Uncertainty of market demand and return on investment One of the most significant roadblocks preventing life sciences investments in climate and health is the uncertainty of market demand and return on investment. Given the high risks70 inherent with life sciences R&D, return on capital becomes a driving force for the industry. It often compels life sciences innovators to set priorities according to investor expectations rather than societal need. When philanthropic investments are made on health- equity concerns, although a positive step forward, R&D programmes are often not big enough to address the full needs of climate-driven diseases. Ultimately, the decision to invest is based on a business case – and for many climate-exacerbated diseases, the traditional risk-return dynamic does not yield sufficient economic rewards. For example, mental health faces71 significant funding challenges because of uncertain ROI. Only about 5%72 of biopharma R&D budgets is dedicated to treatments despite estimates that over half the US population is diagnosed with a mental health condition during their lifetime.73 Public funding74 for academic mental health research tends to be limited, leading to low levels of early-stage research. At the same time, R&D costs are very high. Early-stage failure rates75 of neuropsychiatric drugs are high and psychiatric studies often need to be large, which increases development costs and extends approval timelines. Additionally, a number of climate-driven diseases such as stunting, malaria and dengue predominantly affect less economically developed regions with a perceived small market size76 and marginal return on investment, even as cases rise globally. In the case of vaccines, for example, creating economies of scale in manufacturing can be challenging,77 which further impairs ROI. Although climate-driven diseases are predicted to rise in both less and more economically developed countries, and new cases of vector- borne diseases in North America and Europe may trigger investment interest, the lack of visibility into the timing of commercial viability can dissuade companies from investing in these areas to make real progress. Misalignment of risk and reward limits investments78 or restricts their focus to small-scale philanthropic projects. While a positive step, these would benefit from the large-scale impact of projects in the commercial core business. Changes to funding approaches and global policies will have to be made to enable life sciences innovators to undertake strategic, large-scale investments in climate-exacerbated diseases.For instance, at the beginning of the COVID pandemic, the US government guaranteed the purchase of vaccines from Pfizer79 and Moderna80 to establish the market the vaccine producers needed to justify the R&D programmes they created. But, unlike COVID, climate-related health issues often play out over many years. By implementing innovative funding models and fostering partnerships with governments and impact investors, companies can share risks and unlock new sources of capital. To de-risk these investments, public-private partnerships are essential. One proven model is the GAVI Alliance,81 which funds vaccines for low-income countries — a blueprint that could be expanded to cover climate- related diseases such as malaria and dengue. Between 2000 and 2023, the GAVI Alliance82 vaccinated more than 1.1 billion children in 78 countries and prevented almost 19 million deaths. Unpredictable and diverse regulation Another major obstacle to unleashing life sciences innovation involves policy and drug regulation. This roadblock has an intimate cause and effect relationship with a lack of market uncertainty and return on investment, since regulation can reduce uncertainty and drive investments by establishing clear demand. Disjointed regulatory, financial and tax incentives make it difficult for companies to develop cohesive strategies that span multiple markets, limiting the reach and impact of innovative climate-health solutions. For example,83 unclear or unpredictable regulatory pathways and lack of technical and regulatory capacity in low- and middle-income countries hinder investment in malaria. Existing regulatory systems can be inadequate to drive more competitive markets or ensure widespread production of higher quality products at reduced costs. WHO’s prequalification system (PQ)84 plays a crucial role in providing regulatory guidance, but challenges in coordination85 between WHO PQ and national regulatory bodies can delay product access. Lack of regulatory precedent and established efficacy measures can also complicate the approval process and lead to further regulatory fragmentation. In mental health,86 the novelty of tools such as digital therapeutics and devices for brain stimulation creates uncertainty around approval pathways. Overcoming these regulatory challenges,87 when pursuing mental health innovations, is further exacerbated by reliance on subjective psychiatric endpoints and a nascent understanding of the molecular drivers of mental health conditions. At the beginning of the COVID pandemic, the US government guaranteed the purchase of vaccines from Pfizer and Moderna to establish the market the vaccine producers needed to justify the R&D programmes they created. The accelerated approval by the FDA of COVID-19 vaccines demonstrates how flexible regulatory frameworks can expedite critical healthcare solutions. Healthcare in a Changing Climate: Investing in Resilient Solutions 24

Healthcare in a Changing Climate 2025