Firms keep shareholders in the dark on toxicity risks

Major industrial and other sectors affected by product toxicity risks are doing a poor job of informing shareholders of market risks they face due to toxic chemicals in their products, according to a new study released by the Investor Environmental Health Network (IEHN).

IEHN’s report was based on searches through thousands of SEC filings, and detailed review of more than 25 companies’ reports. The report examines disclosures on supply chain weaknesses before and after the 2007 toy recalls due to lead paint, on scientific studies showing products causing asthma, potential health risks of nanotechnology, and on the new European chemical regulatory program, ‘REACH’ (Registration, Evaluation, Authorisation and Restriction of Chemicals)

Lead author, Attorney Sanford Lewis, said: ‘Our analysis shows that the managers of these companies know much more about these product toxicity risks than they are choosing to share with investors. The companies are not engaging in timely investor disclosure of financially important information on product toxicity risks.’

Lewis said that the lack of disclosure ‘means that many of these companies are likely to be vulnerable to shareholder suits and SEC enforcement actions for failure to comply with the Securities Laws.’

A shareholder resolution filed by Trillium Asset Management at Dow Chemical Company noted that approximately half of Dow’s pesticide products (73 of 149) may be linked to asthma and other respiratory problems. It asked the company to establish an independent panel to examine this issue and to report on possible actions to phase out or restrict these materials. Dow does not now disclose such risks to shareholders. The company has responded to the resolution by contending that such an assessment is more appropriately done by regulators than by the company.

The IEHN said: ‘Dow is basically acknowledging that it will defer to regulators instead of acting proactively on these product toxicity concerns, a potential red flag for Dow investors.’

A shareholder resolution filed by Calvert Asset Management Company, asked the company to report to shareholders on Avon’s product categories containing nanomaterials, and to discuss any new initiatives or actions, aside from regulatory compliance, that management is taking with regard to the issues raised by nanomaterials.

“Our analysis shows that the managers of these companies know much more about these product toxicity risks than they are choosing to share with investors.

The IEHN said: ‘The company has not disclosed any hazards of nanotech used, and has asserted the safety of its use of nanoparticles in sunscreen, despite significant gaps in the state of scientific knowledge on sunscreen nanoparticle safety when used with injured, broken or sunburnt skin, for instance.’

Additionally, the report noted that DuPont has been forced by consumer demand to phase out the use of its controversial chemical, PFOA, despite its ongoing assertions that PFOA does not harm human health. According to the report authors, DuPont has continually failed to provide shareholders with a balanced presentation of what is known to science regarding PFOA hazards.

The report concludes with recommendations to companies, investors, and the SEC, including the following:

• Companies should provide to shareholders additional information on chemical supply chain issues, including sources of materials, risk areas, and control systems.

• Investors should press for better disclosure from companies, through direct correspondence and support of shareholder resolutions seeking such disclosure.

• The SEC should issue new guidance to companies requiring them to more specifically report their product lines vulnerable to Europe’s REACH regulation and should report more fully on credible adverse scientific findings that may impact the company.