Many of the products we come into contact with contain chemicals. Some of these chemicals, in particular those known as ‘forever chemicals’ such as PFAS (per- and polyfluoroalkyl substances), are very harmful to human health and the environment. The Council on Ethics has therefore been working since 2023 with around 50 international investors in the Investor Initiative on Hazardous Chemicals (IIHC), which is coordinated by ChemSec.
Background
Use of hazardous chemicals is associated with negative impacts on human health as well as on biodiversity, such as insects, pollinators and bird populations. In addition, the production of chemicals requires energy-intensive processes and fossil oil and gas as production inputs, making the chemicals industry one of the largest emitters of carbon dioxide globally. There has been a significant increase in chemicals production since the 1950s, and it is predicted to triple by 2050 compared to 2010. At the same time, scientists estimate that the amount of hazardous chemicals in circulation has already exceeded the limit of what is considered safe from a planetary perspective.
In particular, the production and use of what are known as per- and polyfluoroalkyl substances (PFAS) – also sometimes referred to as forever chemicals due to them being non-degradable in nature – is problematic. Because these chemicals are non-degradable, they have a cumulative impact that is concentrated through food in the food chain. Many of them have serious impacts on human and animal health, including various forms of cancer and reduced fertility. For example, PFAS are included as ingredients in firefighting foams and cosmetics. PFAS are present in and accumulate in fresh water and are found in drinking water worldwide. These chemicals also have negative impacts on aquatic ecosystems.
The Council has chosen to work with the non-profit organisation ChemSec in the Investor Initiative on Hazardous Chemicals (IIHC) project in the Water focus area. Companies that develop and produce hazardous chemicals are exposed to financial risks such as lawsuits and regulatory restrictions on the use of these chemicals, in addition to the reputational risk of being associated with hazardous chemicals. Investors are exposed to these systemic risks directly (through ownership of companies that produce hazardous chemicals) and indirectly (through ownership of companies that are adversely affected in various ways by the use of hazardous chemicals).
The Council’s work within the IIHC aims to persuade leading chemicals producers to reduce these impacts and encourage a shift to safer alternatives to manage both sustainability and financial risks associated with the use of hazardous chemicals.
Objectives for the project
The objective of the Council’s participation in the IIHC and its work in the Hazardous Chemicals project is to help influence the companies covered by the IIHC to phase out the use of hazardous chemicals in order to manage and reduce the chemicals’ negative impact on people and the environment, thereby also managing legal and financial risks.
The work of the project focuses on three specific targets, with the companies being asked to:
- increase transparency regarding the company’s exposure to hazardous chemicals;
- publish a time-limited phase-out plan for products containing forever chemicals, with such a plan including clear indicators to allow for follow-up;
- develop safer alternatives to hazardous chemicals.
The companies are evaluated annually on the fulfilment of the targets through ChemScore; read more here.
Outcome
The Council joined the IIHC when it was launched in 2023, and during the year letters have been sent to companies urging them to deliver on established targets. Company meetings were held with 15 companies, based on the evaluation, to discuss their work on phasing out hazardous chemicals, or lack thereof. One company has announced during the year that it is completely phasing out PFAS.
Next steps
The Council will take part in following up on responses from companies and, in the continued dialogue with the companies concerned while promoting greater awareness of and knowledge regarding hazardous chemicals.
About the Investor Initiative on Hazardous Chemicals
All four AP Funds and the Council are active members of the Investor Initiative on Hazardous Chemicals (IIHC), a collaboration of more than 50 international investors with a combined capital of more than USD 11 trillion under management or in advisory services. The IIHC engages in dialogue with chemical companies to increase transparency and promote a reduction in the production of what are known as forever chemicals. Extremely stable (persistent) chemicals accumulate in the environment, humans and animals, posing serious health risks. The IIHC is coordinated by Chemsec, experts in hazardous chemicals. It works to reduce the impact on people and the environment from the production of hazardous chemicals, and thereby also to reduce investment risks in chemical companies.
Through the IIHC, the Council has access to experts in the field, help with coordination of company dialogues and analysis of the companies’ work related to the expectations expressed. Experts from the IIHC also participate in individual company dialogues.
Read more about the IIHC here.