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PFAS: The “Forever Chemicals”

In our opinion PFAS (per- and polyfluoroalkyl substances) stands for a main health and environmental challenge: According to scientific studies, these compounds are ubiquitous in water, food and soil. For decades, governments and environmental regulators have underestimated the adverse effects of these substances on our health.

As an example, last year the German Environmental Agency has tested more than 1’000 children and found PFAS chemicals in every single one. One in five children between the ages of 3 and 17 had concentrations so high that damage to their health could no longer be ruled out1.

Environmental protection authorities around the world are now reacting and are starting to impose stricter regulation on the usage of these substances. As investors, we see opportunities in the field of testing and surveillance of the environment and public health as well as in cleanup, decontamination and remediation of polluted sites.

What is PFAS?

 

PFAS are a family of man-made fluorinated organic chemicals, including PFOA (perfluorooctanoic acid) and PFOS (perfluorooctanesulfonic acid). They are also known by the older abbreviation PFC (perfluorinated chemicals). These substances comprise a group of more than 4’700 industrial chemicals used in numerous industrial processes and consumer products since the 1940s. Their main advantageous characteristics are oil, water and dirt repellency as well as temperature/heat resistance for many consumer and industrial products2.

Because PFAS are very stable and durable, these compounds are persistent in the environment and do not break down in typical environmental degradation processes. They are destroyed only at temperatures above 1’000 degrees celsius. This is the reason why these substances are named as “Forever Chemicals”. They are used in products such as in water- and stain-repellants, teflon, non-stick cookware, pizza boxes, lithion-ion batteries, ski waxes3, fire fighting foam and outdoor gears, among others4. This is of concern because PFAS can accumulate in wildlife and in human bodies. While long-chain PFAS are absorbed in soils and sediments and can accumulate in organisms, short-chain PFAS are highly water-soluble and very mobile5. They can contaminate food, soil as well as drinking water sites. Some PFASs are so volatile that they are even transported over long distances and thus accumulate in remote and pristine areas such as in the Arctic6.

Why are PFAS a concern for humans?

 

According to the US Environmental Protection Agency (EPA), there is scientific evidence that exposure to PFAS can lead to adverse health outcomes. People can get exposed to PFAS in different ways, such as through drinking water or food. These chemical substances can accumulate and stay in the body for a long period of time. PFAS are generally rapidly absorbed into the organism, especially via the intestine and the respiratory tract, are placental and pass into breast milk. People most at risk of adverse health impacts are those exposed to high levels of PFAS and vulnerable population groups such as children and the elderly. Throughout life, people and animals accumulate PFAS in their bodies. Its level may increase up to the point where they start to suffer from adverse health effects7. Fig. 1 summarizes current knowledge of the health impacts of PFAS.

Fig. 1: Effects of PFAS on human health

Sources: Credit Suisse, European Environmental Agency (2020): Emerging chemical risks in Europe — ‘PFAS’, Nov. 23rd 2020, URL: https://www.eea.europa.eu/themes/human/chemicals/emerging-chemical-risks-in-europe, 14.02.2021, 14.02.2021.

Occurrence in the environment, illustrated by the example of Switzerland and the US

 

Worldwide there are several research projects ongoing about the occurrence, analysis, and remediation of PFAS. Residues of these substances are widespread in the environment, as shown by different scientific studies8. For the sake of simplicity and clarity, in this report we only focus briefly on Switzerland and the US.

Fig. 2: Concentration of PFAS in groundwater and wastewater content in various watercourses

Source: Bundesamt für Umwelt (2019): Perfluorierte Chemikalien im Grundwasser, 13.09.2019, URL: https://www.bafu.admin.ch/bafu/de/home/themen/wasser/fachinformationen/zustand-der-gewaesser/zustand-des-grundwassers/grundwasser-qualitaet/perfluorierte-chemikalien-im-grundwasser.html, 15.02.2021.

In Switzerland over 80% of drinking water is obtained from the groundwater. The National Groundwater Monitoring project NAQUA of the Bundesamt für Umwelt (Federal Office for the Environment) provides a nationally representative picture of groundwater quality. They came to the conclusion that PFAS substances were detected at 21 of the 49 monitoring sites sampled, most of which are recharged in large part by the infiltration of river water. PFAS concentrations never exceeded 100 nanogram per liter, except at one site (see Fig. 2)9. The researchers concluded that according to the current state of knowledge, such concentrations do not constrain the use of groundwater as a drinking water resource10.

According to the Swiss chemicals industry, no PFAS-containing substances are manufactured in Switzerland, but they are imported from abroad and are further processed11. This would explain why major sources of PFAS substances in Swiss groundwaters is coming mainly from the urban drainage system. From there they enter the rivers and lakes via wastewater treatment plants and finally into the groundwater12.

In the United States, researchers from the Environmental Working Group (EWG) and North-eastern University found that 49 states have mapped the contaminated locations with PFAS chemicals, including some drinking water sites (Fig. 3). It is noticeable that the drinking water sites in the states of California, Michigan and New York are particularly affected.

Fig. 3: PFAS contamination in the US

Source: EWG, Northeastern University (2021): Mapping the PFAS Contamination Crisis, URL: https://pfasproject.com/2020/04/23/mapping-the-pfas-contamination-crisis/, 17.02.2021.

In 2019 the US Environmental Protection Agency (EPA) has announced a PFAS Action Plan to address this challenge and to protect public health13. In summary they comprise four steps:

  • Groundwater cleanup guidance,
  • New testing methods,
  • Updates to the Toxics Release Inventory (TRI) and
  • Updating the regulations for drinking water standards14.

We believe that with the Democratic Party taking control of the US Senate, the EPA will likely accelerate the legislation and regulation around PFAS contamination. Manufacturers of these substances may face potential personal injury and cleanup lawsuits. Analysts from Bank of America Merrill Lynch are drawing historical analogies with the asbestos claims over 20 years ago: In the third and fourth quarter 1998 many asbestos manufacturers started publically announcing the issue and settling claims. The liabilities of the accused companies were up to 30% of their respective market capitalizations. Between the initial asbestos liabilities (2nd half of 1998) and peak asbestos liabilities (end of 2001) their share prices fell between 70% and 90%. Beneficial factors such as state law developments and shift in corporate strategies reduced the companies’ asbestos payments in the later 2000s15.

In Europe the use of PFOS has been severely restricted since 2006, PFOA has also been largely banned since June 2020. However, due to their longevity these substances are still regularly detected in our environment. Recent regulatory rules are installed recently, such as16:

  • In 2018, the European Commission proposed a limit value of 0.1 microgram per liter for 16 specific PFAS in its revision of the EU Drinking Water Directive. In addition, a "group limit" for PFAS of 0.5 microgram per liter is under consideration.
  • In September 2020, the European Food Safety Authority (EFSA) set a new safety threshold for a group of perfluoroalkyl substances that accumulate in the body. The threshold is a group tolerable weekly intake (TWI) of 4.4 nanograms per kilogram of body weight per week.

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