Below is an excerpt from ISS ESG’s thought leadership paper “EU Chemicals Strategy for Sustainability – Are Companies Prepared?” The full paper is available for download from the Institutional Shareholder Services (ISS) online library.
EU CHEMICALS STRATEGY FOR SUSTAINABILITY
As part of its EU Green Deal, an ambitious program aimed to make the European Union climate neutral as well as meeting related sustainability challenges, the European Commission has announced a comprehensive overhaul of its chemicals legislation. The so called EU Chemicals Strategy for Sustainability, published on 14th October 2020, is meant to support the continent’s ambition for a toxin-free environment.
An internal evaluation of existing EU chemicals regulation has identified several inconsistencies, overlaps, and gaps, as well as difficulties in considering new scienctific information in a timely manner. Further, compliance and enforcement have been identified as additional challenges, with 30% of dangerous product alerts in the EU’s rapid-alert system (RAPEX) involving chemicals, over 90% of which originate outside of EU countries.
Altogether, while the EU has one of the most comprehensive and advanced regulatory and legislative environments regarding chemicals, a harmonized approach has so far been missing. This creates an uncertain environment for companies operating in the EU and decreases the predictability of long-term investments in the EU. The EU Chemicals Strategy for Sustainability aims to meet these challenges while tackling so far unaddressed environmental and health risks and encouraging innovation for sustainable chemical solutions.
Investors aiming to deliver long-term returns for their clients should consider whether companies are prepared to meet the challenges of the new EU framework for chemicals, and whether exposure may increase risk and lower portfolio returns.
Dr. Tabea Junk, Analyst, ESG Ratings, ISS ESG
Ronja Wöstheinrich, Senior Associate, ESG Methodology, ISS ESG
Dominika Dobielewska, Analyst, Sector-Based Screening, ISS ESG