Social

As with any investment, your capital is at risk.

We believe that encouraging responsible social practices is not only ethically sound but can also strengthen companies’ long-term financial and impact opportunities. We regard the materiality of social factors through three primary lenses: how poor social practices destroy value, how good social practices create value, and how companies solving social problems present attractive investments.

While the latter is covered in more detail in our annual Impact Report, our engagement efforts focus on all three areas. Our conversations with companies in 2024 illustrate the sheer range of social topics that are relevant to companies in the Positive Change portfolio. Researching and engaging on social business practices is complex and multi-faceted, not least because of the different approaches to social performance and disclosure around the world. Increasingly, we find ourselves engaging with third party researchers and organisations to inform our company engagements, as you will see in some of the case studies overleaf.

• How poor social practices destroy value
• How good practices create value
• How companies solving social problems present attractive investment opportunities

Conversations in 2024

Engagement case studies

Grab 

Gig workers and responsible finance

© Hugh Mitton/Alamy Stock Photo

Grab is Southeast Asia’s leading mobile app for ride-hailing and food delivery, and is building a suite of financial service offerings. Its digital platform supports micro- and small-sized businesses (MSEs) and promotes financial inclusion in Indonesia, the Philippines, Vietnam and several other countries.

Objective: We took a holding in Grab for the Positive Change portfolio in 2024, but for several years we have been meeting with its management team to discuss the business and its approach to relevant social matters. In particular, we believe that treating its platform workforce well and supporting the MSEs using its platform are both necessary for Grab to successfully execute its strategy and maximise its positive social impact. 

When considering this investment, we commissioned 60 Decibels (60dB), a survey-based research organisation, to better understand how platform models are affecting financial and social outcomes for MSE owners in Indonesia and the Philippines. Both are growth markets for Grab. This survey, of 1,600 MSE owners, demonstrated the great potential digital platforms have for improving lives, but also identified that many MSEs face challenges with digital literacy. We want to encourage Grab to do what it can in this area to help maximise its impact, particularly among smaller and more remote MSEs.

Engagement: We first wrote to the chief executive and chair to state our support for the company’s ambitions to support MSEs across Southeast Asia, and also provided copies of the 60dB research. We subsequently had online meetings with Grab’s ESG team and learnt more about its approachto providing educational resources to the drivers using its platform. The company’s GrabAcademy provides drivers with free online learning opportunities because the company believes that they will benefit from having additional life skills. Grab has plans to build on this and so we put the team in touch with Coursera, another Positive Change portfolio company, to see what Grab could learn about providing effective digital education.

Later in the year, we visited Grab Indonesia and spoke to its chief financial officer. We discussed the findings of the 60dB report and how Grab might help MSEs who want to digitalise and therefore increase its market penetration. The chief financial officer noted that he had recently visited Sulawesi province, and his experience speaking to MSEs
corroborated some of the 60dB report findings on digital literacy. We explored some of the bottlenecks Grab faces in supporting digital education among smaller merchants in more rural areas, such as misinformation, and we suggested alternative routes to reach these customers, for example by partnering with microfinance organisations with more experience in this segment.

Outcome: Sharing the survey results with Grab’s team proved helpful in building a relationship and facilitating discussions about concrete steps which could improve pain points for MSE owners. We were impressed by Grab Indonesia’s openness to explore new avenues to educate customers, and we look forward to seeing how Grab continues to promote digital literacy and education among its partners. We believe this will help it onboard more MSEs and increase its outreach to more remote areas.

Vertex Pharmaceuticals

Drug pricing and access

Vertex is a speciality pharmaceutical company aiming to bring transformative medicines to market in areas of high unmet need. Its treatments in the market include a portfolio of drugs for cystic fibrosis and a gene-editing therapy for sickle cell disease. It also has a pipeline of others, including for pain.

Objective: This year, we took a holding in Vertex. During our pre-investment due diligence, we identified that although its cystic fibrosis treatments have been transformative for many of those suffering from the condition in the US and Europe, access is restricted in many parts of the world and the cost of treatment is prohibitively high.

Engagement: After taking a holding in Vertex, we wrote to the chief executive (CEO) and chair to encourage the company’s efforts on access and affordability. We subsequently discussed this with the CEO and the chief scientific officer. We were somewhat reassured that Vertex has worked hard to make its treatments available in 60 countries, including those where the relevant strains of the disease are most prevalent. It does intend to expand access, but not as fast as some patients would like. 

Our research and engagements have also helped us understand that while appropriate pricing is essential, it is not always the number one issue that unlocks better access. In particular, diagnosis, reimbursement arrangements and access plans are crucial when treating cystic fibrosis. Unfortunately, there are many parts of the world where early
diagnosis is unavailable, leading to high mortality rates.

Outcome: We expect these conversations to continue over the course of our investment in Vertex, and will continue to monitor whether access is expanding. In 2024,we were pleased to see the company come to an agreement with the NHS in the UK, and it started
to provide its leading drugs in South Africa. Vertex is also progressing a further treatment in the clinic, which it hopes will help around 5,000 patients for whom previous treatments did not work.

There is still an opportunity for Vertex to expand access to its cystic fibrosis treatments while appropriately balancing pricing, profits and drug development. As with any pharmaceutical company, there is a balance to be struck between these three
things. Vertex is highly focused on research and development – which is one of the reasons for our investment – but we don’t believe that this needs to come at the expense of expanding access and affordability.

Portfolio Considerations

Given the breadth of issues that come under the social category and how important context is in understanding them, it is difficult to make a useful assessment of ‘social performance’ across the whole portfolio. On traditional social metrics, such as board gender diversity and the presence of human rights policies, the Positive Change portfolio ranks about the same as its benchmark, and all holdings are considered compliant with the UN Global Compact.

While these data provide an interesting snapshot, as with all our work, we prefer to take a bottom-up approach to analysing a company’s social performance. We believe it is best to compare companies to peers rather than to a benchmark. Social performance across the portfolio varies dramatically, from companies with living wage commitments to those with repeated labour relations challenges. Our pre-investment impact analysis aims to consider how each company treats its stakeholders, including customers, employees and wider society.

As you can see in this report, this sometimes means we engage on highly company-specific topics, such as our conversations with Savers Value Village on the African second-hand clothes market. Yet, there are social factors that we come across frequently and have invested time and resources in recent years to understand them better. Some of these areas include:

Labour conditions and relations

Companies in the Positive Change portfolio directly employ more than 1.3 million people, and several employ large temporary workforces. With digitalisation and AI proliferation, the nature of work continues to evolve. It is increasingly hard for companies to attract and retain the best talent, invest in diversity, and stay ahead of shifting labour regulations. Yet these things are extremely important. This year, we spoke with Fairwork to understand better what improvements can be made to enable quality jobs in the gig economy, which
is particularly relevant to our Grab holding.

Supply chains and human rights

Given the material demands of the energy transition and the portfolio’s exposure to that theme, this is an area we have worked on over several years. We have looked at the supply chains of cobalt, nickel and lithium and considered the potential of traceability and transparency to improve labour conditions in upstream supply chains. In 2024, together with other investment teams at Baillie Gifford, we have been speaking with the Initiative for Responsible Mining Assurance (IRMA) to understand best practice in mining, and we also discussed some of the challenges Tesla faces in auditing its supply chain
in China.

Consumer protection

The Positive Change portfolio includes several companies deploying financial services in emerging markets, often to socioeconomically vulnerable households, such as MercadoLibre and Nu in Latin America and HDFC Bank in India. Appropriate consumer protection measures, such as transparency, data protection and risk controls, are vital for ensuring these customers realise the benefits of financial inclusion.

We continue to develop our understanding of trends and best practice in this area. In 2024, we formally became a Strategic Partner of CGAP, a leading research organisation focused on financial inclusion and housed within the World Bank.

Product access

This is most relevant to portfolio companies selling devices, vaccines and treatments in our healthcare theme, as well as to companies such as Duolingo, Coursera and Remitly, where access to their products can have a significant social impact. Pricing is important, which has been a topic of conversation with Dexcom and Moderna, and this year with Vertex and Insulet. Yet there are many other relevant factors in healthcare, such as drug access plans, and regarding digital services, such as connectivity and digital training, that we must consider and engage on.

Back to the Positive Conversations 2024 report page

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