Market Risk
Materiality of Chemicals of High Concern (CoHCs)
Investors increasingly have little patience for companies that ignore the science, policy and consumer concerns with hazardous chemicals. Witness the 2015 example of Lumber Liquidators, in which revelations of formaldehyde in its products caused its stock price to plummet declining by over 70 percent and its CEO to resign. Investor and consumer preferences are clearly signaling the need for corporations to manufacture, use and purchase products made with safe and healthy materials.
Boston Common Asset Management, “The Five Golden Rules for Investors on Good Governance”, Green Biz
IEHN refers to “chemical risks” as the financial liabilities companies carry due to CoHCs in products, manufacturing operations, and/or supply chains. Companies frequently do not know if their products contain and supply chains use CoHCs. This creates hidden financial liabilities for investors. It imposes reputational, regulatory, and redesign risks (3 R’s) that effect corporate performance and create a higher likelihood of fines, lawsuits, lost market share, lower market value, lockouts in certain markets, and loss of trust with consumers.
Chemicals are the building blocks of our material economy. Yet all chemicals are not created equal, and some are more hazardous to human health and the environment than others. CoHC-listed chemicals are pervasive and exposure to them results in significant costs to our health and the economy. CoHCs are used ubiquitously in manufacturing and are found in everyday products such as cosmetics, furniture, TVs, and toys. They are found in drinking water, homes, workplaces, food supplies, and our bodies.
Government and international agencies across the globe, including California, the European Union, and the International Agency for Research on Cancer (IARC) have publicly listed over 2,000 chemicals with known risks to human health and the environment. These chemicals, referred to as “Chemicals of High Concern” (CoHCs) by IEHN and the Chemical Footprint Project (CFP), can have many different adverse health effects, including causing cancer, infertility, and lowering our IQ.
The World Health Organization has linked exposure to CoHCs to premature deaths and higher rates of diseases like cancer. CFP focuses on chemicals that are a material risk for companies because they are recognized by authoritative bodies to cause harm to human health and the environment. A 2017 study by Philippe Grandjean with the Harvard T.H. School of Public Health and Martine Bellanger of the EHESP School of Public Health in Parisconcluded that the health costs of chemically related diseases including cancer, infertility, and learning disabilities total $11 trillion worldwide, or 10% of global GDP.
Economic studies link CoHC’s to loss of revenue, higher health care costs for workers, and increased risk of supply chain disruptions across commercial material and food systems. The Lancet Journal assessed lost GDP to be at $340B (>2% of GDP) due to health costs and lost wages from exposure to chemicals in products.
CFP 2019 Report CFP Survey Guidance CFP Leadership Profiles CFP Disclosure Leaders