For how much longer dare investors ignore the impact of chemicals?

About a year ago, when I read Erin Brockovich’s article in the Guardian about how toxic chemicals are literately threatening the future of humanity, I thought: “I cannot deal with yet another gargantuan crisis; I’ll just ignore this one”. And so, I did. Until about a week ago, when I started my new job as Sustainable Finance Advisor at ChemSec. If you want to ignore this problem (like I tried to), I suggest you read no further. If you want to know some basics and, in particular, what challenges investors face, here’s a quick rundown.

Modern civilization relies on chemicals to manufacture all the stuff we surround ourselves with. Some substances, however, are highly toxic. A particularly problematic chemical group is PFAS, or “forever chemicals”.

They might be in the clothes you wear, the makeup you put on this morning or the fast-food container you got your lunch in. They’re incredibly durable, which is excellent for many products, but less for the environment and animals (including Homo sapiens).

“Unless you plan on going full Into the Wild, you cannot hide from these chemicals”

As they do not naturally break down, or do so extremely slowly, they accumulate in our water, soil and bloodstreams. In other words, they spread everywhere. So unless you plan on going full Into the Wild, you cannot hide from these chemicals (and even then, they might be in the salmon you catch with your bare hands).

If the production of PFAS chemicals continues at the present rate, the levels of these toxic chemicals will keep rising and rising. No one seems to know precisely what that will entail. However, peer-reviewed scientific studies have found that PFAS is linked to, among other things, an increased risk of cancer and obesity, lower birth weights and higher cholesterol levels. In a world full of “crises, ” I hesitate to take this word into my mouth. But what else should we call this?

“In a world full of ‘crises’, I feel hesitant to take this word in my mouth. But what else should we call this?”

To me, a striking first impression when reading about the history of the chemical industry is the remarkable freedom under which it has been able to operate. However, as the general public and lawmakers are starting to learn about the adverse effects of PFAS and other hazardous chemicals (chemical companies have known about it for decades), we are now entering a much harsher regulatory environment on both sides of the Atlantic.

In the US, the Environmental Protection Agency has recently introduced new safety levels in drinking water for two widespread PFAS chemicals at very low levels (part of the larger PFAS Strategic Roadmap). The EU is currently implementing a historically ambitious Chemicals Strategy for Sustainability with the objective to, among other things, ban the most harmful chemicals in consumer products. And on June 10th, UN countries agreed to a global ban on PFHxS, a PFAS, adding it to the Stockholm Convention on persistent organic pollutants.

Most people intuitively understand the huge cost to society if toxic chemicals keep accumulating in our bodies. If you prefer GDP-speak, global GDP will fall to zero if humanity loses the ability to reproduce, as some scientists have warned about.

The production and use of hazardous chemicals should also worry investors seeking to minimize unnecessary financial risks. While more investors are now actively considering how the transition to a low-carbon economy might impact the future performance of various companies, the potential risks associated with companies producing hazardous chemicals are still underestimated.

Companies unwilling to transition to using and producing more sustainable chemicals will come under significant pressure as the regulatory burden increases.

“The potential risks associated with companies producing hazardous chemicals are still underestimated.”

Furthermore, chemical companies are amid a slew of lawsuits and litigations connected to the contamination of drinking water. Bloomberg recently reported that “PFAS Lawsuits Flood Courts” and noted that in addition to the high-profiled lawsuits against chemical behemoth DuPont (depicted in the movie Dark Waters), a bunch of other chemical companies are now being dragged into a jungle of costly legal affairs. This doesn’t only erode their profit margins directly, but also indirectly, as it makes it harder to attract employees who are increasingly hesitant to work for employers that seem to be worsening, rather than improving, the state of the world.

This is all a newbie’s perspective on this matter and some friendly, yet toxic, food for investor thought. But, to me, it seems obvious that they should consider the enormous risks involved in the business-as-usual approach in the chemical industry and use their powers to push companies to implement a swift and comprehensive phase-out of all hazardous chemicals.