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FAIRR’s Maria Lettini: Investors are not immune to antibiotic resistance

Antibiotic resistance is potentially a bigger risk to global health than any US president

With the world, including the responsible investment community, preoccupied with the emergence of President Trump in the US, it may go unnoticed that this week is the World Health Organization’s Antibiotic Awareness Week. Yet the emergence of antibiotic mass resistance poses a potentially bigger risk to global health, and wealth, than any US President could.

The what and how of antibiotic resistance

Perhaps surprisingly, a majority of all antibiotics produced today are not given to humans, but to farmed animals. In the EU, two-thirds of antibiotics go to the animal farming industry (1), and in the US the figure is a staggering 80% (2) .

The problem is with something called ‘non-therapeutic’ use of antibiotics.

Global patterns of meat consumption have shifted animal protein production to industrial-scale systems, where animals are typically kept in densely populated, disease-prone, and often inhumane facilities. This rearing method contributes to compromised immune systems as animals constantly fight off bacteria and viruses while in confined spaces with limited ventilation. Animals in these conditions require regular doses of antibiotics to remain healthy. These ‘non-therapeutic’, regular doses of antibiotics are used to prevent illness (and also in many cases to promote growth) and are believed to be the primary cause of the development of antibiotic-resistant bacteria.

It is estimated that 70% of bacteria around the world have already developed resistance to antibiotics (3) . As drugs become less effective, common infections such as pneumonia or gonorrhea are becoming increasingly difficult and sometimes impossible to treat. A continued rise in resistance by 2050 would lead to 10 million people dying every year and a reduction of 2% to 3.5% in Gross Domestic Product (GDP) (4). In 2016, it is estimated that 700,000 people will die from antibiotic resistant infections.

Antibiotic resistance is a serious public health issue – but how does it affect investors? If left unaddressed, antibiotic resistance could cost $100 trillion in lost global economic output by 2050 – roughly the value of the world’s economy today (5).

Four reasons this matters to investors

Neither the food nor the pharmaceutical sectors are adequately addressing the issue of antibiotics usage in their production supply chains. In the case of pharma, companies have shown little interest in boosting their R&D around new product development given the high costs and relatively low return profile associated with antibiotics.

Despite the reduction in efficacy of current antibiotics, there remains minimal corporate incentive to develop new products. This leads to corporate inaction and investor risk in four key areas:• A changing regulatory landscape: In Europe there is a review of the Veterinary Medicinal Products and Medicated Feed Regulations, which may lead to a ban of the routine administration of antibiotics to animals. Some such bans are already in place in Denmark, and it is estimated that a similar antibiotic ban in the US would cost pig producers alone more than $700 million (6).

Trade restrictions: As certain imports become prohibited in some geographies, trade restrictions will have a heavier impact on corporate revenues. For example, the EU introduced legislation banning products in which growth-promoting antibiotics led to a ban of some US beef imports that cost the industry many millions every year (7). Rising public pressure for restrictions on antibiotics is likely to lead to further jurisdictions imposing import restrictions on those meat and fish products not certified antibiotic- or growth hormone-free.

Changing customer behavior: Consumer preferences and behavior are dramatically altering the landscape for food producers. The recent discovery of MRSA and E.Coli on meat sold in UK supermarkets has led retailers to strengthen their supply chain policy on antibiotics. Similarly, in December 2015, the three biggest supermarkets in the Netherlands announced that they would stop selling chicken meat from poultry given large doses of antibiotics to promote accelerated growth (8). The announcement came after a high profile awareness-raising campaign around the ‘plofkip’, or ‘exploding’ chickens, by animal welfare organization, Wakker Dier. Subsequently, store sales of chickens in Dutch supermarkets fell by half, farmers have shifted their production to slower-growing broilers and consumers are demanding more information about their food (9).

Reputational risks: Food producers and retailers accused of poor practices on antibiotics face increased scrutiny from the media, social media and civil society. Negative coverage that highlights poor governance or irresponsible practices in the supply chain, increasingly has a significant material impact on companies. For a consumer-facing brand, this can be particularly concerning as customers can easily shift their spending habits. The pharmaceutical industry faces a similar reputational challenge if it fails to act.

First signs of corporate action

Earlier this year, a group of investors who believe it is in their long-term interests to manage the risks posed by antibiotic resistance combined their influence via the FAIRR (Farm Animal Investment Risk & Return) Initiative to launch a shareholder engagement with ten of the world’s leading food companies. The coalition of investors managing $1.5 trillion of assets asked the food multinationals to commit to reduce the use of medically important antibiotics in their supply chains.

The engagement has already resulted in a commitment by The Restaurant Group, owning brands such as Frankie & Benny’s and Garfunkel’s, to take steps to phase out the routine, non-therapeutic, use of antibiotics in their supply chains.

This is a significant, but much more needs to be done. Preserving the efficacy of current antibiotics now and in the future will require a fundamental shift away from an industrial meat production model that relies on routine antibiotic use, and towards a more sustainable way of rearing animals. Less intensive and organic farming approaches will help to reduce antibiotic dependency, but there are other emerging solutions as well, such as vaccines. It is important that companies and the market continue to foster best practice and innovation around antibiotic reduction and misuse.

The time for action is now

We hope WHO’s Antibiotic Awareness Week can motivate more investors to take action on this issue. Investors should use their influence as shareholders to encourage companies in the food and pharmaceutical sectors to outline good policies and practices for the use or production of the most critically important antibiotics for human medicine.

Eliminating non-therapeutic antibiotic use in the global food supply chain will require
concerted action from consumers, governments, civil society, investors and companies. But the motivation could not be stronger: to avert a public health catastrophe and large-scale value destruction and move towards a more sustainable global food production system. (For footnotes, please see below.)

To learn more, please see a new investor briefing, Superbugs and Super risks by FAIRR, Aviva Investors and the Alliance to Save Our Antibiotics.

Maria Lettini is the Director of the Farm Animal Investment Risk & Return (FAIRR) Initiative.Footnotes:

(1) See Table 4, p29 of ECDC/EFSA/EMA report published in 2015
(2) United States Food and Drug Administration. (2009). Summary report on antimicrobials sold or distributed for use in food-producing animals. Department of Health and Human Services
(3) consumers/ucm143568.htm
(5) WHO Antibiotic Resistance factsheet, October 2015. Accessible: antibiotic-resistance/en/
(6) cgi?article=1011&context=card_briefingpapers
(7) Johnson, R. (2015), The U.S.-E.U Beef Hormone Dispute, Congressional Research Service, p.11, available at:
(8) met-verkoop-plofkip
(9) drie-grootste-supermarktketens-van-plofkip-af