The large-scale application of toxic substances in industry poses a “significant risk” to companies and the wider economy, major investors warned today, calling for businesses to transition to more sustainable chemicals.
The investors are leading members of the Investor Initiative on Hazardous Chemicals, an investor group with over $12 trillion under management or advice.
“The widespread and largely undisclosed use of hazardous chemicals in manufacturing represents a significant financial risk for investors in chemical companies,” said Rachel Crossley, head of stewardship for Europe at BNP Paribas Asset Management.
“The aggregate impacts of hazardous chemicals also contribute to systemic environmental and human health risks which impose costs on other sectors and the wider economy. If these risks are not substantially ameliorated, through regulation and corporate action, they have the potential to affect institutional investors’ ability to deliver sustainable returns to their clients in the long run,” she said.
Legal campaigns on behalf of affected citizens, cities and regions are damaging to business, said Peter van der Werf, head of active ownership at asset manager Robeco.
“There is a growing concern in society as we learn more about the health impact on citizens from exposure to the manufacturing and use of hazardous chemicals. Robeco aims to encourage companies to stimulate change that will help transition the chemicals industry to more sustainable products and prevent the financial costs of the increasing number of lawsuits that are filed against the chemical companies,” van der Werf said.
The investors were responding to a new report from ChemSec, the independent chemicals watchdog, showing companies that base their production on hazardous chemicals and ignore alternatives will struggle to remain profitable beyond the short term.
Some major companies have begun to accept this commercial logic, such as Sabic (Saudi Arabia) disclosing its full chemicals portfolio, 3M (USA) declaring it will exit all PFAS manufacture by 2026, or Lanxess (Germany) stating it will not market or develop products containing more than a tiny fraction of substances with hazardous properties.
In the case of PFAS “forever chemicals” alone, some 140 industries are facing litigation in the USA. The costs of a cleanup are estimated to exceed global GDP, most insurance companies have already stopped insuring PFAS producers, and a historic ban is on the table in the EU.
“The risks posed by the production and use of hazardous chemicals threaten the ability of the wider economic system to generate stable profits,” says Anne-Sofie Bäckar, ChemSec executive director. “It is therefore vital that individual chemical manufacturers are financially incentivised to address this unprecedented predicament.”
ChemSec’s report can be downloaded here. Join us on Wednesday, October 9, for a webinar to discuss the main points.
