Summary of key issues for investors

Improved transparency and corporate accountability in animal testing practices are key for investor engagement. Investors are advised to seek data on the number and type of animals used annually and trends over the past decade. They should assess companies’ development and use of non-animal methods, timelines for implementation, and compliance with the 3Rs—replacement, reduction, and refinement—especially by external suppliers. Investor engagement should also focus on corporate efforts to influence regulatory change supporting non-animal approaches.

The issue: Animal testing

Animal testing includes a range of procedures used in research across biology, medicine, and toxicology. It is employed when human testing is considered impractical or unethical. While rodents, fish, amphibians, and reptiles are most commonly used, the estimated global annual use of vertebrates reached 192 million in 2015. Although efforts exist to reduce animal use, regulatory demands and availability of genetically modified mice have contributed to increased usage in countries such as Australia, Canada, and Germany. Concerns include the limited translation of results from animals to humans, animal welfare, and ethical considerations. In 2024, 74% of Australians wanted to avoid animal-related issues, 66% cited animal cruelty as a key concern in investment decisions, and 54% aimed to avoid animal testing for non-medical purposes. Despite this, only 11% of Australian Assets Under Management are screened against animal testing.

The context: Legislative requirements and voluntary initiatives

Regulation varies by region. The EU and UK maintain stricter controls, while the US FDA has eased animal testing mandates but has not yet endorsed alternatives. Animal testing bans for cosmetics exist in several countries, but not in the US. Companies often shift testing to less regulated jurisdictions, making oversight difficult. Approval processes generally require ethics committee review and adherence to the 3Rs. Voluntary initiatives such as the UK’s Concordat on Openness aim to enhance transparency. However, concerns remain about reputational risks and potential misuse of disclosed data.

Alternatives to animal testing in the health sectors

Non-animal methods or new approach methodologies (NAMs) include computer models, in-vitro techniques, imaging, genetic profiling, and data reuse. Despite broad awareness, adoption remains low due to regulatory constraints, lack of training, institutional inertia, and consumer tolerance for animal testing in medical research. The NC3Rs found that uptake of 3Rs approaches in WHO vaccine guidelines remains limited.

Issues for investors

A review of 21 health sector companies revealed limited disclosure on animal testing and non-animal methods. Outsourcing to Contract Research Organisations in different regulatory environments contributes to this opacity. This misalignment with public interest poses reputational and investment risks. Best practice includes public commitment to the 3Rs, participation in audit schemes, supplier requirements to implement the 3Rs, and detailed public disclosures with time-bound targets for non-animal method adoption.

How can investors improve practices and disclosure?

Investors should push for company alignment with the 3Rs, regulatory advocacy, supply chain oversight, and transparent progress reporting. Animal testing policies and targets should be disclosed and tracked publicly.

• Internal and supply chain action to reduce animal testing and promote use of non-animal approaches
  • Investors should expect clear policies, time-bound targets, staff training, audit participation, and inclusion of non-animal methods in supplier codes. Engagement questions should probe the implementation, outcomes, and oversight of non-animal testing practices.
• Influence on regulation and environment of animal testing and use of non-animal approaches
  • Companies should share non-animal data with regulators, petition for regulatory change, demonstrate sectoral leadership, and engage in public outreach to build transparency and trust.
• Disclosure of data and practices
  • Companies should annually disclose animal testing activities, species used, jurisdictions, regulatory requirements, and progress on reduction targets. A public policy on the 3Rs with emphasis on Replacement and Reduction should also be available.