On December 15th New York-based investment research firm RiskMetrics released their 2009 report “REACH: Strategic Risks and Opportunities.” The report uses the SIN List 1.1 update as a key element to highlight corporate exposure to potential regulatory action, management readiness, and strategic profit opportunities that may arise from REACH.
RiskMetrics and Henderson Global Investors hosted a webcast presenting the findings of the report, an update from 2008 findings, which used the new SIN List 1.1 to help investors identify those companies that will be positively and negatively affected by the evolution of the market as a result of REACH.
- “A key value of the SIN List here is that it provides companies, be they Substance of Very High Concern (SVHC) producers or SVHC users or alternatives providers, a peek into the future,” said Noran Eid, Senior Analyst with RiskMetrics. “What we did with this list of unpronounceable chemicals is map them to the product categories where they are currently used and then mapped those categories to companies within our rating universe to come up with estimates of company exposure.”
Among other conclusions, it is noted that 16 percent of the companies analysed could experience significant impact, while for others the potential impact appears to be less than two percent of sales. The webcast also featured findings released in early 2009 by Henderson in cooperation with Goldman Sachs on how chemical risks are increasingly being addressed by downstream consumer product companies. The UK-focused research assessed companies’ ability to manage risks and exploit opportunities associated with chemical and product safety, noting a clear differentiation in sophistication.
These players observe that chemical liability issues can pose significant risks to an investor’s portfolio performance. Increasingly, regulatory scenarios like REACH will perform their function and undertake to alter the market for chemicals for the good. This may require companies to reformulate products, which can have significant implications for company performance. At the same time, there may be opportunities to seize, in the form of preparedness and innovation, such as filling the gap for alternative substances.