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Investors launch initiative to tackle chemical pollution crisis

Sustainable Finance

Investors launch initiative to tackle chemical pollution crisis

Published on 14 Feb 2023

Fifty institutional investors and their representatives with more than US$10 trillion of assets under management or advice have launched an initiative to address the global health and environment crises related to the use of harmful substances. The Investor Initiative on Hazardous Chemicals (IIHC) encourages manufacturers to increase transparency and stop producing “forever chemicals”.

On January 31st 2023, some of the world’s largest institutional investors and their representatives – including Aviva Investors, Storebrand AM, AXA IM, EOS at Federated Hermes and Robeco – launched a collaborative initiative to engage with major chemical companies regarding management of hazardous chemicals and transparency.

The IIHC builds on a letter the investors sent to the world’s largest chemical producers last year, which was widely covered in the media. In the coming months, many of those investors will hold meetings with the chemical companies worldwide to discuss requests for greater transparency and phase out of persistent chemicals.

Momentum is building on this issue, with 3M recently announcing a commitment to phase out PFAS by 2025, and new investors joining the initiative this year, including BNP Paribas Asset Management, Amundi AM and Zurich Insurance.

“We hope that we can persuade the world’s major chemicals producers to be more transparent”

Rachel Crossley, Head of Stewardship for Europe at BNP Paribas AM, explains the decision to join the initiative and what it aims to achieve:

“As a broadly diversified global investor committed to sustainable investment, it is in our interests and those of our clients to address systemic risks and market failures, such as those related to the chemical sector. We hope that by working cooperatively with other institutional investors we can persuade the world’s major chemicals producers to be more transparent about which chemicals they produce and the steps they are taking to ameliorate the associated risks.”

Scientists recently warned that chemical pollution has crossed the safe limit for humanity and threatens the biological and physical processes that underpin all life on Earth. Man-made chemicals released in large quantities accumulate in nature and wildlife and threaten to disrupt fragile ecosystems. Even the remote Antarctic is contaminated by hazardous chemicals and microplastic waste.

“A growing part of the chemical industry welcomes investor pressure”

According to one industry analysis, the chemical sector contributed seven percent to global GDP in 2017. However, researchers have estimated that the environmental and human health costs associated with environmental chemical exposures worldwide may exceed ten percent of GDP.

The production and use of hazardous chemicals pose growing risks for investors, including litigation as well as financial, regulatory and reputational risks. These risks are amplified by a lack of transparency in the chemical sector, which currently allows limited insights into the product portfolios of the companies.

“For too long, a lack of transparency from chemical manufacturers over which hazardous chemicals are produced, in what volumes, has created a critical blind spot for investors trying to accurately assess risk. Aviva Investors is proud to spearhead the efforts to change this. We believe that a growing part of the chemical industry welcomes investor pressure in this area and relishes the opportunity for systemic change toward greater sustainability. This is essential, as we need all stakeholders to work together”, comments Eugenie Mathieu, Earth Lead at Aviva Investors.

The aim of the IIHC is to reduce impacts on human health and the environment from the use and production of hazardous chemicals which, in turn, reduces financial risks for investors.

Environmental NGO ChemSec, an expert on hazardous chemicals, is the supporting secretariat and coordinator of the initiative. ChemSec produces ChemScore, which is a sustainability ranking of the world’s largest chemical companies and the main assessment tool used to track the progress of the companies targeted by the IIHC.

“Chemsec and the ChemScore ranking is a very useful tool for us as investors”

“Chemsec and the ChemScore ranking is a very useful tool for us as investors. The ranking provides us with information and empowers us to be even more active shareholders and pursue dialogues with companies on the most relevant issues. We have reached significant goals when engaging with several companies during the past year and are looking forward to continuing the movement to push the chemical sector in a more sustainable direction as part of the Investor Initiative on Hazardous Chemicals“, explains Victoria Lidén, Senior Sustainability Analyst at Storebrand.

Investors from around the world are still welcome to join the IIHC.