Food companies are facing increasing pressure from their investors over the overuse of antibiotics in the food supply chains as campaigners turn to shareholder muscle to tackle the global scourge of antimicrobial resistance.
About 70 per cent of antibiotics are consumed by animals to prevent disease, and companies that produce, or buy, large amounts of meat are becoming a focus for campaigners.
As investors become more aware of the threat that antimicrobial resistance can pose to returns, the number of resolutions at annual meetings putting pressure on household-name companies to address the growing risk of AMR has risen significantly over the past few years.
The move reflects campaigners’ growing determination to harness shareholder pressure to confront an issue increasingly seen as a threat to global health rivalling the climate crisis.
AMR has been associated with almost 5mn deaths a year globally and has cost the world $100tn in global economic losses, according to the World Health Organization.
Investors are a vital weapon in the fight but they have yet to be fully deployed, according to Dame Sally Davies, the UK government’s special envoy on antimicrobial resistance. “Politicians and policy can do a lot but investors are very powerful,” she added.
Several bodies are in the vanguard of the push to alert investors to the threat of AMR. In 2020, Davies helped to launch the Investor Action group at the World Economic Forum in Davos, which aims “to leverage investor influence to combat drug-resistant superbugs”.
It includes the Fairr initiative, an investor network focused on the risks around intensive livestock rearing. It has the backing of about 370 investors from around the world, with $71tn in combined assets.
The Shareholder Commons, a non-profit advocacy group, has helped to organise a number of the resolutions at annual meetings designed to persuade food companies to limit antibiotic use, while the Cambridge Universal Owners group, established by pension fund leaders and academics at the university, aims to enlist pension and endowment funds in the fight against AMR.
Belinda Bell, from the Finance for Environmental and Social Systemic Change Centre, which convenes the Cambridge group, said collated data suggested that voting against directors could lead to change even in cases where the vote failed to pass. “We’re seeing a lot more voting against directors at this AGM season and we’ll be seeing more,” she said.
Davies said that involving entities with a long-term mindset such as pension funds, sovereign wealth funds and insurance companies will be crucial in the fight against AMR. The investors rely on generating income for decades and prize a stable society and environment, rather than focusing exclusively on short-term profits and dividends.
Last month, Fairr announced that 71 institutional investors and investor representatives, representing $15.2tn in combined assets, were training a spotlight on 12 North American fast-food restaurant companies, including McDonald’s, Yum Brands, owners of KFC and Pizza Hut, and Restaurant Brands International, owners of Burger King.
As some of the world’s largest purchasers of animal protein, these companies “could be exposed to financially material regulatory and reputational risks from inadequate policies for managing antibiotic use in their supply chains”, Fairr warned.
McDonald’s said it was working to cut the use of antibiotics in its supply chain, including not permitting routine use of medically important antibiotics in livestock rearing. Restaurant Brands International said it took “the issue of responsible, sustainable sourcing seriously” and was making good progress. Yum Brands did not respond to a request for comment.
Katie Frame, responsible for engagement and stewardship at £726bn asset manager Schroders, which is backing the initiative, said there was “increasing evidence about [AMR’s] relevance to the investment industry”. Comparing it with climate change, she added that AMR was “not one of those things where we’re going to see a sudden shock to the system . . . but there’s going to be this gradual creep and this gradual impact on society”.
Campaigners acknowledge that investor attitudes will have to change if the drive is fully to gain traction. Sara Murphy, chief strategy officer of the Shareholder Commons, said that investors tended to “recalcitrantly [focus] on the idea that every single company should be maximising its own internal financial returns”.
A resolution at McDonald’s annual meeting this year, calling for the adoption of a company-wide policy to phase out the use of antibiotics for disease prevention in its beef and pork supply chains, was backed by prominent fund managers including Legal & General Investment Management and Amundi. However, influential proxy advisory groups such as ISS and Glass Lewis recommended voting against it.
ISS said that McDonald’s policies appeared to “align with regulatory requirements around antibiotic use for disease prevention and the requested target is not a market norm.” Glass Lewis said it did not believe the company’s current handling of the issue had presented a risk to shareholder value nor that supporters of the resolution had shown that the fast-food group would “not be responsive to consumer or regulatory demands”.
Nevertheless, some investors feel momentum is building behind the need to control antibiotic usage. Peter van der Werf, head of engagement at asset management firm Robeco, said that in the past a lot of companies had been defensive about the use of the drugs as a necessity to raise and keep animals on the farms.
Over time, he suggested, “there has been a lot of appreciation that they need to develop more responsible use of antibiotics”. However, he warned that the “devil was in the detail” and much depended on how policies were defined and how strictly they were adhered to.
Sophie Deleuze, lead ESG analyst at Candriam, a €139bn asset manager, said when analysing companies involved in livestock production, it paid attention to the “policy and stance on the reduction of the antibiotics use”.
Candriam also scrutinised the extent to which a company encouraged or supported its suppliers to use antibiotics in a more sustainable way and “values positively” companies that invested in finding alternatives in order to “actively combat the development of AMR”, she added.
Not all observers agree about the level of culpability that food companies should bear for reducing AMR. Eva Gocsik, senior analyst for animal protein at Rabobank, a leading lender to the sector, said antibiotic use in livestock production was “only one potential contributor” to the problem and it was “difficult to scientifically establish the livestock sector’s exact contribution to AMR in humans”.
Campaigners acknowledge that the issue has yet to grip investors as powerfully as climate change has done. However, Fairr said its support had grown more than 200 per cent since 2019 with $15.2tn in combined assets now backing the push for changes to companies’ AMR practices.
The volume of shareholder resolutions over the past 18 months was a clear sign that “investors are actually willing to really put their names out there to try to bring AMR to front and centre of companies’ priorities”, said Sofía Condés, head of investor outreach at the Fairr initiative.
At the Shareholder Commons, Murphy called on investors to take a wider view of their responsibilities. As part of their stewardship on behalf of their customers, she said they needed to focus on “the health of the systems that support their clients’ portfolios as opposed to any individual company’s own enterprise value”.
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