LGIM ‘won’t shy away’ from voting against directors on AMR

The trillion-dollar fund’s global ESG manager, Maria Larsson Ortino, speaks to RI about its shareholder proposal at McDonald’s on antimicrobial resistance.

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The threat posed by antimicrobial resistance (AMR) is not just to the health and wellbeing of millions, it is also a risk to investor returns, industry heavyweights have warned.  

Filers of a shareholder proposal at McDonald’s, which include Legal & General Investment Management (LGIM) and Amundi, cite a 2016 review backed by the UK government. It estimated that the cost of AMR to the global economy could be as much as $100 trillion by 2050.  

Given the threat, Maria Larsson Ortino, global ESG manager at LGIM, tells Responsible Investor that the trillion-dollar manager would not be afraid to vote against directors on the issue if necessary.  

“At the moment, we do not have a policy that says in the case of AMR, we will vote against X, Y and Z directors, but we certainly wouldn’t shy away from using that tool,” she says. “It just need to come in at the right time.”  

The proposal at McDonald’s is a collaboration with The Shareholder Commons (TSC), a US non-profit focused on systemic financial risks.  

It calls on the US fast-food giant to align its business, including supply chains, with the World Health Organization’s (WHO) guidance on antibiotic use. 

This is the third year in a row that McDonald’s has been hit with an AMR proposal.

Previous proposals have asked the company to report on health costs linked to the firm’s use of antibiotics and the associated risks to diversified investors. But the 2023 resolution is more specific.  

Systemic risk requires systemic response 

Ortino tells RI that McDonald’s was not targeted because it was the worst offender when it comes to antibiotics – although the company did fail to publish antibiotic reduction targets in 2020 covering all the beef sold in its restaurants, despite committing to do so in 2018.

The commitment subsequently disappeared from McDonald’s website. Then in December – the same month it was hit with the AMR proposal – the company published new but scaled-back targets for the “responsible use of medically important antibiotics”.

Ortino says McDonald’s was chosen as a target for the proposal due to its systemic importance. As the largest beef purchaser globally, she says, the firm has a unique position of influence should it issue a “rallying cry” on the issue.

Such a move would “reverberate across the entire industry”, Ortino believes, including with companies in sectors such as animal pharma that provide antibiotics to McDonald’s supply chain.  

The same proposal has been filed at US meat giants Tyson Foods and Hormel Foods this year by Amundi and Australian superfund HESTA, which also co-filed on McDonald’s. 

LGIM has supported these proposals and similar ones in the past at both companies, but Ortino says McDonald’s position as one of the most powerful customers in the supply chain has particular potential to convene and influence the market on AMR. 

WHO guidelines  

The WHO guidelines on AMR were created in collaboration with the World Organisation for Animal Health and Food and Agriculture Organisation. Ortino says the expertise behind the guidelines should make it hard for a company to decide not to adopt them. 

“I do find it challenging as to why you wouldn’t be able to just apply the WHO guidelines, which are very clear.”  

But she stresses, LGIM does not expect this to happen overnight. “We’re not saying that this should happen in six or 12 months. What we’re saying is we want you to take this on board and implement it.” 

The use of the WHO guidelines as a common framework would not only make it easier for investors to assess companies but also for the companies themselves to engage with their supply chains, Ortino says.  

Investors lag on AMR  

Support for the WHO proposal has been relatively low so far. When management votes are discounted, it secured 13 percent at Hormel Foods and 20 percent at Tyson Foods earlier this year. 

AMR-focused proposals struggled last year too. The one at Hormel Foods, which asked the company to report on how its current business practices around antibiotics threaten the returns of diversified owners, attracted 14 percent of non-insider votes. The same proposal achieved similar support in 2022 at McDonald’s.  

Ortino says she will be “very disappointed” if the proposal at McDonald’s does not do better this year. 

“I’m hoping the fact that we’ve filed it will help other investors feel comfortable in supporting it – in addition to the fact that it’s very concrete, asking for a very specific action based on international organisations.”  

Ortino believes there is a lag in understanding among some large investors about the long-term, systemic risks posed by AMR risks that she sees as comparable to climate change and the pandemic.  

“We are not an NGO, this is not a hobby horse,” she says. “AMR will have impact on our investments, on multiple sectors, and you can draw such a clear comparison to climate change and the covid pandemic.”

Proxy adviser opposition

Another barrier to support is the position taken on the AMR proposals by influential proxy advisers ISS and Glass Lewis.  

The latter, for instance, stated that the proponents of this year’s proposal at Tyson had not provided “a sufficiently compelling argument as to how adoption of [it] would benefit the company’s shareholders”. 

Ortino acknowledges that diversity among the clients of proxy advisers makes their work “challenging”. She argues, however, that the advisers tend to lag when it comes to looking at systemic risks such as AMR, partly due to their their company-by-company approach. 

“I do think they will, as they’ve done with climate change, need to slightly step up their game.”  

Since the filing at McDonald’s the company has been “fairly responsive” to LGIM’s engagement, Ortino tells RI. There has been a meeting dedicated to the filing, but nothing has been proposed “sufficient to withdraw the resolution”. 

“We want to see concrete action, rather than saying we are listening to you and aiming to do something more,” she says.   

Encouraging other investors to back the proposal, she tells RI: “We know what we need to do when it comes to AMR and if we don’t, we might not be around to solve the climate change crisis.”  

McDonald’s annual general meeting will take place in May.