Financial investors have a big impact on the strategic decisions of companies. From the investors perspective, the production and use of hazardous chemicals implies financial risks. However, these risks can be avoided by including the chemical perspective in investment analysis, and there are opportunities to grasp in investing in companies producing safer alternatives.
At ChemSec, we see the investor sector as an important stakeholder in promoting the production and use of safer chemicals. Many financial investors are asking for more information about the underlying future risks embedded in the chemicals sector, but this information is often well-hidden, scarce or sporadic. This is why we are in dialogue with the investment community.
What is the outlook of future legislative regulations, which companies produce the most hazardous substances, which companies restrict them in their products and who produces safer alternatives?
The answers to some of these questions are not publicly disclosed today. Here the investment community has an important role to play, having the power to require those answers in order to make investments, encouraging more transparency and better decision-making.
Every year, we release ChemScore, which ranks the world’s top chemical producers on their work to reduce their chemical footprint. The ranking was developed in order to provide investors with better information to assess which companies have strong chemicals management strategies, and which do not.
ChemSec also coordinates the Investor Initiative on Hazardous Chemicals (IIHC), which aims to reduce the impacts on human health and the environment from the manufacture of hazardous chemicals. The investor-led collaborative engagement initiative comprises 50 institutional investors with $8 trillion under management or advice.
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Investor Initiative on Hazardous Chemicals
The Investor Initiative on Hazardous Chemicals (IIHC) is an investor-led collaborative engagement initiative involving 50+ participating investors and their representatives with over US$10 trillion under management or advice. The initiative aims to reduce the impacts on human health and the environment from the manufacture of hazardous chemicals, thereby reducing financial risks to investors in these companies from litigation, regulation and threats to license to operate.
Investors call on chemical companies to provide greater transparency on the names and volumes of hazardous chemicals they produce globally and publish timebound phase-out plans for persistent chemicals. This includes asking companies to work to improve their score on ChemScore, an annual sustainability ranking of the world’s largest chemical companies.
Launched in 2023, the IIHC is coordinated by ChemSec, an independent non-profit organisation that advocates for the substitution of hazardous chemicals with safer alternatives. It receives funding from the Swedish government, charity foundations and private donations.
Asks of chemical companies
✅ Increase transparency, by disclosing the full list and production volumes of all hazardous chemicals produced globally.
✅ Publish time-bound phase-out plans of persistent chemicals.
✅ Work to improve ChemScore and share information with ChemSec.
If you have any questions regarding the IIHC or ChemSec’s investors work in general, please don’t hesitate to reach out to our Sustainable Finance Officer Patrik Witkowsky.
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Quotes from members
Rachel Crossley, Head of Stewardship for Europe at BNP Paribas AM:
”We hope that by working cooperatively with other institutional investors we can persuade the world’s major chemicals producers to be more transparent about which chemicals they produce and the steps they are taking to ameliorate the associated risks”.
Eugenie Mathieu, Earth Lead at Aviva Investors:
”We believe that a growing part of the chemical industry welcomes investor pressure in this area and relishes the opportunity for systemic change toward greater sustainability”.
Victoria Lidén, Senior Sustainability Analyst at Storebrand:
”We have reached significant goals when engaging with several companies during the past year and are looking forward to continuing the movement to push the chemical sector in a more sustainable direction as part of the Investor Initiative on Hazardous Chemicals”.
- ACTIAM
- Æquo Shareholder Engagement Services
- Allianz Investment Management
- Amundi Asset Management
- AP1 (Första AP-fonden)
- AP2 (Andra AP-fonden)
- AP3 (Tredje AP-fonden)
- AP4 (Fjärde AP-fonden)
- Aviva Investors
- AXA Investment Managers
- BNP Paribas Asset Management
- Boston Common Asset Management
- Comgest Group
- Credit Suisse Asset Management
- DNB Asset Management
- Domini Impact Investments
- EOS at Federated Hermes
- Folksam
- Handelsbanken Fonder
- Impax Asset Management LCC
- La Française Group
- Mercy Investment Services, Inc.
- Nordea Asset Management
- Rathbones Group Plc
- Resona Asset Management Co., Ltd.
- Robeco
- SCOR SE
- Skandia
- Storebrand Asset Management
- Swedbank Robur
- Trillium Asset Management
- Triodos Investment Management
- WHEB Asset Management
- Zurich Insurance Group Ltd
- Achmea
- Adrian Dominican Sisters
- AkademikerPension
- AP7 (Sjunde AP-fonden)
- Bailard
- Columbia Threadneedle Investments
- Committee on Mission Responsibility Through Investment of the Presbyterian Church U.S.A.
- CommonSpirit Health
- Congregation of St. Joseph
- Ethos Foundation
- First Affirmative Financial Network
- Harrington Investments, Inc.
- KLP Asset Management
- LOIM
- Öhman Fonder
- Sisters of St. Francis of Philadelphia
- Trinity Health
- Vancity Investment Management
Disclaimer
The IIHC does not require or seek collective decision-making or action with respect to acquiring, holding, disposing and/or voting of securities. IIHC participants are independent fiduciaries responsible for their own investment and voting decisions. The use of particular engagement tools and tactics, including the scope of participation in IIHC engagements, are at the discretion of individual IIHC participants. IIHC participants may not claim to represent other participants or make statements referencing other participants without their express consent. Any decision by participants with respect to acquiring, holding, disposing and/or voting of securities shall be at their sole discretion and made in their individual capacities and not on behalf of the IIHC, its networks of investors and their representatives or their other participants or members.
The IIHC and its investor and their representatives’ networks do not act or speak on behalf of each other or IIHC participants. They also do not seek directly or indirectly, either on their own or another’s behalf, the power to act as proxy for a security holder and do not furnish or otherwise request, or act on behalf of a person who furnishes or requests, a form of revocation, abstention, consent or authorization. In addition, the IIHC does not provide investment or voting recommendations.
IIHC and its investor participants do not provide investment, legal, accounting or tax advice, nor do participants necessarily endorse or validate the information contained herein. IIHC participants are committed to comply with competition laws. IIHC participants shall not allow IIHC led meetings, their organisation or name, either directly or indirectly, to be used for any illegal or anti-competitive purposes. It is the duty of each participant to ensure that their participation in the IIHC does not contravene or assist any other party in the contravention of applicable competition laws or any other applicable international or domestic statute or regulation and participants shall take all due care to ensure that no infringement occurs as a result of their IIHC participation.
IIHC participation shall not require any participant to adopt, follow, implement or obey any decisions, rules, terms of reference, recommendations, policy positions, discussion points or any other form of concerted activity, written or oral, of the IIHC or other member company insofar as it might limit the commercial freedom of the participant and in particular the level of premiums and settlements or other terms and conditions that such participants might choose to apply.
By participating in the IIHC, participants shall not disclose to other participants commercially confidential or sensitive information. Participants commit to refer to publicly available information only at meetings. Where IIHC participants wish to use information that is not publicly available to support media releases, lobbying or other legitimate business activity through the IIHC they shall only do so after receiving legal advice and ensuring that the activity is fully compliant with applicable law (including, without limitation, competition law). The terms of engagement, responsibilities, rights, and other information contained elsewhere herein are intended to be interpreted in a manner consistent with the foregoing.
This disclaimer has been adapted from the CA 100+ disclaimer, with reference to the UK competition laws
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Tools for investment analysis
Financial investors aiming for sustainable investments have a broad range of factors to take into account, chemicals being only one of them. To facilitate investors to avoid investments in hazardous chemicals, ChemSec provides and develops new tools for investment analysis regarding chemical management.
What kind of substances is it and which companies are producing them? The following ChemSec tools can answer these questions:
SIN Producers
The SIN Producers List is the only searchable database of companies that are producing or importing the most hazardous chemicals in Europe and USA.
Questions to ask chemical companies
Here are some examples of questions that investors can ask companies when engaging with them. Some of the questions only apply to certain companies. When a question relates to a specific criterion in ChemScore, the criterion is stated in parentheses.
- At what level in your company has your ChemScore rating been discussed?
- Have your company set any targets or aspirations for improving your ChemScore rating?
- What is your general strategy for reducing and eliminating your use of hazardous chemicals?
- 3M have published a time-bound phase-out plan of all its PFAS substances (criteria 1.4 and 3.2). Do you have a strategy for reducing or eliminating the use of PFAS and other persistent chemicals?
- Lanxess and Ecolab have a cut-off criterion (criterion 2.3) for Substances of Very High Concern (SVHCs) in their new products. Do you have plans to implement a similar policy for new products?
- Eleven of your peers offer safer alternatives (criterion 2.4) and market those on independent third-party platforms like ChemSec’s Marketplace (criterion 2.5). Do you have plans to do the same in the coming year?
- Circularity is becoming more prioritized by policy makers and regulators globally. Do you have strategies in place to increase your circular products portfolio (criterion 2.6)?
- Do you have plans to increase the use of biobased, renewable or mechanically recycled feedstocks in your production (criteria 2.7 and 2.8)?
- Various chemical companies define “safer” or “sustainable” products in very different ways. What are your definitions?
- How much of your R&D spending is allocated to developing safer and sustainable alternatives?
- Solvay have a public time-bound phase-out plan for their hazardous portfolio (criterion 3.2). In addition, Indorama, SABIC and Yara have phase-out plans, but not time-bound. Are you developing similar plans?
- Eighteen companies have taken first steps to report in accordance with the EU taxonomy regulation (criterion 3.3). Do you have plans to do the same?
- 36 out of 54 ChemScore companies actively engaged with ChemSec in 2022 (criterion 3.5). Will you engage with them in the coming year to improve your score?
- Lanxess and Eastman disclose their global portfolios of hazardous chemicals (criterion 3.6). Will you be doing the same in the near term?
- Five companies have clear key performance indicators to assess their progress on circularity (criterion 3.8). Do you have plans to do develop similar indicators to track your progress?
- Braskem publish the volumes and sales of a large part of their product portfolio. Do you have similar plans to disclose the volumes and sales of your hazardous product portfolio?
- How do you use your experiences from previous incidents to develop your health and safety policies?
- Are you actively engaged in remediating pollution and minimize human exposure to hazardous chemicals, beyond legal requirements?