Investment firms holding US$8 trillion demand PFAS reduction from world’s biggest chemical players

05 Dec 2022 --- Forty seven investors and asset managers collectively holding over US$8 trillion have written to the CEOs of world’s biggest chemical producers to disclose the volume of all hazardous chemicals they produce. The letter demands improvement actions for managing PFAS, also known as “forever chemicals.”

The letter, led by Aviva Investors and Storebrand Asset Management, comes as the third annual ChemScore rankings, released by Swedish non-profit ChemSec, highlighted that the industry is doing little to halt “an emerging global crisis.”

This year, the non-profit found four out of the 54 assessed chemical companies have a public strategy to phase out hazardous chemicals from their portfolio: Indorama (Thailand), SABIC, (Saudi Arabia), Yara (Norway) and Solvay (Belgium).

Additionally, it revealed that BASF (Germany) and DSM (Netherlands) have stopped publishing phase-out plans, signaling weakening commitment.

“It is a normal business practice for chemical companies to research and develop innovative products. They should increase their work on substitutes for persistent chemicals like PFAS dramatically – in all of these thousand uses – and stop fighting authorities to keep persistent polluting chemicals like PFAS in the markets,” Sonja Haider, senior business and investors advisor at ChemSec tells PackagingInsights.

“Besides that, they should publish the produced volumes for every single substance and their timed exit plan every year to allow an evaluation of ambition and progress.”

PFAS are linked to cancer, lung disease, diabetes, reproductive abnormalities and learning difficulties.ChemScore assesses companies’ performance in four key areas: hazardous chemical portfolio; development of safer chemicals and circular products; chemical management and company transparency; and controversies.

Letter to the CEOs
Investors including Axa IM, Credit Suisse Asset Management, Resona Asset Management and Robeco, warn that growing awareness of the dangers posed by PFAS has triggered an increasing number of lawsuits against companies which could cost the chemical producers as much as US$30 billion.

“We encourage you to lead, not be led, by phasing out and substituting these chemicals. In addition to the financial risks associated with litigation, producers of persistent chemicals face the risk of increased costs associated with reformulating products and modifying processes, which can have significant implications for company performance,” they wrote in the letter.

“As investors, we believe that companies’ license to operate depends on the public understanding of risks and impacts.”

Scientists have also warned that chemical pollution has crossed a “safe limit” for humanity, sparking action to tighten legislation around the world with global leaders setting up a UN scientific body to advise governments on managing chemicals and waste to prevent pollution. 

Eugenie Mathieu, Earth lead at Aviva Investors, says: “Investors are rightly pushing for better disclosure on the volume of substances being produced globally, which can inform better investment decisions and identify the corporations leading the transition toward a more [environmentally] sustainable and responsible future.”

Meanwhile, Liudmila Strakodonskaya, Environmental, Social and Governance (ESG) analyst at AXA IM, shares that the importance of the chemical industry for the protection of biodiversity and natural capital is crucial. “As an investor, AXA IM is convinced that sound management of chemicals throughout their life cycle at each point of the related value chains will help the industry to minimize adverse impacts on the environment and human health.”

Chemical catastrophe
PFAS, often found in cosmetics, furniture, carpeting, non-stick pans and waterproof jackets, is known to accumulate in the environment and cause health impacts for generations. They are linked to cancer, lung disease, diabetes, reproductive abnormalities and learning difficulties.

“There are evaluations from banks, investors and rating agencies, but the chemical topic plays a subordinate role,” Haider says.

“ChemScore fills this gap. We try to shed light on chemical management practices and especially the hazardous portfolio of companies. It is a difficult undertaking as we only have public data sources from authorities in the EU and US.”

Haider informs that the lack of transparency is considered while calculating their ChemScore ranking, resulting in lower company scores.

Scores of 2022
According to ChemScore, the average score across all 54 companies is unchanged at 13.3 out of 48. European companies have the highest average score, which has improved slightly, driven by EU REACH (Registration, Evaluation, Authorisation and Restriction of Chemicals) legislation and progressive investors.

However, in North America, the average score has fallen. “In the US, Sherwin-Williams has increased the number of hazardous Substitute it Now (SIN) chemicals it produces from 18 to 24 and Westlake from five to 12. DuPont, which has been named in more than 6,100 PFAS lawsuits, has now removed all details of its portfolio from public view, which pushes it into the bottom place,” it published.

Moreover, despite Indorama topping the table overall with a score of 30, the average across Asian companies is also down, and they lag Europe and North America. “Twelve of the 15 worst performing companies are Asian, including six from Japan,” ChemScore flags.Scientists have warned that chemical pollution has crossed a “safe limit” for humanity.

Holding chemical producers accountable
PackagingInsights asked Haider about the reason behind the weakening commitment of the companies with lowest scores.

BASF is still producing more hazardous chemicals, she informs. “We see 134 this year, where it was 127 last year. The number in 2020 was 112, but not completely comparable as we increased the hazard classes afterward. The company’s final score was slightly (0.6) points lower than in the previous.”

“In our perspective, the biggest chemical company in the world is doing business as usual and doesn’t react to the pollution crisis,” she continues.

For DSM, she adds that the company is transitioning from the chemical part of business and divesting its material business units bit by bit. Its former paint and coating business unit “had a very progressive chemical strategy with a clear phase-out plan for substances of very high concern,” however, as the unit was sold to Covestro, in Haider’s opinion, “the policy has also disappeared.”

“The global chemical industry is turning a blind eye to the unfolding chemical pollution crisis. Most companies are taking little or no action to phase out hazardous chemicals despite the risks to public health, the environment and shareholder value,” she concludes.

By Radhika Sikaria