Antimicrobial Resistance Overview

The Scope  

According to the World Health Organization (WHO), AMR contributed to nearly 5 million deaths in 2019, and it estimated AMR would cause 10 million deaths a year by 2050. In a recent study sponsored by the WHO, it was observed that AMR rates have increased by more than 15% from 2017 to 2020 for key antimicrobials used to treat E. coli, salmonella and gonorrhea among other infections, so this is a rapidly developing issue.

Growing Risk  

Currently, many view the potential negative financial implications of AMR as low-probability tail risks. However, we believe without significant attention and intervention, there is a high likelihood that AMR will continue to lead to negative outcomes for humans and eventually for the macroeconomy. The risk is likely to grow to a point where the market can no longer ignore it. And that has implications for us as investors.

Research

A critical first phase of our journey into incorporating AMR in portfolio management has been education. In order to understand the potential implications for our investments and understand how to best position portfolios while considering the effects of AMR, we needed to learn more:

1. What is driving AMR?
2. What are the most effective & efficient solutions?
3. What are the potential ramifications?

Broadly speaking, we have delved into as much research as we could collect from Wall Street research analysts, academics and non-profit organizations to better understand the issues. So far, this approach has resulted in the development of information-sharing relationships and continual learning about best practices.

KEY LEARNINGS TO DATE:

1. AMR research facets
2. Integration - industries likely to be most affected
3. Engagement to drive change

1. RESEARCH 

In the academic arena, we have found a lack of rigorous research to date on what would be the most effective and efficient solutions to AMR. Clearly, further understanding of the biggest roadblocks to interventions and realistic ways to remove those impediments are important steps. We think progress in academic research could help us determine where AMR may be financially material. We plan to continue our dialogue with researchers.

TALKING WITH EXPERTS

We have also engaged with experts on AMR at the biotechnology industry’s trade association, Biotechnology Innovation Organization (BIO). This organization is a strong advocate of the PASTUER act proposal, which is intended to support developers of new, or “novel,” antibiotics. The Pew Charitable Trust reported that these would include drugs that are significantly different from existing antibiotics in their core molecular structure or their mode of attacking bacteria.⁴

BIO was instrumental in the biotechnology industry’s preparations for the 79th UN General Assembly High-level Meeting on AMR in September 2024, titled, “Investing in the present and securing our future together: Accelerating multi-sectoral global, regional and national actions to address Antimicrobial Resistance.” According to WHO representatives, global leaders approved a political declaration committing to a clear set of targets and actions, including reducing the estimated 4.95 million human deaths associated with bacterial AMR annually by 10% by 2030.⁵

Through these conversations, we are increasing our awareness and education of the overall AMR issue. We are also gaining an appreciation of the focus on the push/pull incentive mechanisms needed to drive innovation in the pharmaceutical space to make strides toward improvements on this worldwide issue. (See sidebar: PASTEUR Act section).

2. INTEGRATION - INDUSTRIES LIKELY TO BE MOST AFFECTED

As a result of our external education as well as internal discussions, we have constructed a preliminary AMR focus list of industries and topics for engagement (see 3. Engagement section). The list will evolve as we learn more about AMR and related material risks. Additionally, the Loomis Sayles credit research analysts who cover these industries have begun analyzing what is being done to combat this issue. This research will form the backbone of our integration and engagement efforts.

We have taken preliminary steps to understand what our data vendors are collecting in terms of AMR and to encourage them to report on this topic where figures are available. Even at this early juncture, we have learned how one of our vendors incorporates its AMR research into its methodology, which might aid our internal research efforts.

3. ENGAGEMENT

We believe setting reasonable and realistic engagement topics and goals is the most effective way to drive change. In our view, we can make the most impact by focusing on industries that we have identified as having the most financially material exposure to AMR risks and opportunities. While data to measure AMR and analyze progress is limited thus far, our analysts have designed issuer-specific quantified targets (e.g., the percentage of dairy sourced from suppliers following formal animal welfare standards) as well as more qualitative goals (e.g., rolling out new diagnostic methods in hospitals).

In addition to individual engagement efforts, Loomis Sayles recently joined the FAIRR Initiative, a collaborative investor network that raises awareness of the environmental, social and governance (ESG) risks and opportunities in the global food sector. We believe joining FAIRR will help provide us with actionable education on issuers and industries that could prove useful in our integration and individual engagements.