In July 2005, The Wall Street Journal published a front page story captioned “Common Industrial Chemicals in Tiny Doses Raise Health Issue” and the next month USA Today published a lengthy feature story entitled “Are Our Products Our Enemy?” These two articles represent the tip of an iceberg of growing scientific concern about the impact on human health of relatively small amounts of chemicals in everyday products.

Researchers are increasingly detecting scores of these substances in human blood, breast milk, and amniotic fluid, and scientists are increasingly recognizing the particular vulnerability of fetuses and young children to them. These and related findings are contributing to rising awareness that the strategic choices businesses make about managing toxic chemicals in their products can have major financial consequences. As DuPont has been discovering from lawsuits and government enforcement actions surrounding its management of a toxic chemical used to produce Teflon®, toxic hazards can lead to sizeable financial and reputational damage. Conversely, both General Electric’s landmark Ecomagination4 program and Wal-Mart’s Smart Products Initiative5 reflect the growing recognition that producing and marketing less toxic products provide significant business opportunities.

Companies’ strategic choices in turn have implications for individuals, governments, and individual and institutional investors. Toxic exposures can impose costly burdens on both individual budgets and on government educational and health budgets. Poor corporate management of toxic hazards can increase risks for investors and burden share performance, while corporate efforts to minimize or avoid exposures, or to offer safer alternatives, can benefit corporate bottom lines and potentially reward investors.

This Fiduciary Guide to Toxic Chemical Risk examines the financial dimensions of toxic chemical risk – in products, in supply chains, and in many investors’ portfolios. It explores how these risks may be quantified, and offers fiduciaries a policy framework to view these long-term (but often poorly understood) threats to shareholder value. It also highlights some of the emerging investment opportunities that inevitably arise when the power of the market dynamic is harnessed to move towards commercializing new technologies and increasing the efficiency of existing technologies. We also profile the growing wave of shareholder concern around toxic chemicals and associated financial liabilities, as well as responses by a broad spectrum of companies after the 2006 proxy season. While the companies that acted cited various reasons for adopting more health-protective policies, all acknowledged the role of shareholder dialogue in advancing the issue of toxics to the forefront of management’s attention.

Finally, and perhaps most importantly, this Fiduciary Guide to Toxic Chemical Risk details a comprehensive set of immediate action steps that can be taken to translate the long-term threats and opportunities associated with toxic chemical issues into prudent portfolio stewardship. These steps include comprehensive directions that can help fiduciaries understand the relationship between toxics and financial risk, and guide their exploration of these issues with investment managers and consultants.

Shareholders Speak, Companies Respond: Corporate Policy Initiatives Following the 2006 Proxy Season

• Whole Foods Markets announced that it would remove baby bottles and other products that contain certain toxics from its shelves as part of a new corporate policy initiative to reduce customers’ exposure to hormonedisrupting chemicals.
• Wal-Mart announced a new “preferred substances policy” that incorporates a precautionary, hazards-based approach to chemicals management, initially focusing on persistent bioaccumulative toxics and carcinogens.
• ConAgra agreed to analyze and report on alternatives to PFOA in food packaging.
• Becton, Dickinson agreed to survey its suppliers regarding brominated flame retardants in its medical devices.
• Johnson & Johnson agreed to initiate a stakeholder dialogue with one of the cosmetics industry’s harshest
  critics, the Campaign for Safe Cosmetics.

Download Fiduciary Guide to Toxic Chemical Risk

PDF format, 3.5MB, 54Pages.

Contributing Authors:
Jane Ambachtsheer, Mercer Investment Consulting
Jonas Kron, Attorney at Law
Richard A. Liroff, Investor Environmental Health Network
Tim Little, Rose Foundation for Communities and the Environment
Rachel Massey, Global Development and Environment Institute, Tufts University

The Investor Environmental Health Network
Rose Foundation for Communities and the Environment
March 2007

Table of Contents
Introduction - Executive Summary......................3
1. The Hidden Costs of Toxic Exposures ............ 7
By Rachel Massey
2. Risks to Shareholder Value from
Corporate Toxic Chemicals Policies ...............15
By Richard A. Liroff and Tim Little
3. Toxic Chemical Risk and Fiduciary Duty ........21
By Jonas Kron
4. Addressing Toxic Chemicals: A Road Map for Fiduciaries ..........27
By Jane Ambachtsheer
Appendix 1........................................................35
Prototype Investor Inquiry Letter to Companies Regarding Corporate Safer Chemical Policies
Appendix 2........................................................37
Compendium of 2006 Environmental Health Shareholder Resolution Resolved Clauses
Appendix 3........................................................39
Compendium of 2007 Environmental Health Shareholder Resolution Resolved Clauses
Resource Appendix............................................41
Endnotes...........................................................45

About the Authors:

Jane Ambachtsheer is a principal of Mercer Investment Consulting. She leads Mercer’s global Responsible Investing business, and consults to investors in North America, Europe, and Australasia.

Jonas Kron is an attorney specializing in shareholder advocacy and institutional investor fiduciary duties as they apply to environmental, social and corporate governance issues.

Richard A. Liroff is the founder and director of the Investor Environmental Health Network and for many years served as a senior program manager at World Wildlife Fund working on toxic chemical issues.

Tim Little is the Executive Director of The Rose Foundation for Communities and the Environment and director of Rose’s Environmental Fiduciary Project.

Rachel Massey is a researcher at the Global Development and Environment Institute at Tufts University, where she has helped to build a program in Economics for Health and the Environment. Her recent work has included a series of studies of the economic implications of the proposed new European chemicals policy, REACH.

Investor Environmental Health Network

The Investor Environmental Health Network (IEHN) is a collaborative partnership of institutional investors, advised by non-governmental organizations, concerned about the market and health risks associated with corporate toxics policies. It serves as an informational resource and secretariat for investors working to reduce portfolio risk related to toxics. www.iehn.org

Rose Foundation for Communities and the Environment

The Rose Foundation is a grantmaking public charity dedicated to nurturing positive intersections between the environment, the economy, and communities. Through its Environmental Fiduciary Project, the Foundation advocates the prudence of considering environmental and social factors in portfolio management. It serves as the fiscal sponsor of the IEHN. www.rosefdn.org

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