14th Apr 2024

Forever chemicals will be the 'new asbestos', investors warn

  • 'PFAS are the new asbestos; that is clear to us and increasingly to investors,' warned Sonja Haider, from ChemSec (Photo: Kevin Casper)
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In the wake of emerging litigation and strict regulation on so-called 'forever chemicals', there are growing worries among investors that the chemicals technically known as PFAS could be the 'new absestos'.

"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," a group of investors warned the world's largest chemical companies on Wednesday (15 November).

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The Investor Initiative on Hazardous Chemicals (IIHC), which is coordinated by the Swedish NGO ChemSec, involves more than 50 institutional investors which represent over $10 trillion [€9.2 trillion] in assets under management or advice.

IIHC members include Storebrand Asset Management, Allianz Investment Management, and BNP Paribas Asset Management.

Investors said chemical giants should publish a realistic phase-out plan for products containing forever chemicals and develop safer alternatives.

"Safer products that substitute the use of hazardous chemicals and support accelerated phase-out are likely to present a significant opportunity for value creation," they wrote in a letter.

According to Eugenie Mathieu from Aviva Investors in the UK, many in the chemical industry welcome investor pressure and see it as a chance toward greater sustainability.

Asbestos déjà vu?

Despite the widespread health concerns around asbestos, it was considered a 'magic mineral' because of its ability to withstand flames.

By the early 1900s, global asbestos production had expanded to exceed 30,000 tonnes per year.

Yet asbestos quickly became the subject of thousands of lawsuits, which led asbestos manufacturers to file for bankruptcy in the US.

In the EU, the use of asbestos has been banned since 2005 but several EU countries introduced restrictions in the 1990s.

Likewise, PFAS production is today very profitable, despite the massive cost to society and human well-being — which are increasingly leading to lawsuits.

"We see parallels emerging between the PFAS and asbestos issue, especially with respect to the substantial liability and insurance risks associated with asbestos in the past," said Sabrina Sanz from French asset manager Amundi.

Kidde-Fenwal this year faced more than 4,400 lawsuits over the production of PFAS-based firefighting foam and experts argue that the US-based company will be the first of many to file for bankruptcy to avoid litigation, Bloomberg reported.

In Europe, the chemical giant 3M reached a multimillion settlement last year with the Flemish government, but it is now facing fresh litigation over PFAS pollution in the Netherlands.

Similarly, Chemours is facing new lawsuits in the Netherlands for the contamination of soil, air, and surface water with PFOA and GenX.

'Eroding shareholder value'

"We have 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 from Oslo-based financial group Storebrand.

Lidén also said that the mishandling of hazardous chemicals is among the most significant and immediate environmental risks for investors.

ChemSec's ChemScore project published a ranking on Wednesday, featuring the 50 largest chemical companies globally. The findings expose that the leading producers of PFAS (3M, AGC, Chemours, Daikin and Honeywell) rank lowest in terms of sustainability.

BASF and Bayer, two of the biggest PFAS producers in Europe, rank 25 and 23 respectively.

BASF produces around 27 persistent chemicals and Bayern at least 13 forever chemicals — being exposed to stranded assets and significant liability risks, according to ChemSec.

"PFAS are the new asbestos; that is clear to us and increasingly to investors. The parallels are stark: scientists blow the whistle, and firms continue producing for decades until, eventually, the law catches up with them and it's game over," said  Sonja Haider, from ChemSec.

In Europe, PFAS pollution hotspots have been identified in Germany, Belgium, Sweden, Italy, and Denmark.

The EU is preparing a ban on the non-essential uses of PFAS. But critics argue the ban is moving too slowly, possibly not taking effect until 2025.

The global cost to society of PFAS to society is estimated at €16 trillion per year. Exposure to forever chemicals costs Europeans between €52bn and €84bn annually, according to the Nordic Council of Ministers.

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