Let’s re-emphasize the ‘social’ aspect of our ESG investments

News: Need to start a new ‘bio bond’ asset class to support Biomedical research.

In Environment, social and governance investing, while many of the investments goes to environment and governance aspect, Social-welfare investments are often neglected.

But there is an urgent need to change this, especially in biomedical research, to make it more sustainable, and affordable.

What are the issues/concerns associated with the funding of Bio medical research in the US?

When a treatment or cure shows promise, it then needs to be tested in clinical trials of increasing size, complexity and cost.

At the start of these trials, they get funding mostly from university tech-transfer operations, philanthropy and outside investors.

When a trial shows promise, the next step is another clinical trial and the expense for advancing the proposed cure goes up.

Likewise, it takes a lot of expensive trials before finding third-party investors willing to carry promising research for the end-stage trials essential for drug or medical-device approval.

However, there is a concern, the equity investors on which biomedical research now depends demand major stakes in high-profile projects with high drug prices to meet their own market imperatives.

Many nations bypass this equity-based, high-cost, high-risk business model with public investment. But the US has never done it, due to its historic aversion to direct federal investment in for-profit firms.

Translational valley of death – The gap between promising early-stage clinical research and the end stage at which big money is needed.

What can be done?

The best way to bridge the translational valley of death is to change the biomedical-funding model that is currently dependent on equity investments.

The proven way to create safe, sound, sustainable, and affordable financing is via a limited federal guarantee. This can be done by creating a new ‘bio bond’ asset class. This will reduce risks dramatically via the government guarantee and eligibility and diversification requirements.

These requirements also ensure that guaranteed debt funding isn’t misused by big biopharma in the form of a new subsidy or as a back-door backstop for venture capital.

Source: This post is based on the article “Let’s re-emphasize the ‘social’ aspect of our ESG investments” published in Livemint on 27^th Dec 2021.