Perfluorinated chemicals (PFAS) are not only a huge threat to human health and the environment. They are also a really bad investment for the producers and their investors.
Some time ago, ChemSec Director Anne-Sofie Bäckar wrote a piece in which she rhetorically asked if toxic chemicals are going out of fashion. In the United States, the main producers of the PFAS chemical PFOA are now facing high fines and remediation costs for contaminating drinking water.
So not only are toxic chemicals going out of fashion, they are also turning out to be a financial disaster for the companies involved with them.
Two years ago, DuPont, and its spin-off Chemours, had to pay $671 million to settle several thousands of lawsuits connected to a leak of PFOA into local water supplies from a plant where it was used to make Teflon.
Last year, 3M – another producer of PFAS chemicals – had to pay $850 million to settle a similar case. But this was not the end of PFAS troubles for 3M. Earlier this year, four lawsuits alleging contamination of drinking water and other natural resources were filed against the company.
These are a few cases where the production of PFAS has cost a lot of money for companies, but the list of PFAS contaminated sites is long.
Surely more liability cases will surface in the future because PFAS are not only hazardous due to negative health effects such as cancer, reduced sperm quality and attention deficit disorder. They also accumulate in our environment and in our bodies and take forever to break down.
“PFAS are turning out to be a financial disaster for the companies involved with them”
The three companies mentioned – together with Corteva, which has recently spun off from DuPont – have an aggregate market value of about $180 billion. The problem for investors, however, is sizing up the potential liability. According to Gordon Haskett analyst John Inch, the PFAS industry could be forced to face costs ranging from $25 billion to $40 billion in the future.
Environmental liability cases are also taking a toll on the chemical producers’ stocks. DuPont’s stocks, as well as those of 3M and Chemours, have all lagged far behind the market.
DuPont shares are down 37% from 2018 to date (including reverse splits and spin-offs), 3M has fallen 33% and Chemours shares are down 72% from 2018 to date.
Converted into actual money, the drop seems even more dramatic. The stock market value of 3M, for example, dropped with $47 billion and Chemours with $7 billion.
These five-year charts are taken from Bloomberg.com. The American industry average has stayed roughly the same since 2018 (where the cursors are located), but notice the drop for the PFAS producing companies on the following slides.
You would think that the producers of PFAS would learn from their mistakes, but so far, this has not been the case. When PFOA was regulated and DuPont had to stop producing it, the company quickly substituted it for GenX chemicals, marketing them as safer alternatives.
However, these substances are not any better. The European Union recently identified these chemicals as Substances of Very High Concern (SVHCs), meaning that they are just as big of a concern as other PFAS chemicals.
In the Netherlands, studies are finding GenX chemicals in drinking water, which has caused a public outcry, and similar findings in the United States have led to Chemours agreeing to pay a $12 million fine.
It seems like the idea of short-term profits has clouded the mind of PFAS producers. The so-called forever chemicals are working out to be a long-term financial disaster.