Investors are waking up to the risks posed by antibiotic resistance

By Joy Frascinella, head of PR, the Principles for Responsible Investment (PRI)

Antibiotic resistance, caused by the overuse and misuse of antibiotics, is a very real and growing threat to human health worldwide.  It is estimated to claim approximately 100,000 lives in the US and Europe every year. The numbers are much higher in developing countries.

Alongside the human costs, the financial implications are also equally startling.  The World Health Organisation (WHO) estimates that in the European Union (EU) alone antibiotic resistance is costing more than $1.5 billion in healthcare expenses and productivity losses.

The only way to tackle this threat is to curb the use of antibiotics, dramatically.

Investors are taking note.

In 2016, the investor initiative FAIRR (Farm Animal Investment Risk & Return) launched an investor statement on antibiotic stewardship. It identified the financial risks associated with antibiotic misuse and growing antibiotic resistance.  Intensive farming has increased the use of antibiotics which builds resistance in animals and gets into the food chain, affecting humans. The statement has now been signed by 71 institutions with over $2 trillion assets under management (AUM).

While this is a great start, investors can exert more pressure to reduce the use of antibiotics among animals.

What’s the problem with antibiotics?

There are two reasons why antibiotic use has become such a problem.

First, antibiotics are overused and misused. The continued use of factory farming, which keeps animals in close confinement in often unhygienic conditions, has resulted in increased use of antibiotics as a way to mitigate disease.

Over time, animals become resistant to antibiotics. As this happens, different antibiotics are used and all become ever less effective. This has led to the development of new “superbugs” that are untreatable using conventional drugs.

The human threat arises when drug-resistant bacteria remains on meat from animals. When not handled or cooked properly the bacteria can spread to humans.

The second problem is linked to the first. A growing number of food product recalls are because of the drug-resistant bacteria that remains on the meat from animals causes illness among humans.

A study by the Food Standards Agency (FSA) released last year, found that these types of product recalls are rising at alarming rates.

These product recalls are costly for business. The Grocery Manufacturers Association in the US found that 18 per cent of those companies hit by a recall said the financial impact from operational costs and lost sales was between $30 million and $99 million. Five per cent said the impact was $100 million or more.

The long-term reputational damage can have an even steeper price tag.

 So, what can be done?

When the cause of the problem is the overuse and misuse of antibiotics, the only solution is to curb to their use.

Investors have a significant role to play by exerting pressure and arguing for reduced use.

According to a 2017 report by FAIRR and ShareAction, the numbers of shareholder resolutions being filed that concern the overuse of antibiotics in livestock supply chains are increasing.

Between 2010 and 2015, there were only four resolutions filed,whereas in 2016 and 2017 a total of 12 resolutions were filed.  These resolutions are also gaining the support of proxy voting agencies. They have either have, or are, projected to achieve a higher percentage of shareholder votes than ever before.

As Jeremy Coller, CIO of Coller Capital and founder of FAIRR has noted: “Investors are not immune to antibiotic resistance. New regulation, shifting consumer preferences and trade restrictions are already driving a reduction in antibiotic use in livestock. The clear message to these companies is that their shareholders want to see meaningful action on antibiotics”.

By engaging directly with investee companies, investors can demand more disclosure on antibiotic use and how companies are addressing this issue. They can also engage with policymakers to influence regulation that would ensure food standards are strengthened worldwide.

And they can work with other shareholders to develop resolutions which companies will need to address at AGMs.  Using their collective financial clout, investors can help safeguard human health as well as contribute to greater financial stability by curbing antibiotic use.