Antimicrobial resistance: Relevance to investors

When used correctly, antimicrobials play a key role in treating human and animal health. Antibiotics in particular have saved millions of lives since the 1940s and have contributed significantly to the life expectancy we see today. But microorganisms are becoming more resistant to contemporary medicine. Without responsible antimicrobial use, disease prevention and research into alternatives, the systemic risk posed by antimicrobial resistance (AMR) could be extremely disruptive. This has brought awareness from policymakers, industry bodies and investors of late.

This report explores the ESG considerations related to AMR and the importance of stewardship and company engagement in the healthcare and food sectors to address this risk.

Antimicrobial resistance (AMR)

Antimicrobials – antibiotics, antivirals, antifungals and antiparasitics – are widely used to prevent and treat infections in humans, aquaculture, livestock, and crop production. These agents have transformed modern healthcare, enabling the treatment of diseases that were once uncurable. Antibiotics in particular have played a vital role in the success of medical procedures such as organ transplants and cancer treatment.

However, the misuse of antimicrobials could lead to a considerable economic cost and financial risk for investors. If antimicrobials are not prescribed and used for their intended purposes, disease-causing microorganisms, or microbes, can become immune to the medication that once suppressed them. This worsens the spread of disease, severe illness and associated deaths, a phenomenon referred to as AMR.

How is AMR relevant to investors?

In early 2021, we identified AMR as an emerging research area. AMR is considered a systemic risk that holds implications for specific sectors in the shorter term, such as healthcare and food. But, left unmanaged, AMR could impact the productivity and resilience of companies across industries and affect the global economy. We believe that the market’s understanding of AMR and its implications is relatively nascent compared to other ESG topics. However, AMR has started to gain investor attention.

In 2023, we saw shareholders submit proposals at the AGMs of major food industry players such as Tyson Foods and McDonald’s, urging them to prioritise AMR-related issues. Since AMR and ecosystem health are interrelated, the focus on nature and biodiversity as an investment risk will likely elevate awareness of AMR. Regulation too is evolving, with Europe rolling out antibiotic restrictions in animals and humans.

Our research

This report offers perspectives on the systemic risk posed by AMR and key ESG considerations for investors. This research has an emphasis on the healthcare and food sectors as we believe they are exposed to the most significant risks, and equally, can influence the system-wide impacts of AMR. We outline examples of good management of the risks, and questions that can be asked of companies to delve deeper into their AMR strategies. Companies outside of these key industries could also hold a level of exposure due to the systemic nature of AMR. The implications of AMR span restaurants, banks, insurers and healthcare providers (as examples).

We have identified two primary mechanisms by which AMR risks can be addressed. Firstly, by reducing antimicrobial use and promoting responsible application and oversight will decrease the drivers of AMR. Secondly, by investment in research into new antimicrobials and a focus on alternatives and prevention will help to mitigate its impacts.

As stronger regulations emerge and the financial impacts of AMR on investee companies become more pronounced, we anticipate that industry engagements on AMR will become more targeted and sophisticated. Improving investor knowledge will enable detailed, and therefore more credible, dialogue with companies going forward. With this in mind, we hope that investors consider engaging with companies using the risk assessment and questions outlined as guidance.

Click here to read the full report.

Author: Moana Nottage, ESG & Sustainability Analyst