addressing AMR to help protect long-term returns

Treating unwell patients in hospitals is a challenging role for our members working in the healthcare sector, especially with an increase in hospital admissions¹ stretching an overburdened healthcare system.

Now add to this the effects of antimicrobial resistance (AMR), which is when bacteria and viruses change over time and no longer respond to medicines, making infections harder to treat and increasing the risk of disease spread, severe illness and death².

AMR is recognised by the World Health Organisation as a global health threat¹. Misuse and overuse of antibiotics (including for livestock in food supply chains) are the main drivers of AMR.

Compromising the efficiency of life saving drugs can impact public health as well as the strength of the global economy. Research has found that AMR could lead to $US100 trillion in lost global production by 2050³ because of antibiotics and other antimicrobial drugs no longer treating infections in the way that they are supposed to.

At HESTA, aligned with our commitment to SDG3: Good Health and Wellbeing, we have identified AMR as a systemic risk⁴ that has the potential to influence the market fundamentals that drive member investment returns, including economic growth.

The overuse of antibiotics at Hormel Foods

Hormel Foods, a company held in our International equities portfolio, is a manufacturer of processed meats based in the US. Concerns were raised with us that medically important antibiotics were routinely being used for livestock within Hormel’s supply chain to increase profit, despite the growing AMR challenge.  

The World Health Organisation recommends restricted antimicrobial use⁵, and Hormel’s actions diverge from that recommendation.

How does this affect our members and their investments?

The cost of the effects of AMR to the economy and the health system is significant⁶. The World Bank estimates that by 2050 AMR could result in a 3.8% loss in global GDP, an impact comparable to that of the 2008 financial crisis.⁷

In addition to loss of life and disability, prolonged illness results in longer hospital stays, and the need for more expensive medicines that may create financial challenges for those impacted. 

In contrast, good health and wellbeing enables economic growth by improving productivity, raising incomes and reducing economic costs due to illness⁸. Seeking to address the overuse of antibiotics can help contribute to protecting and enhancing long-term portfolio value and ultimately the returns we can deliver for our members. And it helps to address a challenge that many of our members face in their work.

What we’re doing about it

HESTA joined the FAIRR Initiative⁹ in 2020. FAIRR is a collaborative network that helps investors identify and prioritise environmental, social and governance (ESG) risks in the global food sector.

HESTA has co-filed shareholder resolutions over the past 3 years at food producing companies calling for greater compliance with the World Health Organisation’s guidelines on Use of Medically Important Antimicrobials in Food-Producing Animals throughout the supply chains. While there has been some company progress in reducing antibiotics in their relevant protein supply chains, it falls short of the WHO Guidelines, which apply to all food-producing animals in all markets. Filing shareholder resolutions in support of these asks, is helping build investor awareness of AMR and its potential effect on portfolio value.

¹ https://www.ama.com.au/sites/default/files/2022-03/Public%20hospitals%20-%20cycle%20of%20crisis.pdf 

² https://www.who.int/news-room/fact-sheets/detail/antimicrobial-resistance#:~:text=Antimicrobial%20Resistance%20(AMR)%20occurs%20when,spread%2C%20severe%20illness%20and%20death

³ https://www.worldbank.org/en/news/press-release/2016/09/18/by-2050-drug-resistant-infections-could-cause-global-economic-damage-on-par-with-2008-financial-crisis

⁴ Systemic risk are those that threaten the functioning of the economic, financial and wider systems on which investment performance relies (United Nations Environment Project Finance Initiative)

⁵ https://www.ncbi.nlm.nih.gov/pmc/articles/PMC5772708/

⁶ https://www.who.int/news-room/fact-sheets/detail/antimicrobial-resistance

⁷ https://documents1.worldbank.org/curated/en/323311493396993758/pdf/final-report.pdf

⁸ http://www1.worldbank.org/publicsector/pe/pfma06/financedevelopmentbloom.pdf

⁹ https://www.fairr.org/