Investing in healthcare: Understanding practices and disclosures on animal testing

Can it ever be ethical to inflict pain on animals? If so, under what circumstances? What if their suffering helps to discover a drug with the potential to save or transform millions of lives? What if testing an experimental drug or procedure on one group of animals helps to develop a treatment that will spare countless other animals from suffering? And, where there are viable alternatives, to what lengths should companies go to use them?

These are emotive questions. Their answers, however, carry practical implications for companies – particularly those in the healthcare and personal care sectors – and for their shareholders.

A lack of transparency on a company level

A lack of public disclosure makes it difficult to find hard facts on this emotive topic. That, in turn, made it challenging for us to answer questions such as:

- How many animals do our companies – and their suppliers – test their products on?

- What are the alternatives to animal testing? And what is preventing their adoption?

- Which companies are leading the adoption of alternatives to animal testing?

- Which companies are the laggards?

- What role do regulators play and what role should they play? Are they impeding change or fostering it?

Initially, we tried to answer these questions for ourselves, talking to companies about their policies in this area and liaising with industry bodies to understand the bigger picture. Finding it hard to gain the level of insight that we wanted, we published a research tender, eventually selecting the University of Technology Sydney’s Institute for Sustainable Futures (ISF) to deepen our understanding and answer our questions. That initiated a process that we hope will ultimately assist us – and other investors – to compare different companies’ approaches to animal testing and to measure the progress they are making towards the use of alternatives. The two outputs from this process have been published.

What the research tells us about animal testing – and what we still don’t know

The first item is a research report¹ summarising the current policies and practices relating to animal testing and setting out the alternatives. We want to invest in companies that are on the right side of change and animal testing is an area in which change is happening, albeit fitfully. New approaches highlighted by the report include:

1)       ‘In silico’ methods, such as computer modelling and simulations.

2)       In vitro techniques using cells, tissues, organoids (or organs on chips), imaging, biochemical analysis and gene profiling.

3)       Other approaches such as using human research subjects, subjecting existing trials data to meta-analysis and using artificial intelligence.

Attempts at a governmental level to reduce animal testing seem likely to promote these alternative approaches. So, change is coming, but as the report shows, a lack of public reporting makes it difficult to say which companies are best placed to benefit from it.

Key findings:

- There is a lack of transparency in publicly available information around the use of research animals.

- The majority of companies failed to provide information on the numbers of animals they use and provided no details about their plans for developing or using non-animal approaches.

- There is, at present, limited engagement between companies and regulators to encourage greater use of non-animal testing methods.

- Many companies outsource testing to external contract research organisations (CROs), complicating the task of assessing their practices.

- None of the companies they questioned provided targets for implementing non-animal approaches or reducing their use of animals.

This suggests there is little incentive for companies to actively engage with the issue, with many citing regulatory requirements as a key barrier.

A guide for investors

The second output is an investor guide which highlights approaches investors may want to prioritise when engaging with companies about their animal-testing practices, such as:

- Encouraging transparency – suggesting companies could do more to showcase their efforts in promoting the ‘3Rs’: replacement, reduction and refinement.

- Promoting supply-chain disclosure – asking companies to disclose the animal-use policies of their subsidiaries and subcontractors.

- Encouraging companies to set time-bound targets for shifting to non-animal testing (where regulations allow) and training employees on alternative testing methods.

- Emphasising that animal testing can influence investment decision-making.

In some ways, the lack of disclosure highlighted by this research is disappointing. This will not, however, discourage us from continuing to engage with companies on this topic. We believe that those companies that can position themselves to anticipate and embrace change often derive material and lasting advantages.

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<small> 1. This material was produced by the Institute for Sustainable Futures and the University of Adelaide as a result of a project sponsored by Stewart Investors. The report was commissioned from the Institute for Sustainable Futures and the University of Adelaide by Stewart Investors, a business name of First Sentier Investors UK (Funds) Limited (company number 2294743), First Sentier Investors (UK) IM Limited (Scottish company number SC047708) and First Sentier Investors International IM (Scottish company number SC079063). The content of the report, including any opinions contained within it, is the responsibility of the Institute for Sustainable Futures and the University of Adelaide and it has not been endorsed or approved by Stewart Investors. The Institute for Sustainable Futures, the University of Adelaide and Stewart Investors disclaim any responsibility to anyone relying upon the report.

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<small> Disclaimer: The views and opinions expressed in this article are solely those of the author(s) and do not necessarily reflect the view or position of the Responsible Investment Association Australasia (RIAA). This article is intended as general information and should not be considered investment advice. It is recommended to seek appropriate professional advice before making any investment decisions.