2020 Impact Report

Health Care Impact Equity


We believe an investment focus on innovative health care companies not only offers the potential for compelling returns, but a lasting impact on world health as well.

Michael Li, PhD, Senior Portfolio Manager


Letter to Shareholders 

In this Impact Report, we will show how your investment capital supports crucial innovation and change leading to better health care outcomes around the world. Indeed, investing for positive impact continues to evolve and gain acceptance in the investment community as a way to align both financial and social investment objectives.

A central component of American Century Investments’ approach to investing is that investors do not need to choose between impact and returns. Our approach offers an opportunity to invest in companies that fuel change by contributing to the United Nations’ Sustainable Development Goals* (U.N. SDGs) and by demonstrating solid environmental, social and governance (ESG) risk management practices. We believe this can be achieved while also generating alpha through our distinct investment philosophy.

Providing investment solutions geared toward the SDGs is a natural extension of the impact our firm creates through its unique business model. With more than 40% of dividends distributed to the Stowers Institute for Medical Research, we enable our clients to directly support lifesaving research and contribute to the global fight against cancer. This is how we and our clients redefine prosperity and—together—become a powerful force for positive impact.

COVID-19 has altered the global economy, but it is also affecting investment theory. There is a growing consensus among many investors—especially among the consequential millennial generation poised for the “Great Wealth Transfer”—that so-called neoclassical economic theory must evolve past the sole focus of maximizing firm profits. As a result, investors are increasingly measuring company performance by more than just financial profit and loss. It is no longer about what makes a good stock but what makes a good company. Investors exposed to the health care theme in their portfolios have an opportunity to adapt to this shift in perspective and contribute to positive change.

We will demonstrate how we invest to achieve financial return while supporting U.N. SDG No. 3: Ensure healthy lives and promote well-being for all at all ages. We will identify several companies and relate how their important work is contributing to progress within four crucial health care impact themes. Consider, for example, the health care sector’s remarkable advancements developing COVID-19 treatments and vaccines in a matter of months rather than years. We think this provides a valuable proof point about the ability of innovative health care companies to make a positive impact on society. Ultimately, we believe an investment focus on such companies not only offers the potential for compelling returns, but also provides a direct, meaningful way to promote positive social change.

Thank you for partnering with us in this important undertaking. 


*Developed by a global team of industry and government leaders and adopted by all 193 U.N. member states, the SDGs include 17 goals and 169 attendant targets aimed at solving some of the world’s most pressing problems by 2030. The goals include eradicating poverty, protecting environmental resources, and achieving gender and income equality



How We Invest for Impact

Businesses with the resources and expertise to innovate and provide creative solutions to health care issues can help bring about positive systemic change. By investing in these companies, we, too, can play a role in societal transformation.

The Challenge 

While the urgency and necessity of progress on global health care concerns is obvious, we also think it is important to recognize the underlying issues that will remain long after COVID-19. The rapid response to the pandemic should give us heart—it validates the ability of innovative health care companies to effect positive social outcomes.


Critical Challenges Ahead

• The World Health Organization estimates the proportion of 60-year-olds will nearly double in the next 30 years, and 80% of these people will live in low- and middle-income countries.1

• Increasing wealth levels in emerging economies highlight the global drive for greater access to health care.

• More than 50% of the world’s population lacks access to essential health services.2

• Medical bills push 100 million people into poverty every year.2

• Mortality rates from four largely preventable diseases—cancer, cardiovascular disease, diabetes and chronic respiratory illnesses— are increasing globally.3


These conditions make clear the rising demand for health care and pressing need to create and distribute new and effective treatments. This situation places significant stress on health care systems, so we need to see investments in infrastructure and capacity, in addition to innovations in treatment and drugs.

1 “Ageing and Health,” World Health Organization, February 18, 2018, https://www.who.int/news-room/fact-sheets/detail/ageing-and-health.

2 “World Bank and WHO: Half the world lacks access to essential health services, 100 million still pushed into extreme poverty because of health expenses,” World Health Organization, December 13, 2017, https://www.who.int/news/item/13-12-2017-world-bank-and-who-half-the-worldlacks-access-to-essential-health-services-100-million-still-pushed-into-extreme-poverty-because-of-health-expenses.

3 World Health Statistics 2020: Monitoring Health for the SDGs, World Health Organization, https://www.who.int/data/gho/whs-2020-visualsummary.



We Believe Change Is Possible

We expect to see unprecedented innovation by health care companies resulting in new treatments for cancer and other gene-based diseases. Powerful new diagnostics and data analytics enable more efficient research, diagnosis and potentially better outcomes. At the same time, advancements in medical devices are creating more effective treatment options.

We believe an investment focus on these innovative health care companies not only offers the potential for compelling returns, but also a lasting impact on world health.



We think that’s particularly true now because we are in the early stages of a revolution in health care technology and treatments. Economic development and population aging are simultaneously fueling global demand for health care solutions.

For example, the combination of innovation, growth and positive social impact by investing in biotechnology is significant. This reflects the fact that we’re opening new treatment frontiers because of the completion of the Human Genome project, lower genome sequencing costs, and enhanced research and laboratory capabilities.

The combination of innovation, growth and positive social impact by investing in health care companies is significant. We believe we are in the early stages of a health care revolution that will improve the quality of people’s lives all over the planet. But while these trends are secular and enduring, investing in the sector nevertheless requires careful active management and informed security selection.

Investment Thesis

We believe good stocks start with good businesses and that good businesses can become good investments when they demonstrate improving fundamentals, relative strength and valuation. As part of our fundamental analysis, we ensure potential ESG risks and opportunities are identified and adequately managed using our proprietary ESG research framework.

Alignment With Health Care Impact Themes

To ensure proper SDG alignment, every company we consider for inclusion in our portfolio should demonstrate efficacy in at least one of four health care impact themes.

For example, a medical device maker might fall under the themes of new and innovative treatments for diseases in addition to more productive and efficient equipment. An investment in a health care technology company might be consistent with the goals of providing greater access to health care and new solutions for lowering the cost of care.

Our analysts may also utilize a variety of resources, including mapping tools and direct company engagement to further validate SDG alignment.


Our goal is to invest in companies that not only generate a financial return but also fuel societal change by contributing to one or more of our health care impact themes:


New or innovative treatments for diseases, including cancer


More productive medical equipment, services and software


Greater access to medicine and health care services


New solutions for lowering health care costs






Impact Thesis

We seek to achieve positive change through enabling growth by investing in companies with current or projected net-positive impact and encouraging improvement through active engagement.


Investment Thesis

• Identify companies exhibiting improving fundamentals, relative strength and valuation

• Assess ESG risks and opportunities

• Validate company’s SDG exposure


Measuring Impact by Applying the Theory of Change*

Input

Identify company resources used to achieve impact

Output

Identify products or services that lead to impact

Outcome

Articulate or quantify impact enablers

Impact

Measure actual or projected contribution to SDGs

Measuring impact continues to be a challenge. This is especially true of emerging markets given that sustainability disclosure is limited. This challenge offers an opportunity for investors to do their own deep-dive impact research and conduct active engagement. As part of our focus on continuous improvement, we will continue to review our impact approach against industry standards and best practices to ensure alignment with our processes. We will also continue to work with our investee companies to improve the availability and quality of our reporting.

*Theory of Change is a methodology for impact evaluation. For more information, please visit: https://iris.thegiin.org/metric/5.0/od6350/


Impact Results

We believe companies can generate a financial return and fuel positive societal change.




Total Portfolio Impact 

By investing with the intention of making an impact, our investors play a critical role in helping to advance U.N. SDG 3: Ensure healthy lives and promote well-being for all at all ages.

The following chart summarizes the portfolio’s holdings by social impact theme as of Dec. 31, 2020. Because many holdings impact more than one health care theme, numbers add up to more than 100%.


Percentage of Portfolio That Addresses Each Social Impact Theme

Market capitalization data as of 12/31/2020. Source: American Century Investments, FactSet.  



We believe healthy populations are fundamental to any meaningful progress toward social, economic and environmental sustainability.

Henry He, CFA, Portfolio Manager



Case Studies


New or Innovative Treatments for Diseases, Including Cancer
 

Recent advances in understanding our genetic makeup, along with disease development and transmission, put potential cures to some of the most intractable diseases within our grasp for the first time in history. 

Read about Regeneron Pharmaceuticals and argenx
in the full report 

Enhancing the Productivity of Medical Equipment, Services and Software

Harnessing data, stronger computing capability, and research and analysis tools result in new health care insights. Improving technology is leading to significant progress in disease diagnosis, treatment and prevention.

Read about DexCom and Silk Road Medical
in the full report 

Access to Medicine and Health Care Services

A critical social impact goal is addressing the wide discrepancy between the existence of and access to health care treatments and services, particularly in developing countries, ensuring that health systems reach all of those in need. 

Read about Gilead Sciences and Teladoc Health
in the full report 

New Solutions for Lowering Health Care Costs

Population health is highly correlated with income levels both across and within countries. As a result, finding more cost-effective health care solutions as a means of improving access is crucial to improving health across populations.  

Read about UnitedHealth Group and MicroPort Scientific
in the full report 

Download the Full Report

Learn more about our unique ownership structure, read Case Studies, review our Proxy Voting Policies, and meet our investment team.

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. Opinions and estimates offered constitute our judgment and, along with other portfolio data, are subject to change without notice.

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.

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