Friday, November 17, 2023

Big investors warn chemical companies to phase out ‘forever chemicals’ as litigation risk grows

By Lene Powell, J.D.

Institutional investors representing over $10 trillion in assets under management or advice called on the 50 largest stock-listed chemical companies to phase out PFAS chemicals, citing a “flood” of litigation, insurance risks, and costs running into the hundreds of billions. PFAS are the “new asbestos,” the Investor Initiative on Hazardous Chemicals (IIHC) said.

“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 $10.3bn settlement by 3M this year, can have in eroding shareholder value,” said Victoria Lidén, co-chair of the IIHC and senior sustainability analyst at Storebrand Asset Management.

PFAS. Per- and polyfluoroalkyl substances (PFAS) are a group of thousands of manufactured chemicals widely used in industry and consumer products that break down very slowly over time, according to the U.S. EPA. They have been found in the blood of people and animals all over the world, as well as in food and the environment. Studies show that PFAS exposure may be linked to harmful health effects.

Risks and costs. In a letter to the CEOs of the 50 largest stock-listed chemical companies, IIHC compared the risk to asbestos.

“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,” the group said.

The group cited significant financial risks:
  • More than 2,400 PFAS-related lawsuits have been filed since 2005, according to Bloomberg.
  • Litigation is expanding beyond producers to PFAS users in the auto, food, textiles, cosmetics and paper sectors.
  • The first bankruptcy occurred this year, and more are expected.
  • 3M reached a €500m settlement last year in Europe, but new lawsuits have begun in the Netherlands and Belgium.
  • US states and the European Union are drafting PFAS bans.
Costs from cleanup and injuries may reach hundreds of billions of dollars.
  • Full clean-up costs could exceed $400B.
  • Additional costs to remove PFAS from drinking water across the United States range from $64.5B to $248B.
  • US PFAS bodily injury estimates covering all production to date range from $10B to $41B at 5% probability.
Requests. IIHC asked the chemical companies to take three actions:
  • Disclose. To help investors appraise relevant risks at the company, disclose both the share of revenue and production volume of products that are, or contain, hazardous chemicals.
  • Phase out. Publish a realistic time-bound phase-out plan of products that are, or contain, persistent chemicals.
  • Develop alternatives. Conduct a robust evaluation and substantially ramp up R&D and investment in the development of safer alternatives.
The group added that five chemical companies that produce PFAS frequently rank near the bottom in ChemScore sustainability rankings, but two others score relatively well due to more sustainable processes and better transparency, among other things.