Investors urged to flag financial and systemic risks of anti-microbial resistance and to support collaborative engagement initiatives to ensure influence on policy.
Investor concerns over anti-microbial resistance (AMR) have encouraged use of more responsible practices by pharmaceuticals firms, according to a new report, but the authors say increased engagement can accelerate their adoption.
Published last week by the Access to Medicine Foundation (AMF), ‘Methods Matter’ outlined recent progress by firms involved in antibiotics production in managing their waste more effectively. Release of antibiotic waste into rivers and waterways by pharmaceuticals firms has been identified as a key driver of AMR.
The report cited improved efforts by firms to quantify and limit waste released from their own sites and those of suppliers, as well as moves toward increased disclosure, partly in response to pressure from stakeholders, including investors.
But Suzi van Es, Investment Engagement Manager at AMF, said there was more investors could do to embed responsible manufacturing processes more widely and rapidly across the pharmaceuticals sector.
“Investors can make it clear to their investee companies they see AMR as a financially material risk in the pharmaceutical sector as well as a systemic risk to the global economy, and they can seek assurance these risks are managed effectively,” van Es told ESG Investor.
Waste from the antibiotics manufacturing process can contain high levels of active pharmaceutical ingredients (APIs), which can increase the emergence and spread of AMR, as well as potentially causing other forms of environmental harm, when discharged into rivers.
High levels of APIs can kill off susceptible bacteria, leading to increased selection of resistant bacteria, which then multiply and can lead to new forms of resistance. Harmless bacteria that develop resistance are more likely to transfer it to harmful bacteria, potentially resulting in increased antibiotic-resistant infections in humans.
“It is vital that pharmaceutical companies engage in responsible manufacturing practices that ensure their lifesaving medicines are produced in a way that does not – as an unintended consequence – have a detrimental impact on human health and the environment,” said the AMF report.
Pressure is increasing on firms from regulators, said the report, adding that major procurement agencies are also beginning to incorporate AMR alongside other sustainability factors into their due diligence processes.
“The procurement landscape for antibiotics is an area that investors and companies should stay aware of, with growing expectations from countries, regional bodies and organisations who are placing a greater focus on environmental considerations when choosing who supplies their antibiotics,” said van Es.
AMF is a non-profit funded by public and private sources, focused on increasing access to essential healthcare products in low- and middle-income countries. Its AMR programme has benchmarked the pharmaceuticals sector’s performance on AMR action in 2018, 2020 and 2021.
Large firms “uniquely positioned”
The World Health Organization (WHO) declared AMR one of the top ten global public health threats in 2019, when 1.27 million deaths were directly attributed to antimicrobial-resistant infections, the majority in poorer countries with high rates of infectious disease.
Discharge of antibiotic waste in the manufacturing process is considered one of the key drivers of AMR, alongside overuse and misuse of antibiotics, as well as lack of access to appropriate antibiotics. The UN has predicted that deaths from drug-resistant diseases could rise to 10 million per annum by 2050.
AMF’s new report assessed progress on AMR across the antibiotics supply chain – including research-based pharmaceutical companies, generic medicine manufacturers and business-to-business providers – but said large firms that hold market authorisations “are uniquely positioned to drive change” through their ability to “influence the standards and practices” of third-party suppliers.
Large pharmaceuticals firms are increasingly establishing and monitoring wastewater discharge limits and taking steps to reduce API content, according to AMF. This includes Japan’s Shionogi setting and complying with discharge limits for all antibiotics production, while Sandoz has removed bacteria via membrane filtration at its main manufacturing site in Austria, and Abbott’s pharmaceuticals division is monitoring antibiotic concentrations via a “synergistic combination” of the mass balance approach and wastewater sample analysis.
Many major firms – including Centrient, GSK, Pfizer and Shionogi – are also sharing expertise and resources on responsible manufacturing processes, including free-of-charge wastewater sample analysis, particularly with strategic suppliers with which they have long-term partnerships. Some are also reporting on the results of changes to their waste management practices, both at their own sites and along the supply chain.
But no company currently reports actual antibiotic discharge levels at its own sites or supplier sites, said the AMF report, adding that it is “critical” that they provide clear information about AMR-related initiatives and processes.
“Not only will this allow for accountability across the supply chain, but it can offer much-needed insights into the relationship between wastewater management and AMR,” it said.
“Under-developed” regulatory framework
Pressure from regulators and investors on the pharmaceuticals sector to act against AMR has been building in recent years, but AMF said the urgency of the risks means increased action is likely and necessary.
The AMF report describes the current AMR regulatory landscape as “under-developed”, with van Es adding that there is “a lack of internationally agreed actions or measures to control or limit the release of antimicrobials and antimicrobial resistant bacteria and genes into the environment”.
In April, the European Commission proposed new legislation to tackle AMR, introducing environmental risk assessments to evaluate potential adverse impacts and specifically citing the risks from the manufacturing of antibiotics. It also recently passed the Corporate Sustainability Due Diligence Directive, which holds firms accountable for environmental and human rights harms along their supply chains.
China and India both intend to introduce similar AMR-specific measures, and the AMF sees the upcoming G20 Leaders’ Summit in September under India’s presidency as an opportunity for a coordinated call for action from pharmaceuticals firms.
Van Es said policy engagement by investors on AMR remained important to demonstrate appetite for regulation of harmful practices and to ensure investors could influence future policy, for example in the introduction of R&D incentives.
“By joining multi-sectoral and widely collaborative engagements, the investor voice will be heard when providing increased clarity over agreed expectations, roles and responsibilities in addressing AMR,” she said.
In the absence of regulation to date, AMR-related guidance for the pharmaceuticals industry has been developed, often with the participation of investors. The AMR Industry Alliance agreed a Common Antibiotic Manufacturing Framework in 2018, introducing a risk-based approach to antibiotic waste streams, which was formalised as the Antibiotic Manufacturing Standard last year, supported by BSI Standards.
Investors have supported and monitored these developments in recent years, while increasingly engaging with investee firms. Examples of engagements, tools and collaborative mechanisms were published last November in the first progress report of Investor Action on Anti-microbial Resistance, a coalition formed by investor network FAIRR, AMF, the UN Principles for Responsible Investment and the UK’s Department of Health and Social Care.
Individual engagements by investors include Japanese asset manager Sumitomo Mitsui Trust, which has engaged with Japanese companies about AMR at CEO level, as well as making it key factor in assessing business models in the sector, and EOS at Federated Hermes, which has engaged with US-based Pfizer on the longer-term risks of AMR.
Van Es said investors should ensure responsible manufacturing processes are being discussed at board level and that research findings are being followed through with management actions.
“Investors can aim to understand company levels of engagement with initiatives such as those operated by the AMR Industry Alliance and BSI.
“Adoption of certification schemes can give an indication that manufacturers in the global antibiotic supply chain are taking necessary steps to ensure antibiotics are made responsibly, helping to minimise the risk of releasing antibiotic waste emissions into the environment.”
The AMF and its supporters also emphasised that adoption of responsible manufacturing processes and increased due diligence and transparency along supply chains would be increasingly central to the future business models of pharmaceuticals firms, because of emerging trends in regulation and procurement.
“Investing in responsible manufacturing not only serves to address the increasing threat of AMR, it also ensures long-term viability amidst shifting global policies and procurement trends, creating a win-win for health and sustainability,” said Abigail Herron, Global Head of ESG Strategic Partnerships, Sustainable Finance Centre for Excellence at Aviva Investors, an AMF signatory.