Unlock Editor’s Digest for free
Roula Khalaf, editor of the FT, picks her favorite stories in this weekly newsletter.
Investors are increasing pressure on companies to stop producing and using dangerous “forever” chemicals amid concerns about increasing litigation and regulatory scrutiny.
More than 50 investment firms with $10 trillion in assets will write to the world’s largest producers of perfluoroalkyl and polyfluoroalkyl substances known as PFAS on Wednesday, offering a “time-bound exit plan,” more transparency in production and greater investment in safer alternatives demand .
This is the third year that investors such as LGIM, Aviva Investors, BNP Paribas Asset Management, Nordea and Storebrand Asset Management have joined forces against PFAS as part of the Investor Initiative on Hazardous Chemicals. They write to 50 of the world’s largest chemical companies, including Germany’s BASF, Chemours from the USA and Japan’s Daikin.
Chemours and BASF said they had not yet received the letter and could not comment, while Daikin was unable to respond to a request for a response.
The letter states: “Manufacturers and users of PFAS chemicals face high liability and insurance risks similar to those associated with asbestos in the past.” This “could jeopardize the long-term value of the companies involved in their manufacture and use.” those involved in their sale.”
Popular for their resistance to oil, water and temperature changes, PFAS are used in millions of products, from nonstick cookware and batteries to computer chips and smartphones. However, they are not easily broken down, they accumulate in humans and the environment, and are increasingly linked to health problems such as cancer and infertility.
More than 9,800 lawsuits alleging harm from PFAS have been filed in 140 industries since 1999, according to a report by risk consulting firms Milliman and Praedicat and law firm Mendes & Mount.
Those health concerns are prompting more U.S. states to restrict their use, while EU regulators are considering an outright ban on around 10,000 variants.
Many industries argue that such a blanket ban is too broad and that many variants are crucial for green technologies, pharmaceuticals and chip manufacturing. However, investors are pushing for greater support for alternatives that would enable a complete exit.
John Hoeppner, one of the letter’s signatories and head of U.S. administration at Legal & General Investment Management, which manages $1.3 trillion in assets, said companies are not doing enough to reduce PFAS exposure to reduce.
“We view this as universal ownership,” he said. “We own chemical companies, but on the demand side we also own cosmetics companies, consumer goods and electronics. We are more interested in whether the use of these chemicals results in greater costs for our portfolio.”
Sabrina Sanz, ESG analyst at Amundi, which manages $2 trillion in assets, said the group assessed the potential impact on business, society and the environment as “severe.” The most vulnerable companies have been placed on a “watch list” “to closely monitor progress and prioritize engagement,” she added.
Susan Baker, head of shareholder advocacy at Trillium Asset Management, said the risk of litigation isn’t just for manufacturers. “We want better transparency for downstream companies who need to know what is in their products and supply chain.”
The number of signatories has steadily increased from 23 in 2021 to 51, a sign that shareholders are more aware of the impact of these long-lasting chemicals on their portfolios.
“If you put all the lawsuits together, some companies could go bankrupt,” said Cecilia Fryklöf, head of active ownership at Nordea in Sweden. “We want them to invest more in alternatives to future-proof their businesses so they can continue to create value.”
Late last year, 3M announced it would end PFAS production by 2025 and then agreed to pay up to $12.5 billion to settle claims over contaminated drinking water in the United States.
Recommended
A study released Wednesday by risk analysts Praedicat estimates that companies in the U.S. alone face more than $66 billion in personal injuries, not including claims for environmental damage and cleanup. It is estimated that these additional claims could result in costs of more than $400 billion.
The letter is part of a campaign coordinated with ChemSec, an independent non-profit group partially funded by the Swedish government that advocates for an end to the production of dangerous persistent chemicals.
ChemSec will publish its annual ranking of sustainable chemical companies on Wednesday. The ranking found that only five of 50 companies had a public strategy to eliminate hazardous chemicals.
Source : www.ft.com