European asset managers take on McDonald’s over antibiotics

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Two of Europe’s largest 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 the risk that antimicrobial resistance poses to shareholder returns and the broader economy.

Legal & General Investment Management and Amundi are among the institutions backing a resolution at the fast-food chain’s annual meeting on Thursday, asking the US group to “establish a policy for the company to comply with World Organization guidelines of health on the use of important antimicrobial medicinal products in food-producing animals”.

The resolution, which was tabled by Shareholder Commons, a non-profit advocacy organization, is a sign of the growing concern among some investors about the systemic impact and broader economic threat of antimicrobial resistance (AMR).

Antimicrobial resistance has long been seen as a threat to global health and development, believed to contribute to millions of deaths worldwide each year. Inappropriate and excessive use of antimicrobial drugs can reduce the effectiveness of drugs critical to the control of a variety of diseases that were often fatal in the pre-antibiotic era.

The WHO guidelines recommended “an overall reduction in the use of all medically important classes of antimicrobials in food-producing animals”.

McDonald’s has urged shareholders to reject the latest resolution, saying it has “a strong record of responsible antibiotic use” across its supply chain.

Maria Ortino, global ESG manager at LGIM, said McDonald’s failed to meet a previous commitment to publish antibiotic reduction targets that would cover all beef sold in its restaurants by 2020. It later issued more limited targets for “the responsible use of medically important antibiotics,” she said.

Ortino said AMR threatened “devastating consequences for both humans and the economy.” About 70 percent of antibiotics were consumed by animals, he said, noting that McDonald’s was “the world’s largest buyer of beef.”

Antibiotics originally designed only for animals were increasingly being used as “last resort” treatments for humans, he said, emphasizing the risks to the global population if they were rendered ineffective by overuse.

But the resolution faces long probabilities. Last year, a similar shareholder proposal failed to win the backing of Vanguard and BlackRock, McDonald’s two largest shareholders. Amundi and LGIM both supported last year’s resolution.

The two largest shareholder advisors – ISS and Glass Lewis – also recommended the refusal. “[McDonald’s] appears to be in line with regulatory requirements on antibiotic use,” the ISS said. “Shareholder support is not guaranteed at this time.”

McDonald’s highlighted to investors its “current responsible antibiotic use policies and practices, our focus on helping drive continuous improvement with our suppliers and industry, and our work to increase access to data on the use of antibiotics and transparency”.

Adopting the policy outlined in the resolution would be “unnecessary, duplicative and would not provide significant benefits to shareholders,” it added.

However, activists continue to press their case. Caroline Le Meaux, head of ESG research, engagement and voting policy at Amundi, said AMR was a “material consideration” for both food companies and society at large.

He said: “Antimicrobial resistance will create a major cost to society and cause many deaths in the future.”

Le Meaux pointed to a 2016 report by the World Bank, which predicted that in a worst-case scenario where antibiotics and other antimicrobial drugs no longer treat infections as they should, annual global gross domestic product could fall by 3.8%.

He added that individual food companies faced the threat of increased regulation, fines or even being sued for animal consumption of antibiotics in their supply chains. “At some point governments will increase regulation on this and if companies don’t anticipate this, it will be quite costly for them,” she said.

Additional reporting by Andrew Edgecliffe-Johnson in New York