Why Should Investors Care About Anti-microbial Resistance?

Maria Larsson Ortino, Senior Global ESG Manager at Legal and General Investment Management, outlines the role of asset owners and managers in avoiding a new pandemic.

From recent experience, we know the catastrophic impact that Covid-19 had on society. In our view, anti-microbial resistance (AMR) has potential to deliver similar, sustained levels of damage, both to public health and investor portfolios. We believe that without imminent coordinated action, AMR could become the next pandemic.

Anti-microbials are medicines developed to prevent and treat infections caused by pathogens in humans, animals and plants. Anti-microbials most notably include antibiotics, but also include anti-virals, anti-fungals and anti-parasitics.

AMR is the evolutionary process whereby microbes develop resistance to these medicines. This occurs naturally as bacteria, viruses, fungi and parasites mutate over time, making the medicines in question less effective. One of the consequences of AMR is that it makes simple infections more difficult to treat and increases the risk of severe illness, the further spread of diseases and, ultimately, death.

The World Health Organization (WHO) has identified AMR as one of the top 10 risks facing global health. It has been estimated that the global death toll attributable to AMR could rise to 10 million people a year by 2050 if we do not act now, with damage to the economy potentially being as catastrophic as the 2008-2009 global financial crisis. It’s estimated that AMR was directly responsible for the death of 1.27 million people in 2019, up 180% from an estimated 700,000 in 2016.

Farming in focus

Most antibiotics globally are used for animals, not humans; it is therefore essential to limit the use of antimicrobials, and in particular antibiotics, to mitigate the spread of AMR.

Inappropriate use of anti-microbials can accelerate the evolutionary process of AMR, and we are seeing this within the animal husbandry industry. Anti-microbial prophylactics are frequently employed with the aim of preventing animals from getting sick. If one infected animal has been identified, all the animals on a farm may be provided with an antibiotic. A further (mis)use of anti-microbials is for animal growth promotion, where an antibiotic is administrated purely to promote the growth of the animal for financial gain, and not to treat a disease.

Anti-microbial use also impacts the environment, and its heavy use in animal husbandry often leads to the anti-microbial being discharged into the environment via animal waste, which impacts micro-organisms and further increases AMR.

In addition, anti-microbials can be released into the environment in factory wastewater during pharmaceutical manufacturing. This can contribute to the development of AMR, when bacteria naturally present in water and soil are exposed to antibacterial ingredients that can trigger the emergence and/or selection of resistance genes which consequently may increase AMR.

The pandemic in the shadows

Despite the severity of these threats, we believe AMR risk is significantly underappreciated by financial markets. As such, we have been publicly raising our concerns about AMR for several years and, given its increasing relevance to investors, we have made AMR a key sub-theme of our investment stewardship health pillar. We continue to track the issue and proactively engage across a wide range of sectors, companies and policymakers at a regional and global level – including the UN and Group of Seven.

Under the umbrella of Investor Action on AMR, of which we are founding investors, we together with 80 investors representing US$13 trillion of combined assets have urged global leaders and policymakers to take action to curb the spread of AMR at the UN General Assembly’s second-ever high-level meeting on AMR, which took place on 26 September. The statement outlines seven asks, including commitments to reduce the use of antibiotics in agriculture, to set limits for antibiotics in wastewater from manufacturing facilities, and to establish appropriate mechanisms to manage antibiotic residues entering the environment from additional sources such as livestock manure and wastewater treatment systems.

As the threat of AMR moves up the agenda of multilateral organisations, we are seeing an increase in investor interest in antimicrobial use across their investees’ supply chains. Three AMR shareholder resolutions have been filed at high-profile food service companies this year: Yum! Brands, McDonald’s Corp and Restaurant Brands International Inc (RBI).

At Yum! Brands and RBI, the filing shareholders asked the companies to comply with WHO guidelines on the use of medically important antimicrobials in food-producing animals throughout their supply chains. We expect that companies within the restaurant/out-of-home sector (e.g. fast-food companies) should require all their meat suppliers to comply with the WHO guidelines and that they should be transparent about their AMR strategy, actions taken to implement it, and steps taken to monitor implementation. Our expectations are outlined in our Health Policy which was published this year.

The path ahead

Failure to adequately address AMR risk across supply chains could potentially cost the global economy US$100 trillion by 2050, which would have a significant impact on investors’ portfolios.

We believe compliance with WHO guidelines for the largest fast-food companies would be a significant step in mitigating AMR risk. Their influence within their sector could also help them lead by example by encouraging broader improvements, expanding potential for effective action on this systemic risk.

Social health and economic health are connected. We ignore that at our peril.

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