Polluting to Heal: The dark side of India's pharma success

India's pharmaceutical sector is growing rapidly. But the success is a costly affair for the environment. Nordea has visited some of the suppliers included in our portfolios.

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India’s chemical industry is the main bulk provider to the pharma industry in the Western world (revenues of US$15 billion in 2014). The industry is one of the fastest growing segments of the Indian economy and has experienced rapid and sustained expansion since the second half of the 20th Century. The market is expected to grow to $100 billion by 2025.

Tonnes of ingredients are produced and end up in medicine produced in Europe and the US.

Nordea has travelled to India to visit some of the pharmaceutical suppliers that are included in a number of our portfolios. These field trips are standard procedure for us and ensure that our focus on ESG is reflected in the companies that we engage with.

But the field trips also help us understand the challenges that companies as well as local communities are facing. We are not looking to exclude companies from our portfolios, even though this is sometimes necessary. We want to create the necessary solutions in collaboration with companies and local people.

In India, it is clear that the environment is paying the price for the booming pharmaceutical industry. This is very much down to short-term thinking and a disregard for environmental consequences. The water is highly polluted and this will eventually hamper the growth that is needed to yield the necessary returns to our customers.

The matter is complicated further by the fact that local authorities do not have the possibilities to control and punish companies who ignore the rules. And the companies themselves, which in the long run would benefit from water recycling and stricter environmental policies are doing nothing.

There is great potential in the Indian pharma industry. But the situation also highlights the need for investors to get involved and make demands so that the country’s water resources should be protected and recycled much more than is the case today. Read more here.

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