Antimicrobial resistance (AMR) ranks among the top 10 threats for global health and represents a growing concern for shareholders. Drug-resistant infections lead to directly to nearly 1.3 million deaths annually (about 2% of deaths globally) according to the World Health Organization. The total could rise to more than 11% of global deaths by 2050 absent AMR being brought under control sufficiently.

The guide arrives as the growing risks of AMR are rippling through industries and investment portfolios. As much as 10% of the value of the world’s listed companies (about USD 14.6 trillion) may be exposed to risks arising from AMR, as of June 18, 2024, according to Institute estimates. Companies at risk are domiciled in every region and range from makers of agricultural products and services to healthcare providers, insurers and food companies.

It also arrives in the run-up to the annual meeting of the United Nations General Assembly, which will convene a high-level meeting on AMR during its seventy-ninth session in New York this September. The session marks what the U.N. has termed an opportunity for world leaders to address the threat that AMR presents to global health, food security and achievement of Sustainable Development Goals (SDGs) for 2030.

AMR could translate to USD 1 trillion in additional healthcare costs and shrink global economic output by 3.8% annually by 2050, the guide notes. The presence of drug-resistant Salmonella and E. coli in retail beef and poultry together with antibiotic residues in dairy milk raise growing public-health concerns on the transfer of AMR through their consumption. Resistance to antimicrobials could cause an estimated 11% drop in livestock production in low- to middle-income countries by 2050, the guide adds.

The risks suggest a growing role for investors. It begins with recognizing the risks of AMR and includes incorporating AMR into investment decisions, together with surfacing both exposures and opportunities to invest in companies that are developing solutions. For investors in the pharmaceutical and biotechnology industries, it also includes driving research and development of new antibiotics, diagnostics and alternative treatments.

While antibiotics and other antimicrobials represent some of the greatest discoveries in medicine, prescribing them to adults and children unnecessarily or overusing them in agriculture makes current and future infections harder to treat. That’s because antimicrobials destroy not just pathogens but also bacteria that control pathogens, fueling the rise of drug-resistant strains of infections ranging from tuberculosis and malarial parasites to fungal infections and making current and future infections harder to treat.

AMR presents particular risks for sustainability-minded investors. It can hold back achievement of SDGs tied to good health and well-being (Goal 3), no poverty (Goal 1), and decent work and economic growth (Goal 8), the WHO notes.

Yet while AMR research is marked by an urgent need for novel antimicrobials to address rising resistance, there is a dearth of innovative drug candidates in the research pipeline. The guide notes that while clinical development of products for priority pathogens included 97 products (57 antibiotics and 40 nontraditional antibacterials) as of December 2023, the current clinical pipeline and the antibiotics that have been recently approved are insufficient to address the growing challenge of AMR.

As the pipeline suggests, the landscape of antibiotic development is facing a decline in active research and development due to concerns over commercial viability, according to data compiled by the Access to Medicine Foundation, a European not-for-profit organization. Similar shares of companies in those industries acknowledge the risk of AMR as a public health threat.

At the same time, the market for antibiotics faces a series of challenges that constrain its profitability. They include limits on sales based on the stewardship that accompanies development of antibiotics designed to treat drug-resistant infections that must be held in reserve for use as a last resort. Drug resistance itself can compound the difficulties by shortening the useful life of newly developed therapies.

A combination of low unit sales and the need for low cost per unit has led some of the largest pharmaceutical companies to cede much of the innovation to small competitors. Yet while small drugmakers sponsored 81% of antibacterial therapeutics in clinical trials as of last December, investment in the sector is lagging, with antibacterial-focused biopharma receiving significantly less funding than fields such as oncology, the guide notes.

Shareholder pressure has a critical role to play in persuading companies to confront AMR risks. Companies in animal agriculture, for example, can ban nontherapeutic use of medically important antibiotics, while retailers and restaurants chains play a critical role in encouraging suppliers to improve practices and monitor compliance. Healthcare providers can prioritize responsible administration of antimicrobial medications. Biopharmaceutical companies may have substantial opportunities to develop new medications and diagnostics such as rapid tests that inform prescriptions decisions.

The guide details examples of investor strategies. They include engagement by the French asset manager Mirova that has focused, for example, on persuading agricultural supplier Ecolab to prioritize disease-prevention that uses alternatives to antibiotics, and on persuading the animal health company Zoetis to develop therapies and diagnostics designed to minimize reliance on antibiotics.

Capital plays a critical role too. The combination of growing AMR and drug development that has come to a near standstill may present opportunities for strategic investments, notes the guide, citing an estimated USD 250-400 million needed annually to bridge the gap between the current outlays for AMR-related R&D and needed to replenish the clinical pipeline.

That includes funding for both research and clinical development. The guide points to the U.K. Pathways to Antimicrobial Clinical Efficacy (PACE), a collaborative initiative that has raised GBP 15 billion apiece from both the medical research charity LifeArc and Innovate UK to finance discovery of AMR drugs as one model.

Late-stage funding of development of new microbials includes alliances such as the U.S.-based CARB-X (Combating Antibiotic-Resistant Bacteria), which since inception has allocated nearly USD 400 million for drug development, and the AMR Action Fund, which brings together drugmakers and NGOs with the aim of launching two to four new antimicrobials within the next decade. For its part, the Access to Medicine Foundation is monitoring late-stage development of antimicrobials by GSK, Innoviva, Venatorx and Pfizer.

Investors have a unique opportunity to help tackle the problem of AMR, notes the guide, which suggests key areas of focus for investors. They include understanding the costs of AMR globally and examining investments through an “AMR lens” that includes both managing risks and identifying opportunities to invest in solutions.

They also include supporting R&D by pharmaceutical and biotechnology companies for antibiotics, diagnostics and treatments; urging portfolio companies to use practices designed to reduce AMR; and participating in collaborative initiatives such as Investor Action on AMR (IAAMR), which comprises owners and managers of assets representing more than USD 14 trillion.

The guide details a series of questions designed to help investors bring an AMR lens to engagement by industry. That may include:

• Agriculture — Urging companies to adopt a policies that ban nontherapeutic use of medically important antibiotics, engaging suppliers to adopt practices that reduce the inappropriate use of antibiotics, and improving farm conditions.
• Healthcare — Evaluating responsible administration of antimicrobial medications by providers and the adoption of policies to govern antibiotic use and patient safety.
• Biopharmaceutical — Examining initiatives that uncouple financial metrics from the sales volume of novel drugs and exploring strategies for derisking product development, including the use of product development partnerships, accelerators, and public-private collaborations.
• Environmental management — Encouraging adoption of environmentally sustainable practices in the manufacture of antibiotics and responsible waste management.
• Surveillance — Assessing investment in evaluating healthcare providers’ performance on AMR and policies that promote responsible use of antimicrobial medications among healthcare providers.

By fostering an environment conducive to research and development and by implementing sustainable practices, investors and other capital markets participants have a critical role to play in mitigating the threat posed by antimicrobial resistance. It’s now an imperative for the financial sector to contribute to the solution, the guide stresses.