Chemical companies have been warned by a group of major investors, including Aviva Investors, Allianz, BNP and UBS, that they must quickly phase out PFAS, known as forever chemicals, or else face severe legal liabilities and insurance risks as these chemicals could become "the new asbestos".
Letters are being sent to the boards of companies that make perfluoroalkyl and polyfluoroalkyl substances (PFAS) by the group of over 50 investment firms, collected together as the Investor Initiative on Hazardous Chemicals (IIHC) and representing over US$10 trillion in assets under management.
"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 letter says.
PFAS, of which there are more than 10,000 different types used in disposable food packaging, non-stick cookware, waterproof clothing, carpets, cosmetics and electronics, are toxic to humans and wildlife, while also building up over time in humans and in the environment due to their inability to break down easily.
Major manufacturers include Germany’s BASF, Japan’s Daikin Industries and US-based Chemours Co (NYSE:CC), which was spun out of DuPont (NYSE:DD).
Members of IIHC, of which some are active like Aviva, Allianz, Impax and Rathbones, and others are passive like Legal & General's LGIM and Lombard Odier, have stepped up the pressure over these chemicals this year in face-to-face meetings with 16 chemical firms to push for reforms and to follow 3M Co (NYSE:MMM) in promising to stop production.
IIHC pointed to a "flood" of lawsuits rising around the chemicals, but also seeping into the automotive, food, textiles, cosmetics and paper sectors.
Last year, 3M Co (NYSE:MMM) reached a €500 million settlement over PFAS in Belgium for remedial actions, with losses due to these chemicals included in July's quarterly earnings, which followed the group's decision last December to pledge that it will exit PFAS manufacturing and discontinue their use across its product portfolio by the end of 2025.
Fresh lawsuits have also been launched in the Netherlands and Belgium, while some US states and the European Union are drafting PFAS bans.
However, there have been reports that the EU may backtrack on its pledge to ban forever chemicals and other potentially harmful substances in consumer products, following intense industry lobbying.