Why we must invest in a future free from forever chemicals

This post is by Rachel Crossley, Head of Stewardship, Europe, at BNP Paribas Asset Management

Investment managers, like BNP Paribas Asset Management (BNPP AM), have a critical but often little understood role in shaping our collective future. As long-term investors, managing risk decades into the future is fundamental to protecting the pensions, insurance funds and savings of our clients. Few sectors are as firmly implicated in contributing to global systemic risks like climate change, biodiversity loss, pollution and poor public health, as the chemical sector. BNPP AM has therefore been working for several years to spur the wholesale transformation of this sector from a dependence on hazardous chemicals to a business model based on safer alternatives.

We have focused particularly on persistent chemicals, including PFAS (per and polyfluoroalkyl substances). PFAS is a group of over 10,000 chemicals linked to serious and mounting environmental and human health harm. Often referred to as ‘forever chemicals’, some PFAS can last for centuries in the environment. For investors, this translates into financial risks through long term exposure to litigation costs, remediation and fines likely to be borne by the companies in which we invest.

The societal costs far outweigh the value generated
There’s a stark financial imbalance with PFAS. Global production generates around £30 billion a year, the vast majority made by only 12 chemical companies. The costs they impose on society, however, vastly outweigh their financial and economic value. Annual health costs exceed £40 billion in Europe alone, remediation costs estimated to exceed £345 billion in the EU and the US where the financial impacts of litigations are conservatively estimated to exceed £25 billion. This recent report from the European Commission reiterates the huge costs associated with PFAS pollution.

Moreover, PFAS and related liabilities are increasingly excluded from insurance policies. These costs do not disappear, they are displaced onto governments and taxpayers, other companies and, ultimately, our clients. In light of this highly imbalanced equation, a rapid phase-out of PFAS seems the obvious way forward.

Investors are flying blind
Despite these growing risks, investors lack the data to manage them effectively. When making investment decisions, BNPP AM integrates consideration of companies’ environmental and social impacts, the effectiveness of their management of associated risks and the quality of their corporate governance. However, at present, we do not know how much of each harmful chemical any company produces, nor the revenues it generates from them, including PFAS. This lack of transparency means we cannot redirect clients’ money towards companies producing or using safer alternatives.

While the EU Corporate Sustainability Reporting Directive (CSRD) introduced the requirement from 2024 onwards for companies to publish data on production volumes and revenues of substances of concern (SoC) and substances of very high concern (SVHC), many companies took advantage of phase-in periods or provisions allowing them not to disclose what they deem to be commercially sensitive information. Nor were PFAS included in the scope. Under the Omnibus 1 package, the European parliament and council have proposed substantial changes to the directive and the European sustainability reporting standards. This is likely to reduce the number of metrics against which companies must report, including those that would provide us with information we need regarding harmful chemicals like SoCs, SVHCs and PFAS.

Voluntary progress has been inadequate
Given the lack of regulations to compel disclosure that investors need, BNPP AM has been working alongside other investors and stakeholders to improve chemical companies’ disclosure and secure commitments to move away from hazardous chemicals. This has principally been through the Investor Initiative on Hazardous Chemicals, which has over 80 institutional investor members representing $23 trillion in assets. Members have been engaging with companies assessed by ChemSec’s ChemScore, which has resulted in some modest improvements in disclosure and commitments to phase out PFAS and invest in safer chemistry, as illustrated in IIHC’s 2025 progress report.

Organisations such as Fidra have encouraged similar commitments from UK companies, working with investors and retailers to support voluntary action towards PFAS-free alternatives and the introduction of resilient chemical policies to help futureproof businesses.

Regulation is needed
Progress in phasing out persistent chemicals is far too slow, which means the environmental and health impacts continue to mount, as do the financial risks to our clients and those of all institutional investors. We therefore believe there is an urgent need for a credible time-bound regulatory plan, in both the UK and the EU, to transition to a PFAS-free economy.

While the EU has already banned PFAS use in some sectors and has proposed a universal restriction covering over 10,000 forever chemicals used in a wide range of sectors, efforts to implement these restrictions are facing significant resistance from industry. ECHA’s PFAS restriction assessment is moving forward, with a final scientific opinion expected by the end of 2026. Meanwhile, the UK has not yet banned a single PFAS since leaving the EU.

We strongly hope the EU will adopt a comprehensive group-wide restriction on all PFAS, and that the UK will follow suit. This will provide certainty for investors and companies alike, spur corporate investment in safer alternatives and put our clients’ future returns on a more sustainable footing.