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Legal cases send top chemical polluters into a financial nosedive

Sustainable Finance

Legal cases send top chemical polluters into a financial nosedive

Hazardous chemicals are not only bad for people and planet, they can also be bad for business. Real bad. Lawsuits and liability costs are stacking up against the big polluters causing stock prices to drop. Just check out the recent numbers from Chemours, Bayer and 3M.

Published on 20 Mar 2024

Chemical pollution is a huge environmental problem, threatening biodiversity, fragile ecosystems and human health. The non-profit think-tank Planet Tracker has stated that European chemical facilities alone have released and transferred 125 million tonnes of chemicals since 2010, resulting in an estimated 24,640 years of healthy life being lost and enormous damage to wildlife.

For a long time, this environmental injustice flew under the radar of more or less everyone except the companies responsible for it.

But that was yesterday. It’s a different ball game today. Nowadays, people are becoming aware of the contamination caused by chemical companies and news outlets are taking an interest in the issue. Institutional investors are also very reluctant to invest in companies with a high degree of “chemical risk”.

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Victoria Lidén, co-chair of the Investor Initiative on Hazardous Chemicals (IIHC), has stated that “mismanagement of hazardous chemicals ranks as one of the largest and most immediate of all environmental risks for investors when it comes to its potential to impact the bottom line of corporates”.

All of this adds up to what has become a hot financial mess for some of the largest chemical manufacturers. Some even say the liability costs connected to certain groups of chemicals such as PFAS could rival those of tobacco and asbestos cases.

Let’s have a look at the recent performance of three chemical producers that are all knee-deep in liability cases:

Credit: The Financial Times

Chemours is involved in numerous legal cases linked to chemical pollution in general and PFAS in particular. Recently, Chemours witnessed a momentous plunge in its stock price. A staggering 42% drop brought the company’s market value to the lowest point in over three years.

This sharp decline is primarily due to the company’s decision to place its top three executives — including CEO Mark Newman — on administrative leave, which underscores deeper concerns about the company’s internal management and financial reporting practices. The unexpected move comes as the company is looking into “material weaknesses” in its financial reporting. 

Adding insult to injury, Chemours has projected a substantial net annual loss, estimated to be up to $235 million. This forecast is a stark contrast to the company’s previous year’s net income of $578 million. 

Credit: The Financial Times

Earlier this year, German chemicals company Bayer was ordered to pay $2.25 billion in damages linked to the cancer-causing effect of its infamous Roundup weedkiller. Even though the result may have been expected, it still led to a steep drop in the stock market. During the same day, the company shares fell almost 6% to their lowest point in several months.

Four years ago, Bayer settled most of the unresolved Roundup cases for a sum of almost $10 billion but failed to get court approval for an agreement to prevent future cases. As a consequence, more than 50,000 claims now remain pending.

Since Bayer bought the agrochemical company Monsanto back in 2018, it has lost 70% of its value. In fact, the company is currently worth less than half ($29 billion) of what it once paid to acquire Monsanto ($63 billion). So, not the greatest corporate takeover in history.

Credit: The Financial Times

When the company appointed its new CEO a couple of days ago, share prices went up almost 4%. But this is just a blip in a longer-term downward spiral. Since 2018, 3M’s shares have lost about half their value. 

The company is up to its neck in legal challenges, which are taking a real toll on its finances. Last year, for example, 3M agreed to pay up to a record $12.5 billion to resolve PFAS contamination claims. 

3M announced its plans to phase out PFAS from its production by 2025, but the company will surely continue to suffer financially from its long-standing history of PFAS contamination. The decision to move away from PFAS will, however, prevent more litigations in the future.

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