Antibiotics: A success story for investor pressure?


There’s now growing acceptance that unnecessary and excessive use of antibiotics poses significant risks.

Changing course

When engaging with companies on some of the big ESG topics, changing ingrained behaviours can often be akin to turning an ocean liner. Progress can be slow.

So it is worth celebrating the successes, where pressure from investors has made a real difference.

We’ve seen it just recently with the issue of antimicrobial resistance (AMR), where a concerted effort over the last three years has led to tangible steps made to reduce the use of antibiotics in agriculture.

The scale of the problem

There’s now growing acceptance that unnecessary and excessive use of antibiotics poses significant risks. Drug-resistant infections are already responsible for 33,000 deaths in Europe per year*, while some estimates put the economic impact as potentially greater than the Global Financial Crisis in 2008.

With more than half of global antibiotic use in agriculture, rather than human medicine, companies are under pressure to re-evaluate their supply chains and we’ve seen tougher legislation to combat the problem in recent years, particularly in Europe and parts of Asia.

There’s evidence that they are taking note. Fast-food giant McDonalds, for example, has acknowledged that antibiotic resistance is a ‘critical public health issue’ and has pledged to use its scale to identify antibiotic usage across its global supply chain and establish reduction targets. Meanwhile, retailer Costco has revised its animal welfare policy to restricting animal antibiotic use – and will assess the feasibility of eliminating the routine use of medically important antibiotics among supplier farms by December 2020.

Stronger together

An important factor behind companies taking more decisive action has been collective pressure from investors. A prime example of which is the collaborative engagement led by the Farm Animal Investment Risk & Return (FAIRR) initiative, which we became involved with when it launched in 2016.

Through three phases of engagement, the initiative, involving 74 institutional investors, targeted UK and US fast-food and casual dining companies. It has sought to address the issue of AMR and work towards a reduction or structured process to phase out the nontherapeutic use of antibiotics in food supply chains.


Progress has certainly been made. Before the initiative started, no company had an antibiotic stewardship policy; on its completion, the vast majority of companies either had one in place or in development. In addition, a large proportion have committed to reduce or prohibit the routine use of medically important antibiotics in line with WHO recommendations.

We’re not there yet

Before claiming victory though, it is worth highlighting there is a long way to go. We, along with other investors, met England’s Chief Medical Officer at the start of the year, as she was trying to understand the role investors can play alongside companies and governments in tackling the issue.

There was without doubt a feeling of optimism at the progress made so far, but it was acknowledged that poor practices remain and markets such as India were described as a ‘mess’.

From the point of view of businesses, there is still a leap from acknowledging the problem to actually taking action to address it (and a further leap from there in how well this is disclosed to investors).

Our investment perspective

Of course, as with any ESG topic, we approach this area as a source of potential investment opportunity as well as taking account of the risks.

For example, some companies are focusing on scientific solutions to animal nutrition. Chemicals company BASF has developed a formic acid Amasil®, which eliminates salmonella in swine and poultry feed. Meanwhile, bioscience company Chr Hansen has developed testing kits for dairy farmers in the Russian market to test for antibiotic residues in milk.

A second, longer-term benefit has been the benefit to our engagement process. While the majority of our engagement is on a one-to-one basis, collaborative efforts, such as FAIRR can give us a broader insight into the ESG and Stewardship best practice and enable us to improve the conversations we have in the future – with the ultimate potential for better investment outcomes.

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