Nordea in dialogue with companies about PFAS phase-out

Chemicals can make food last longer, make clothes rainproof and prevent computers from catching fire. But over time the chemicals that make life easier accumulate in our bodies and threaten our health, and the phase-out of especially PFAS substances is now high on the agenda for the EU and other authorities.

As a responsible investor Nordea is looking into how we can contribute to the phase-out. We are already in dialogue we several major producers of hazardous chemicals and together with the asset managers in the IIHC initiative we have sent a letter to the world’s top 50 chemical producers asking them to make phase-out plans and develop safer alternatives to hazardous chemicals.

Head of Active Ownership Cecilia Fryklöf is representing Nordea in the IIHC initiative and  we have met with Cecilia to learn more about why Nordea has decided to be active in this engagement.   

Cecilia, why is the use of dangerous chemicals important to Nordea?

"Nordea is an active owner and dialogue with companies is a cornerstone of our strategy for responsible investments. The production and use of dangerous chemicals, such as PFAS, can negatively affect nature, animals and people. The environmental and human health risks related to forever chemicals and PFAS translate to financial risks through litigation, reputational damage and regulatory action. Our aim is to reduce the adverse impact of hazardous chemicals and our exposure to the financial risks that are linked to them.”

"In light of these risks, it’s important for us as investors to know which chemicals that the companies we invest in actually produce and use – and to which extent. How would a regulatory ban or increased restriction affect the company’s product portfolio and what challenges would it entail? Is the company prepared for increased restrictions on PFAS and other hazardous chemicals? Have they invested in research and development to find other less harmful alternatives to replace PFAS substances in future?”

"It’s important to evaluate these issues so that our investments retain their value and the negative impact on animals, nature and people is reduced."

What has Nordea done as part of the IIHC initiative so far?

"We’ve done quite a lot of things. Nordea has taken an active role in the initiative and is part of the steering committee. IIHC is currently in dialogue with 16 of the 50 companies that ChemSec has identified in their ChemScore ranking, which evaluates chemical producers’ efforts to transition to less hazardous alternatives. We have also participated in dialogues with companies at industry level and spoken with representatives from the European Commission. In addition, we have started our own bilateral dialogues with manufacturers of industrial and consumer goods that Nordea Asset Management invests in. We foresee that these companies will be affected by the upcoming tightened legal requirements as well as consumer demand.”

How have the companies responded to your inquiry?

"Some producers are actually quite far in the process and are well prepared. They have plans to phase out some of the hazardous chemicals they use or are already in the process of replacing them. Others haven't made it quite as far. They may currently believe that it isn’t possible and are therefore to a greater extent against the restriction proposals. We need to continuously evaluate whether a company will be a profitable investment in the long term – especially if the ban from the EU is implemented.”

How long do you think this kind of dialogue will take and what does Nordea plan to do going forward?

"It’s always difficult to predict an exact time horizon. We can see that the authorities in both the EU and the US are already tightening the restrictions, and new bills are also being discussed. Through dialogues with the companies we have invested in, we’re determined to continue to encourage both producers and users to focus on increased transparency, research and development to find safer alternatives and commit to phase-out plans with fixed deadlines. We will continuously assess how well prepared the companies are to meet future requirements.”