Authors
Sarbjit Nahal, and Beijia Ma
This Primer sets out the challenges and opportunities presented by the theme of fighting pandemics.
As the current Ebola outbreak shows, the risk of a pandemic spreading globally is a question of “when” rather than “if”. The danger looms large, with smallpox having killed 500mn in the 20th century, the 1918 Spanish Flu 30-100mn, and AIDS 30mn to date. The threat of a global pandemic is arguably higher than at any time in human history with risk factors including: globalisation, demographics, climate change, “zoonoses”, unknown pathogens and re-emerging diseases, antimicrobial and antibacterial resistance, and laboratory escapes and bioterrorism. In this report, we outline the risk factors around 16 potential pandemics.
The potential costs of a pandemic are estimated to establish the price of its containment. Extrapolating historic examples, a severe and prolonged global pandemic could kill 180-360mn and hit global GDP by as much as 5-10% in the first year, with most industry sectors adversely affected, EMs hit the hardest, and the financial markets sliding into a major global recession off the back of widespread but highly unpredictable risk aversion. Worryingly, significant gaps exist in government funding for pandemic preparedness, and over three-quarters of corporates are thought to have inadequate pandemic plans.
In terms of the potential sector impacts, a severe pandemic could hit demand for transport (air, road, rail, travel agencies), hotels and catering, restaurants, and arts and recreation by 67-80%. For many insurers, disease is the number one extreme mortality risk, and a severe pandemic could therefore wipe out 10-20% of the value from insured losses alone (not including financial market effects). The overall cost of a major global pandemic scenario including spillover across industry sectors could be as high as US$2.5tn (source: WTTC/Oxford Economics).
The 'fighting pandemic exposure' theme has been mapped across a number of sectors’ value chains to highlight a diverse range of entry points for investors wishing to play the pandemics theme: (1) Pharmaceuticals and Healthcare, (2) Life Sciences & Diagnostic Tools, and (3) Personal and Protective Equipment. Together with our sector analysts, we have created a list of close to 60 global stocks.