European asset managers take on McDonald’s over antibiotics
Europe’s two biggest asset managers this week will try to increase pressure on McDonald’s to reduce the use of antibiotics in its food supply chain, highlighting what they say is a risk to shareholder returns and the wider economy from antimicrobial resistance.
Legal & General Investment Management and Amundi are among the institutions backing a resolution at the fast-food chain’s annual meeting on Thursday calling on the US group to “establish a policy that the company complies with World Health Organization guidelines for medical use regarding. important antimicrobial agents in food-producing animals”.
The resolution, put forward by Shareholder Commons, a non-profit advocacy group, is a sign of growing concern among some investors about the systemic effects and broader economic threat of antimicrobial resistance (AMR).
AMR has long been regarded as a threat to global health and development, believed to contribute to millions of deaths worldwide each year. The inappropriate use and overuse of antimicrobial drugs can blunt the effectiveness of drugs critical to fighting a range of diseases that were often fatal in the pre-antibiotic era.
WHO guidelines recommended a “general reduction in the use of all classes of medically important antimicrobials in food-producing animals.”
McDonald’s urged shareholders to reject the latest resolution, saying it has a “strong track record of responsible antibiotic use” across its supply chain.
Maria Ortino, global ESG manager at LGIM, said McDonald’s had failed to meet its previous commitment to publish antibiotic reduction targets for all beef sold in its restaurants by 2020. After that, it published more limited goals for “responsible use of medically important antibiotics,” he said.
According to Ortino, AMR “threatens devastating consequences for both people and the economy”. About 70 percent of the antibiotics were consumed by animals, he said, noting that McDonald’s is “the largest buyer of beef in the world.”
Antibiotics originally intended only for animals were increasingly being used as a “last resort” for humans, he said, stressing that overuse is negating the risks to the global population.
But the resolution faces long odds. Last year, a similar shareholder proposal failed to win the support of Vanguard and BlackRock, McDonald’s two largest shareholders. Both Amundi and LGIM supported last year’s decision.
The two largest shareholder advisory firms, ISS and Glass Lewis, also recommended rejection. “[McDonald’s] appears to be consistent with regulatory requirements for antibiotic use,” the ISS said. “Shareholder support is not warranted at this time.”
McDonald’s highlighted to investors its “current responsible antibiotic use policies and practices, our focus on facilitating continuous improvement with our suppliers and industry, and our work to increase access to and transparency of antibiotic use data.”
The adoption of the policy set out in the resolution would be “unnecessary, duplicative, and would not bring substantial benefit to the shareholders,” he added.
However, campaigners continue to press their case. Caroline Le Meaux, head of research, engagement and voting policy at Amundi ESG, said antimicrobial resistance is a “material concern” for both food companies and wider society.
He said: “Antimicrobial resistance will cause significant costs to society and lead to many deaths in the future.”
Le Meaux pointed out the 2016 report The World Bank predicts that in a worst-case scenario, when antibiotics and other antimicrobials no longer treat infections as they should, annual global gross domestic product could fall by 3.8 percent.
He added that some food companies face increased regulation, fines or even lawsuits for animal consumption of antibiotics in their supply chain. “At some point, governments will increase regulation, and if companies don’t anticipate that, it’s going to be quite costly for them,” he said.
Additional reporting by Andrew Edgecliffe-Johnson in New York