we’ve been here before, surely?” Norman Macrae thought this age was upon us when he wrote in a 1975 edition of The Economist that there “would be little coherent purpose to trudge long distances to work.” Looking out the window, I’m in a rainy business park.

If VR has been a perennial white elephant it is partly because the technology hasn’t been ready. We’re perhaps still not quite there yet, but it does appear closer than ever.  The technological issues have been nearly surmounted – for example new OLED displays are coming that are not far off achieving the upper bounds of human vision2.

The real barrier now appears to be empathy – interaction is about empathy and understanding subtlety of body language and facial expressions, things we interpret subconsciously.   Bailenson believes that “when it’s done well it’s an actual experience”.    He has studied the relationship between empathy and VR for more than 15 years and believes that richer content such as 360 degree video is bridging the empathy gap.  “In VR, content that moves the body will also move the mind.”

Virtual and augmented reality could change our lives dramatically. It could, for example, increase access to live events or allowing industrial design companies to give technical product demos on demand. A virtual retail experience certainly appeals to me, so good news that Wal-Mart has recently applied for a couple of patents.

If a hardware solution like VR can become a platform for a broad set of uses, it has a great chance of widespread adoption – in a diversity of applications we cannot yet predict. It is another object lesson in the way we investigate sustainable impact investing; sustainable solutions to current problems may come from unexpected places.


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Witness the PHITness

“Cause right now, I see clearer than most
I sit here contending with this cheese on toast”

Roots Manuva

On 12 July 2018, the ‘Ways and Means’ US tax writing committee passed a bill 28-7 that would allow the cost of gym memberships and exercise equipment to be treated as a medical expense, paid for with an HSA (Health Savings Account). A few days later it received further bi-partisan support in the House of Representatives where it passed 277-142. It now awaits final confirmation from the Senate to become law. The Personal Health Investment Today (PHIT) Act not only demonstrates that some politicians have a sense of humour but will also allow individuals to spend up to $500 a year on fitness-related expenses. This interests us on a number of levels……

An ounce of prevention
Firstly, we are all about prevention over cure (see An ounce of prevention) and with Health & Wellbeing as one of our sustainability pillars, we think about this a lot. I think the PHIT act is a surprisingly forward thinking policy which links back to the broader theme of health economics and value-based care (see Human Life: Cost-benefit). Improving population health through exercise and diet is the front line of prevention and can have meaningful positive second-order impacts.

Source: Planet Fitness

Lean business models
Secondly, we already find the evolving wellness sector (particularly gyms and gym equipment) interesting from an investment perspective due to positive trends globally and the emergence of some listed business models that are capturing high investment returns from this growth. We see gyms as both protected from internet disruption on the one hand (you can’t buy a six pack online…. although some do try Seven Minute Abs), whilst also benefiting from it on the other (lower rents and better locations).

Fitness industry could receive a legal stimulant
Thirdly, this bill would provide a legal stimulant to an industry that is already growing at a healthy rate. The number of US gym memberships increased from 33 million to 57 million between 2000 and 2016 and it’s estimated that this rate of growth will increase in the coming years. There are approximately 25m HSA accounts covering roughly 50m adult Americans. We like no-frills gym business models which offer monthly memberships for $10-25 per month (or $120-$300 per year), expanding gym access to a lower income demographic. With such memberships entirely funded via the $500 tax break we would expect increased adoption and membership retention if it passes. It is also likely to have an indirect impact on companies that service (e.g. software) and equip (e.g. strength and cardio machines) these gyms.

‘Golf is not a sport’ say politicians
Finally, we should all spare a thought for the beleaguered top 1% of the income distribution. These poor souls were again left reeling as it was revealed that golf, hunting, sailing and horse riding are not sporty enough to qualify for the tax break.

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Everybody’s Free (To Wear…. Earplugs)

Mary Schmich’s article, which Baz Luhrmann adapted into the 1999 smash hit “Everybody’s Free (To Wear Sunscreen)” offers advice and warnings which intend to aid the listener to live a happier, healthier life.

Wear sunscreen, stretch, be kind to your knees, get plenty of calcium, dance.

Sunscreen will help protect you from skin cancer. Stretching daily and taking care of your joints will reduce the likelihood of arthritis. Studies suggest that a regular intake of calcium can protect us from brittle bones and even high blood pressure. And an active lifestyle is recommended to avoid diabetes.

I’ve linked the advice to a number of the most prevalent chronic physical health conditions in the US today. However, there’s one missing and it’s the third most common behind diabetes and cancer; hearing loss.

I wouldn’t blame Schmich for the exclusion – it’s a largely unrecognised health problem but almost one in four adults in the US suffer from some form of hearing difficulty. The Centers for Disease Control and Prevention (CDC) states that hearing loss is associated with decreased social, psychological, and cognitive functioning” and is “inversely associated with distress, somatization, depression, and loneliness among all age groups”.

Ok, time to look outside the US. The World Health Organisation estimates that, globally, 466 million people live with disabling hearing loss. 34 million of them are children.

And due to recreational exposure (nightclubs to personal headphones and everything in between!), over one billion young people (12-35) are at risk of it. Public health campaigns to raise awareness on the issue are paramount as it is largely preventable amongst children.

For hearing loss that has already occurred, I’m going to highlight two companies that are trying to make a difference.

Amplifon supplies hearing aids and has over 65 years’ experience in retailing and fitting the devices. Founded in Milan in the 1950’s, the company now operates in over 20 countries and provides an end to end service. It really excels in this area, evidenced by receiving the “Best in Italy – Champions of Service” award for the past three years. Allan commented on Amplifon’s acquisition of GAES last month. Take a look here.
  Cochlear provides ear implants and over 450,000 people of all ages, across more than 100 countries, now hear because of Cochlear. The company designs, manufactures and supplies three implants for different medical situations. It has the most reliable products on the market and its implants for children rank as the second best healthcare expense, on a cost benefit analysis (behind neo-natal care), according to a Stanford study.

Perhaps if Baz Luhrmann was to re-release the hit “Everybody’s Free (To Wear Suncreen)” it would include the line; “To Wear…. Earplugs”?

Well, there’s a reason I didn’t make it as a songwriter.


In case you missed the reference… Baz Luhrmann – Everybody’s Free To Wear Sunscreen

You may not have heard that it was national ‘Quiet Day’ last week… National Quiet day

About the author

Euan Ker is a sustainable investment analyst. He is responsible for analysing and monitoring environmental, social and governance factors within the Global Sustainable Equity Strategy. Euan joined us in 2014 as an investment implementation analyst with responsibility for implementing macro investment decisions across a number of fund-of-fund mandates, totaling some £13 billion under management. Prior to moving to the ESG Research team in 2018 his responsibilities also included asset class, regional and currency hedging overlays through derivatives. Euan has a 1st Class Honours degree in Management with Economics from Robert Gordon University. He has the IMC professional qualification and has 4 years’ industry experience (as at 30 June 2018).

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How many cigarettes do you smoke each day?

None? Wrong. Don’t believe me? Then check out the App: ‘Shoot! I Smoke’, which turns live pollution data from hundreds of air quality stations in cities around the world into a cigarette equivalent figure. Great idea. Technology enabled. Thoroughly depressing. 

Source – Shoot! I smoke 13/06/2018

Smoking leads to 98,000 ‘preventable deaths’ each year in the UK. The equivalent figure due to particulates and other vehicle emissions is 40,000. And the health cost? £5.9 billion each year according to new research* from the University of Oxford and University of Bath published ahead of Clean Air Day next week. That’s equivalent to £37 for each petrol car, £258 for each diesel car and £593 for each diesel van apparently.

But at least all those cars mean we are getting to work efficiently right?  Well….they do…currently…..

There are 31 million cars on the road in the UK today, but regardless of whether you are sitting in a ‘dirty diesel’ or a new Tesla, average traffic speeds across England’s A roads are declining. In the morning rush (7am to 10am) average speeds are 23.7 mph and in the evening a slightly lower 22.2 mph. On ‘urban’ roads, the average is to just over 18mph. And in the City of London? Sorry, it’s a nearly pedestrian 7.6mph!

This decrease in average commuting speeds is a relatively new phenomenon, but if things keep going the same way, within the next 10 years it’ll be quicker to cycle (assuming Strava averages). E-bike anyone?


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Mental health – signs of progress

The approach to mental health has changed significantly in recent years, with the stigma that is often associated with it diminishing somewhat.  

Imagine you’ve broken your arm, but you shouldn’t tell anyone or ask for help. What if it makes you look weak and unstable? People might question your abilities, worry about whether you’re ‘capable’. It sounds ridiculous doesn’t it? But if you replace ‘broken arm’ with ‘depression’ or ‘anxiety’, people often feel they are in a different, helpless situation.

Attitudes seem to be changing though. A 2015 study showed that 2.5million people in the UK have improved attitudes towards people with mental health problems, compared with 2011. Not quite there yet, but improving.

The World Health Organisation defines mental health as “a state of well-being in which an individual can realize his or her own potential, cope with the normal stresses of life, work productively and make a contribution to the community”. This is not just about the absence of a specific mental health condition, but is inextricably linked to the concept of human development: the creation of an environment in which people can develop to their full potential and lead productive and creative lives which add value.

A recent NHS study showed that one in three ‘sick notes’ handed out by GPs are now for mental health problems, with more than 5 million people being signed-off work every year. It is estimated that mental ill-health costs the UK around 4.5% of GDP per year in lost productivity at work, higher benefits spending and health care costs. Numerous studies have shown that a positive work environment supports productivity both in and out of the workplace, which in turn reduces stress and anxiety.

Throughout our sustainability analysis for the Kames Global Sustainable Fund we look at three dimensions:

  1. The product (the what)
  2. How the company operates (the how)
  3. The direction in which the company is going in terms of sustainability (ESG momentum)

We assess these three dimensions through factors which we believe are of material value to the particular company / sector.

We believe that employee health and wellbeing is material to every company we invest in. All of the companies we have classified as sustainability ‘leaders’ have established employee welfare programmes for staff to utilise both in and out of the workplace. These programmes include support available through private health schemes to in-house initiatives with a focus on mental healthcare.-


Leader As well as access to environmentally rich surroundings, Mohawk have provided 13 Healthy Life Centres for staff with health coaches. Around 80% of staff have used the facilities at one point whilst employed.
Leader Many health issues associated with hearing difficulties such as cognitive decline, falling and depression can be helped by hearing solutions. Amplifon has designed its whole retail experience around reducing the anxiety often associated with medical experiences.

Improver Mindbody connects consumers with local therapists, providing a range of activities with proven positive mental health benefits: yoga, meditation, pilates and more.

About the author

Georgina Laird is a sustainable investment analyst. She is responsible for analysing and monitoring environmental, social and governance factors within the Global Sustainable Equity Strategy. Georgina joined us in 2015 from Russell Investments where she was an index analyst. She joined Kames as a performance analyst before moving to the ESG Research team in 2016. Georgina has a BSc in Mathematics from Heriot-Watt University in Edinburgh. She has the IMC professional qualification and has 5 years’ industry experience*.

*As at 28 February 2018.

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Human Life: A cost-benefit analysis

Healthcare is expensive and stubbornly inflationary, particularly in the US. Despite spending the most per capita on healthcare, the US underperforms all other developed nations in terms of life expectancy.

Whilst care for the well insured is world leading, it is also very expensive. But, an estimated 27 million (Source: US census bureau) US citizens are ‘uncovered’ and thus have very limited access to healthcare, leading to poorer population health and a higher burden on the most expensive, emergency care. Emergency medicine is necessarily reactive and inefficient, whilst having almost no preventative impact. 

What is the value of a human life? Apparently 90% of healthcare costs come in the first and last six months of a human life (unverified claim). Does this mean that a ‘survival of the fittest’ attitude would be cheaper? Not necessarily. The net contribution to society of these groups is very difficult to measure.

National healthcare systems such as that in the UK have independent bodies like NICE that undertake the daunting task of human life cost-benefit analysis. NICE use the buying power of the NHS to negotiate prices down and prevent treatments being covered if they are deemed too expensive.

Meanwhile in the US, the ‘Obamacare’ act sought to gain healthcare coverage for an additional 23 million people (the US census bureau estimated 48 million or 15.4% of under 65s were uninsured pre-Obamacare). This has increased healthcare costs in the short term and ‘value-based care’ has been a focus since. A shift from a simple price negotiated with the healthcare supplier towards an evidence-based demonstration of value. In plain English, healthcare suppliers need evidence that treatments are worth the cost.

The long-term implication for investors is clear. Healthcare products and services that offer demonstrable value will gain share and be able to maintain prices versus the questionable and overpriced. Evidence is becoming more valuable. Capturing data, knowing how to analyse it and then using it to improve outcomes is ever more critical. The good companies we speak to realise this and want to be on the right side of this shift.

The answer to the challenge of reducing costs in the healthcare system lies in the power of technology. Whether it is an innovative medical device, a new drug or redesigned hospital protocol, technological and business model innovation, and its deflationary impact, is probably the most likely and sustainable solution.

We believe that each of the companies below is leveraging technology in a meaningful way to improve health outcomes and reduce cost, whilst capturing value for shareholders in the process. We see it as our job as sustainable investors to seek out these win-win outcomes:


Company  What they do
Cochlear and Amplifon Cochlear and Amplifon are providers of cochlear ear implants and hearing aids respectively. Cochlear implants in children rank as the second best healthcare expense on a cost-benefit analysis (behind neo-natal care) according to a Stanford study. Hearing loss in old age is increasingly associated with dementia and reduced social interaction, reduced mobility and increased depression.
Insulet Insulet offers innovative ‘tubeless pump patches’ for type-1 diabetics that automatically deliver insulin. This patch demonstrably improves quality of life for patients – particularly children and their parents – whilst also improving long-term outcomes for the patients (reducing the healthcare burden). Indeed, reduced ‘hypo’ events alone (which cost ~$30k per event in the US) justify the increased cost of the device versus multiple daily injections.
 Medidata and Icon Drug discovery and development has remained stubbornly inflationary with drug prices rising year-on-year for decades. Medidata is a cloud-based analytics company that is becoming the industry standard for increasing the efficiency of this process. By objectively assessing the progress of the pipeline via data across multiple processes and disciplines, it helps allocate resources to the most promising drugs and accelerate the process. Icon is an outsourcing Contract Research Organisation that works for biotech and pharma companies to efficiently take proposed new drugs through trials to market more efficiently.

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