Investment strategy: drug resistance is systemically important issue.
Attracta Moody, Financial Times, 11 April 2016
Big investors managing $1tn of assets have called on the world’s largest food companies to end the excessive use of antibiotics in their meat supply chains, amid fears “systemic overuse” of these drugs is damaging human health and hurting financial returns.
Fast food retailers McDonald’s and Domino’s Pizza, JD Wetherspoon, the British pub chain, and seven other global restaurant groups have been contacted by the coalition of 54 asset managers and pension funds. The coalition includes Aviva Investors, the £290bn UK fund house, Natixis Asset Management, the â‚¬331bn French asset manager, and Coller Capital, the private equity firm.
These investors have urged companies to stop their meat and poultry suppliers using antibiotics that are vital for human health, after the World Health Organisation warned that irresponsible use is leading to a “post-antibiotic era”. The concern is that the use of antibiotics in livestock is causing antibiotic resistance in humans. The WHO said in 2014 that antibiotic resistance is a “threat so serious that it threatens the achievements of modern medicine”. “Common infections and minor injuries which have been treatable for decades can once again kill,” the organisation warned.
Abigail Herron, head of responsible investment engagement at Aviva Investors, said her company sees antibiotic resistance as a “systemically important” issue because the UK fund house has “exposure to pharmaceutical companies, food retailers and food producers”. “We face potentially unmitigated health and financial impacts if the excessive use of antibiotics in livestock production is not addressed,” she said. “It is pretty scary. Resistance to antibiotics is developing far faster than antibiotics are being developed. We need to be preserving what antibiotics we have left and not using them [in food production].”
Around half of all antibiotics produced in the UK are given to livestock, with the figure rising to 80 per cent in the US, the coalition said. Antibiotics are typically given to prevent disease in animals, such as chickens and pigs, reared in close quarters.
Jeremy Coller, chief investment officer of Coller Capital and founder of the Farm Animal Investment Risk & Return (FAIRR) Initiative, which aims to highlight poor farming standards to investors, added that food producers that do not reduce antibiotic use are likely to face costly regulation in future. “These large food companies are key ingredients in the portfolios of most of our pensions and savings ”” thus it is a case of proper risk management to ask them to work out how they will meet this challenge,” he said.
The investor coalition said half of the 10 restaurant companies contacted have no publicly available policies in place on how they manage or mitigate antibiotic overuse in their supply chains.
Catherine Howarth, chief executive of ShareAction, a responsible investment charity that brought the investor collation together with the FAIRR Initiative, said: “For a long period, restaurants in this group of companies have relied on meat where the animals are closely confined and are fed antibiotics to prevent disease. This is becoming a supply-chain risk.”
In response to the coalition’s concerns, JD Weatherspoon said that “antibiotics are only used on prescription by a qualified vet and never as growth promoters” in its food chain. Domino’s said its suppliers are only allowed to use antibiotics when necessary to treat disease.
McDonald’s said it is “monitoring, controlling and reducing the use of antibiotics among chickens in our supply chain”. “We have a policy that bans the use of the highest-priority critically important antibiotics for human medicine, as designated by [the] WHO, in our chicken supply chain by 2018,” it added.