Remember plucky paralegal Erin Brockovich taking the Pacific Gas and Electric Company to the proverbial cleaners for contaminating the groundwater in Hinkley, California for many years? How about the equally persistent lawyer Robert Bilott, who managed to squeeze a multi-million Dollar settlement out of DuPont for similar crimes, as portrayed in the film Dark Waters? In both instances Julia Roberts and Mark Ruffalo caught the public’s attention with stellar performances as the two lawyers in question.
Aside from the two companies, the bad guys in these cases were Chromium 6 and Perfluorooctanoic acid (PFOA) respectively. These are just two of the 204 million chemicals that the US-based Chemical Abstracts Service (CAS) lists in its database, with new such substances having been added every 1.4 minutes since 2016. On 22 October this week, environmental NGO Planet Tracker sought to raise the alarm with investors: which company in your portfolio will be the next chemically focused Hollywood courtroom drama?
Planet Tracker’s report Novel Entities: a Financial Time Bomb asserts that markets have not properly priced in the risks represented by this constant flow of new synthetic chemicals. The latter must be differentiated from chemical substances that occur naturally. These are often used as a counterargument to concerns expressed about chemicals in food and other everyday products. “Chemicals are everywhere, relax and stop being paranoid!” we are told. However, there is legitimate concern about these many thousands of synthetic chemicals, so-called ‘novel entities’ that are being created much faster than they can be effectively tested for potential adverse effects on human health and the natural environment. This is evident in the plastics industry alone, where 10,000 of the 16,000 chemicals commonly used remain to be tested. The fact that 4,200 have already been scientifically proven to be hazardous does not really bode well for the remainder.
Despite the scale of the challenge, teams of scientists are beavering away in their labs in an effort to keep up with the industry and inform us of any nefarious effects these novel entities may have on our lives. The publication of this work is essential, as both the aforementioned Hollywood films are based on true stories of corporate cover-ups. This is not a legacy problem from the 70s and 80s, to be filmed in retro style and sepia lighting. It was only in 2022 that US chemical giant 3M agreed to stop producing Per- and polyfluoroalkyl substances (PFAS) by the end of 2025, having also been found to have behaved disgracefully in concealing the work of its in-house scientist Kris Hansen, who proved that its harmful forever chemicals were present in the blood not just of its employees but most of the US population.
While these chemical companies clearly felt they could get away with covering up their in-house research to protect their revenue streams and share price, there is now growing scrutiny of the industry and awareness among consumers of the threat of so-called ‘forever chemicals.” Once harmful chemicals are identified, the work starts on working out where they are in the environment and how to clean them up. The UK’s Environment Agency recently decried the fact that its budget is dwarfed by the scale of chemical contamination in old industrial sites and landfill operations. Meanwhile in the EU, a 2021 study revealed that just 29% of the continent’s surface water bodies achieved a good chemical status.
Although “Big Chem” has a lot to answer for and deserves to be held to account and made to cough up the vast sums of money needed to clean up its mess – in the spirit of ‘polluter pays,’ perhaps we mass-consumers also need to check our role on the demand side. “Darling of the Laundromat” SHEIN is a case in point. It is symptomatic of the insatiable global appetite for low-quality, unethically produced, and arguably tacky clothes and household items that is being impressively serviced by the likes of SHEIN and Temu. Both firms have been found to be shipping products containing levels of chemicals far above the scientifically recommended limits. These include Phthalates used to soften plastics, which have proven adverse effects on human reproductive organs. Other delightful items available from SHEIN were caps soaked in formaldehyde (Sales pitch: Don’t wait for the mortuary, start preserving your body from the head down!), and nail polish containing the liver-destroying carcinogen dioxane (Sales pitch: Cure your nail-biting habit while looking fabulous!).
Planet Tracker is urging investors to wake up to the potential litigational, reputational, and financial risk inherent in this chemical gold rush. It argues that the creation of ‘novel entities’ is often presented to shareholders as innovation and a sign of companies staying one step ahead of the competition. The reality is that the scientific community, industry regulators, government agencies, and consumers are only beginning to catch up with the sheer magnitude of the chemical crisis. Chemical contamination will feature heavily in ongoing negotiations for an international plastic treaty, the fifth and hopefully last session of which takes place in the Republic of Korea next month. Meanwhile, institutional investors would do well to channel the spirit of Erin Brockovich and start sifting forensically through their portfolio companies for the next corporate villain.
