Investors should push for more transparency on hazardous chemicals
Posted on

Investors should push for more transparency on hazardous chemicals

Have you heard the expression “don’t buy a pig in a poke”?

In the past, traders selling piglets at markets often had one pig on show and the rest in bags ready to sell. Dishonest traders used to take advantage of this and put cats in the bags instead of pigs to cheat their customers.

The century-old advice to not buy anything without having inspected it properly first is still valid today. But unfortunately, investors looking to invest in chemical companies have no way of doing so.

To be certain that there isn’t a cat in the bag, much more transparency on the production of hazardous chemicals is needed.

Today, investors can find out which companies produce hazardous chemicals, but not how big their productions are. One company can produce hundreds of hazardous chemicals in very small amounts, while another can produce only one or two but have a huge production – and investors wouldn’t know.

“Are we talking about one ton or one million tons? There’s a big difference”

It goes without saying that the amount of harmful substances that a company produces plays a huge role. Are we talking about one ton or one million tons? There’s a big difference.

But, hazardous chemicals are bad business already from the get-go and have no place in a sustainable future.

In 2018, the World Health Organization estimated that 1.6 million deaths were caused by exposure to selected chemicals. Moreover, scientists have linked the fact that men in the Western world produce half as much sperm as they did 40 years ago to exposure to toxic chemicals.

As for the environment, hazardous chemicals are released in large quantities across the planet, accumulating in nature and wildlife and threatening to disrupt fragile ecosystems.

“It’s time to reveal the quantities of hazardous chemicals produced by companies in the EU”

From a financial perspective, the production of harmful chemicals is equally problematic. Many chemical companies are facing high fines and remediation costs due to pollution. The most notable cases being big PFAS producers contaminating drinking water in the United States.

The responsible companies had to pay around $1.5 billion US to settle the lawsuits, which made their stock prices plummet to the ground.

Investing in companies producing hazardous chemicals definitely means taking a financial risk. And the higher the production volumes, the higher the risk. Looking into the future, such an investment seems even worse than today. Following the European Green Deal and the upcoming Chemical Strategy for Sustainability, more and stricter regulation is expected on EU level.

This means that producers of harmful substances will have to re-think and re-shape their businesses to adjust to the new restrictions. My bet is that investors would not want to take part in the financial blow that this would mean for the big producers.

It’s unreasonable to think that investors should continue buying pigs in pokes.

It’s time to let the cat out of the bag and reveal the quantities of hazardous chemicals produced by companies in the EU.

sonja haider
Sonja Haider
Senior Business and Investors Advisor