Partnerships at Work: Investor Environmental Health Network

By Richard Liroff
From the Summer 2011 Edition of Values

This column highlights groups and organizations working to promote social and economic justice, environmental leadership, or corporate accountability. Walden often supports the work of featured groups and partners in research and engagement efforts.

Scarcely a week goes by without publicity about some toxic chemical scare in consumer products. These include both relatively well-known chemicals like lead in children’s toys, formaldehyde in hair care products, and cadmium in kids’ jewelry, and more obscure ones like bisphenol A in plastic baby and sport bottles and phthalates in cosmetics and cleaning products. Such reports draw on emerging scientific research linking minute amounts of chemicals to neuro- or reproductive toxicity and other health effects, especially when individuals are exposed in the womb or early in childhood. Emerging concerns about toxicants can place product manufacturers’ and retailers’ reputations at risk. If companies just sit by, that risk turns into lost market share and revenues (“toxic lockout” from the marketplace), and targets companies for litigation.

Reducing the toxicity of manufactured products should be core to any business strategy. While lowering potential liabilities, companies reducing their “toxic footprint” can drive innovation, grab market share, lower overhead costs when products subject to government hazardous waste laws are eliminated, and contribute to enhanced employee safety and productivity.

The Investor Environmental Health Network (IEHN) is a collaborative partnership of investment advisors and managers concerned about the financial and public health risks associated with corporate toxic chemicals policies. Through dialogue and shareholder resolutions, IEHN encourages companies to adopt policies to continually and systematically reduce the toxicity of, and eliminate certain chemicals from, their products. IEHN’s publications—reports, articles, and blogs—demonstrate “the business case” for corporate safer chemicals policies, provide companies and investors with tools for assessing corporate performance, offer examples of corporate safer chemicals policies, and provide precautionary warnings to investors.

IEHN also works to strengthen the regulations governing companies’ disclosure of environmental liabilities. The national financial meltdown of recent years highlighted the failure of the regulatory system to ensure honest accounting. The need for honest accounting extends to environmental liabilities. IEHN’s 2009 report, Bridging the Credibility Gap, focuses on two case studies—asbestos and nanomaterials—to assess the effectiveness of the existing regulatory system, and offers recommendations for improvements.

Since its founding in 2004, IEHN has a successful track record of moving corporate policies and practices on various “poster child” chemicals, part of a larger effort to foster adoption of broad corporate chemical substitution policies. For example, investors engaged virtually all the nation’s largest retailers on reduction and elimination of PVC packaging, a goal that the retailers have broadly adopted. Retailers have also moved away from targeted product lines such as vinyl shower curtains and school supplies. IEHN has a long and successful history of addressing the use of bisphenol A in polycarbonate bottles and food packaging. Following a resolution at Whole Foods Market in late 2005, Whole Foods removed polycarbonate baby bottles from its shelves.

In 2009 IEHN expanded its role to examine the community impacts of toxic chemicals, in particular the environmental hazards from “unconventional” natural gas production. Hydraulic fracturing (or “frac’ing”) typically involves injecting a mix of millions of gallons of water, thousands of gallons of chemicals, and particles into deep underground shale formations to create fractures through which gas can flow for collection. Over two proxy seasons, investors have filed 21 resolutions at 16 companies and engaged in constructive dialogue with additional companies. Six resolutions in 2010 received votes from 21 percent to 42 percent, and five resolutions in 2011 received votes from 28 percent to 49 percent. Companies have responded by increasing their disclosures of steps they are taking to reduce chemical toxicity, increase water recycling, and assure better well construction to reduce hazards. Investors (including Walden) are now working with companies to develop key performance indicators and best practices for future reporting.