Stockholm (NordSIP) – Chemical pollution is a plague of our times, causing severe ecosystem and human health problems and altering vital planetary processes on which human life depends. So-called ‘novel entities’, which are hazardous and very slow to break down, are now so widespread they are to be found in the blood of almost every human. Even the snow within the most pristine regions of Antarctica contains traces of PFAS chemicals[1] these days. The need to address the issue of persistent chemicals is ever more urgent.
One organisation determined to do so is the Investor Initiative on Hazardous Chemicals (IIHC), which engages with major chemical companies on the issue. True to their mission, on 15 November, the members of the IIHC sent a letter to the fifty biggest chemical companies in the world, urging them to increase transparency, publish time-bound phase-out plans for products containing persistent chemicals, and develop safer alternatives for hazardous ones. To do so would be in the companies’ own best interest, argue the investors. According to a newly published analysis by Praedicat, their cumulative liability cost attributable to such hazards and related potential mass litigation would range from an average of USD 46 billion to USD 99 billion at a 5% probability.
Nordics in the lead
Launched on 31 January 2023, the IIHC gathers some of the world’s largest institutional investors with over USD 10 trillion combined assets under management or advice. Nordic investors are well represented, leading the initiative. Both Cecilia Fryklöf, Head of Active Ownership at Nordea Asset Management and Victoria Lidén, Senior Sustainability Analyst and active Ownership at Storebrand Asset Management, serve on IIHC’s steering committee.
Notable among active members of the organisation are also Lise Børresen, Head of Responsible Investments at DNB Asset Management; Emilie Westholm, Head of Responsible Investment and Corporate Engagement at Folksam; Aurora Samuelsson, Head of Sustainability at Handelsbanken Fonder; Anita Lindberg, Senior ESG Analyst at Skandia; Pia Gisgård, Head of Sustainability & Corporate Governance at Swedbank Robur; Jenny Gustafsson, Head of The Council on Ethics of the Swedish National Pension Funds (AP 1-4); and Viktoria Voskressenskaia, Sustainability Analyst at Öhman Fonder.
‘The new asbestos’
Publishing parts of the IIHC’s letter, the International Chemical Secretariat (ChemSec), the specialised environmental NGO coordinating the initiative, calls PFAS chemicals the ‘the new asbestos’ for the chemical sector. Just as asbestos was known as the magic mineral for decades, despite early health concerns that eventually led to lawsuits and numerous bankruptcies that continue to this day, PFAS production today is at an all-time high even though its hazards are broadly recognised. Consequently, chemical companies face a flood of lawsuits, with defendants expanding beyond producers to PFAS users in the auto, food, textiles, cosmetics and paper sectors.
The first bankruptcy due to mismanagement of the issue is already a fact. More will soon follow as US states and the European Union are drafting PFAS bans. “Manufacturers and users of PFAS chemicals are exposed to deep liability and insurance risks, reminiscent of those historically linked to asbestos, which could materially adversely harm the long-term value of companies involved in their manufacture and sale,” concludes the letter.
“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,” comments Victoria Lidén, co-chair of the IIHC. “Not only do PFAS – or forever chemicals – negatively impact human health and ecosystems; we have also seen the effect that group litigation, such as the USD 10.3 billion settlement by 3M this year, can have in eroding shareholder value. In the short term, this impact could be more material than even climate change, so it’s imperative that firms take meaningful action to phase out the use of these substances.”
[1] The per- and polyfluoroalkyl substances (PFAS) are a group of chemicals used to make fluoropolymer coatings and products that resist heat, oil, stains, grease, and water. Fluoropolymer coatings can be in a variety of products. These include clothing, furniture, adhesives, food packaging, heat-resistant, non-stick cooking surfaces, and the insulation of electrical wire.
