Super bugs: use of antibiotics on animals is causing human health concerns © Eric Thayer/Bloomberg
Last August, a woman in her seventies was admitted to a Nevada hospital with a bacterial infection. She had just returned from an extended trip to India, where she had been hospitalised for a broken leg, and her doctors’ first instinct was to do what medics have done for decades: prescribe a course of antibiotics.
But, by early September, the patient, whose name was not revealed, had died. The bacteria causing her infection — a so-called superbug — had proven resistant to all 26 antibiotics available to treat it, including recently developed super-strength drugs.
Antibiotics have been the first port of call for treating infections since penicillin was first identified by Alexander Fleming in the late 1920s. The discovery revolutionised medicine, enabling doctors to treat many common diseases, such as tuberculosis and pneumonia, that were once killers.
Yet, the example of the Nevada patient has highlighted how these vital medicines are coming under strain. Her case, while extreme, is not exceptional.
A 2016 study on drug-resistant infections — or antimicrobial resistance — led by Jim O’Neill, a former Goldman Sachs banker and UK government minister, estimated that, globally, 700,000 people already die each year from infections that have become resistant to drugs. Left unchecked, the problem is expected to get worse. A 2014 report by Public Health England estimated that by 2050 the global cost of antimicrobial resistance will be as much as $100tn and will account for 10 million deaths a year — more people than currently die from cancer.
A small but growing number of investors are now concerned that the rise of antimicrobial resistance could have a big financial impact on portfolios, hitting pharmaceutical companies, restaurants and food producers in particular.
“Investors cannot fail to take note of how this issue could pose potential material financial risks to portfolios,” says Fiona Reynolds, managing director of the Principles for Responsible Investment, a United Nations-backed network of asset managers, agrees.
Jeremy Coller, chief investment officer of Coller Capital, the private equity company, agrees: “The potential cost of anti-microbial resistance to our health and wealth is truly frightening,” he says. Investors like Mr Coller are now focusing on the role of farms and food supply chains in causing antibiotic resistance chickens, pigs and other animals raised in closed quarters are often given antibiotics to prevent infection, or to make them grow faster. The fear is that eating them might boost antibiotic resistance in humans.
In 2016, more than 50 big investors including Coller Capital, Aviva Investors (the £319bn asset management arm of Aviva, the UK insurer) and US investment house Boston Common Asset Management formed a coalition to put pressure on restaurant companies to limit antibiotic usage in their food supply chains. The Farm Animal Investment Risk & Return now comprises 71 members and oversees $2tn of assets. It wants to end the routine usage of antibiotics, particularly the use of so-called “last line of defence” drugs, in animals.
“Livestock producers must stop giving medically important antibiotics to healthy animals,” says Mr Coller, “and food companies need to both monitor and minimise the use of these antibiotics in their supply chain.”
As concerns about antibiotic resistance rises up the agenda of policymakers, food producers could be hit with restrictions and fines, leaving them less profitable and driving up costs. Changing consumer preferences could also result in decreasing demand for meat and poultry that is factory farmed and routinely exposed to antibiotics, says Abigail Herron, head of engagement in the global responsible investment team at Aviva Investors. Food producers and restaurants that reduce their reliance on antibiotics will be best placed to deal, she adds. “There an enormous financial risk [for food companies]. We have to lean on companies to make sure they are aware of this [issue].”
In 2016, the coalition contacted 10 food companies, including the fast-food retailers McDonald’s and Domino’s Pizza, and JD Wetherspoon, the British pub chain, urging them to prevent their meat and poultry suppliers using antibiotics that are vital to treat disease in humans. It now plans to target eight additional companies, including Whitbread, the UK’s largest hospitality company and owner of Costa Coffee, the New York-listed restaurant chain The Cheesecake Factory and UK brewer and pub chain Greene King.
Seema Suchak, an analyst at Schroders, the UK’s largest listed asset manager, says: “The issue extends beyond food companies up and down the value chain — such as being able to provide diagnostic testing for infections, to testing meat, to keeping hospitals clean, to researching new antibiotics.”
Investors are also turning to pharmaceutical companies as concerns mount that drug developers are struggling to respond to antimicrobial resistance. Just nine new antibiotics were approved by the US Food and Drug Administration in the last decade. “Big pharma is failing to invest adequately in the development of new antibiotics,” Mr Coller says.
For Mr Coller, antibiotic resistance is one of the biggest issues of our era. But despite this, the threat has not registered on the risk radars of most asset managers, he says: “Awareness of the issue in the investment community at large remains far too low. Antibiotic resistance poses a growing threat to global economic value — it is a risk that spreads beyond territorial boundaries and requires a determined and collective response from investors.”