Over the last eighteen months, WHEB has been leading a collaborative engagement initiative involving several UK institutional investors and focussing on toxic chemicals. Our objective has been to understand the degree to which speciality chemical companies are involved in the manufacturing, processing or sale of chemicals that are considered to be Substances of Very High Concern (SVHC) by the European Commission. These substances are being increasingly tightly regulated in the EU and elsewhere and in some cases are being banned. WHEB has no exposure to commodity chemical companies as they do not fit our social or environmental investment themes, but we do invest in some speciality chemical companies including the UK company Johnson Matthey (JM).

JM is a speciality chemical business whose products offer a range of important environmental and health benefits. Products include catalysts to reduce hazardous air emissions from automobiles and fine chemicals for use in the pharmaceutical industry. In total JM has businesses that handle four substances that are considered to be ‘candidates’ for treatments as SVHCs by the European Commission. A further four are considered to be controversial by environmental groups. It was clear from our meeting, and subsequent correspondence, that the company has a robust approach to the management of these substances, but did not have a systematic approach for assessing and managing the risks of phase-out for these chemicals and the opportunity for developing less hazardous substitutes. In some cases, the company had successfully introduced alternatives, but in others their efforts had not succeeded.

We followed our meeting with a suggestion that the company make the issue of hazardous chemicals a higher priority, particularly in developing a more systematic approach across the company as a whole to assessing which substances are likely to be regulated, what the commercial implications might be, and what the company should do about it. We were very pleased therefore to read in the company’s 2014 annual report a case-study on the work that they have been doing to manage hazardous chemicals and their decision to boost the resources they have within the business to manage these issues and to promote the use of green industry across the group.