As we mark World Water Week this week Guglielmo Merlini, Investment Analyst at MainStreet Partners, shares analysis into the impacts of PFAS – these highly toxic ‘forever chemicals’ which are so embedded in our modern lives
In the Mark Ruffalo film “Dark Waters,” based on a true story, a determined lawyer uncovers the hidden dangers of water contamination, revealing the shocking impact of synthetic chemicals. The story highlights the severe health and environmental challenges posed particularly by polyfluoroalkyl substances (PFAS), which lurk in everyday products from nonstick cookware to firefighting foam.
Known as ‘forever chemicals’, PFAS have proliferated unfettered since their introduction in the 1940s, becoming a highly toxic global problem with deadly consequences. Studies and surveys estimate that approximately 99% of Americans have PFAS in their bodies. Now regulators are scrambling to control the spread: The World Health Organization has classified some PFAS as carcinogenic, the EU is considering a blanket ban on PFAS, and several countries, including Canada and Australia, have already implemented stringent drinking water standards.
Sector Disruption Ahead
From an investment perspective, the prospect of a potential ban on PFAS is likely to significantly impact various industries due to their widespread use in numerous applications, especially Chemicals, Semiconductor Manufacturing, and Textiles.
In the chemical industry, PFAS’ unique properties, such as resistance to heat and chemicals, make them invaluable. For the chemical industry a ban could lead to increased production costs and the need for alternative materials, which may not perform as effectively or economically​​​​.
In semiconductor manufacturing, PFAS play a critical role in photolithography and high-purity water systems. These applications require materials that can withstand harsh chemical environments and maintain high levels of purity and performance. Any restriction on PFAS could disrupt production processes and lead to increased costs as manufacturers seek suitable alternatives​​​​.
The textile industry uses PFAS for water-repellent and stain-resistant treatments. A ban could alter product characteristics and increase production costs as manufacturers look for other chemicals that offer similar benefits without the associated environmental and health risks.
In the automotive and aerospace sectors, PFAS provide durability in components like fuel hoses and gaskets. They are also prevalent in consumer goods such as non-stick cookware, waterproof clothing, and cosmetics, and are used in the packaging industry to prevent grease and oil penetration in food packaging​​​​​​​​​​.
Estimates suggest expenditures to tackle PFAS contamination could exceed $300 billion by 2040. While some industries could benefit from rising demand for PFAS remediation technologies, it also poses a threat to industries heavily dependent on these chemicals.
Resilient Industries, Stock Beneficiaries
Several industries and companies are actively addressing and finding solutions for PFAS contamination, leveraging advanced technologies and regulatory compliance strategies. Environmental remediation companies like Veolia, Waste Management, and Republic Services are at the forefront, employing advanced treatment methods such as membrane filtration, ion exchange, and carbon adsorption to manage PFAS in landfill leachate and other waste streams.
Veolia has treated over 2.1 billion gallons of water across multiple sites, while Waste Management and Republic Services are investing in comprehensive leachate treatment solutions to meet evolving regulations. Water treatment companies like Xylem, Evoqua, and Pentair are also making significant strides. Xylem, boosted by its acquisition of Evoqua, offers a broad PFAS treatment portfolio, including solutions like advanced filtration and nanofiltration systems designed for PFAS removal. Pentair provides products such as the Everpure PFOA/PFOS Reduction Systems, which use Fibredyne media to reduce contaminants like PFAS, chlorine, lead, and microplastics. These collective efforts highlight a robust industry response to the persistent and widespread challenge of PFAS contamination.
Market Risk
Eliminating PFAS from our environment is no small feat. These “forever chemicals” are chemically stable and deeply entrenched in our soils, water, and living organisms, making remediation a complex challenge. Their ubiquitous use means developing alternatives will take time, and they will linger in the environment for years, necessitating ongoing management and innovative solutions.
While regulators worldwide are finally addressing PFAS pollution, it will take time for new rules to make a real impact. This delay increases market risks and potential business disruptions. In the meantime, technological solutions are being developed to tackle pollution and protect our water resources, creating a projected PFAS market worth $250 billion or more​​​​​​​​​​​​.
This significant opportunity could change how we view everyday items like takeaway food packaging. Private capital can play a crucial role in driving these innovations, contributing to a more sustainable world. Just as the movie “Dark Waters” brought attention to the hidden dangers of PFAS, ongoing efforts by regulators, industries, and innovators will hopefully turn the tide on these persistent pollutants, paving the way for a cleaner and safer environment.
Sources:
- PFAS: Genius gone wrong | Candriam
- Movie on the topic: Dark Waters (2019) – IMDb
Bloomberg analysis attached
- A2dfcf5c0-ab90-4e1c-a53d-3138f669f54e (aecom.com)
- 05_PFAS_OVV_0001_OVERVIEW_PFAS CAPABILITIES.pdf (aecom.com)
- ‘Forever chemicals’ were everywhere in 2023. Expect more litigation in 2024 | Reuters
- Groundbreaking map shows toxic ‘forever chemicals’ in more than 330 wildlife species | Environmental Working Group (ewg.org)
Map: Global danger: Threatened and endangered species at risk from PFAS exposure (ewg.org)
- Solvay reaches nearly $393 million PFAS settlement with New Jersey | Reuters
- https://www.wlf.org/wp-content/uploads/2024/01/2024-1-30-WLF-PFAS-Webinar-Final-v.1.pdf
- Pentair, 2024 Investor Day Presentation, March 6th 2024
- Xylem, Investor Day Presentation, March 30th 2024
- PFAS Information for Clinicians – 2024 | ATSDR (cdc.gov)
