Chemical industry can support SRI says Dexia AM report

The chemical sector can offer strong sustainable and responsible investment (SRI) opportunities, according to new research from Dexia Asset Management.

A report, Solutions for Today’s and Tomorrow’s World: The Hidden Talents of the Chemical Industry, highlights the contribution of the chemical sector to global sustainable economic development and identifies a number of companies that meet Dexia AM’s financial and SRI criteria.

The analysis suggests the chemical sector can help industrial customers achieve their environmental aims.

“The chemical sector labours under a negative image, and has long been associated with the development of harmful products and environmental degradation,” said Isabelle Cabie, head of SRI at Dexia Asset Management.

“Our research, however, has shown the sector is finding new sources of differentiation while proposing solutions to tackle environmental issues and, as such, is an attractive investment proposition from an SRI perspective.”

Dexia Asset Management assessed each company against macro and micro SRI factors. The macro factors covers six global sustainability trends, including demographic, economic, health & wellness, interconnectivity, climate change and resource depletion trends.

The micro analysis considered companies’ impact on their local communities and the environment. It also explored the sustainability of companies’ supply chains, their impact on employment, as well their investor and customer relations.

The SRI case for the chemical sector is underpinned by its prominence in the global economy, Dexia’s report claims, because the chemical industry plays a vital role with many other business sectors relying on its products.

“The chemical sector is truly the ‘industry of the industries’ and we believe that the importance of the sector will only grow due to the increasing importance of sustainability trends,” explained Cabie.

“Issues such as climate change and resource depletion increasingly affect business, and chemical companies will not only play a pivotal role developing solutions to these challenges, but also in mitigating the impact of industry on the environment. As a result, the sector as a whole will likely benefit as these trends develop. And investors will benefit from selecting those chemical companies that are best positioned.”

Dexia Asset Management also identified the factors driving improvements to environmental and social governance practices in the chemical sector. They include increased legislation and regulation principally focused on improving processes and product safety.

Patrick Haustant, senior SRI Analyst and author of the report said the multiplication of environmental and health and safety laws is providing the impetus for chemical companies to improve their environmental, social and governance practices. “The Registration Evaluation Authorization of Chemical substances (REACH) regulation is a good example of this and is already leading companies to phase out their most dangerous products,” he added.

Companies that performed well against Dexia AM’s SRI criteria and have strong financials include:

Novozymes (Denmark), a world leading producer of enzymes that facilitate the production of biofuels

Johnson Matthey (United Kingdom), a world leader in autocatalysts that helps industrials to drastically reduce fuel emissions and clean emissions

Air Liquide (France), the market leader in hydrogen fuel cells

BASF (Germany), a leader in the insulation market that promotes the use of polyurethane and polystyrene chemicals (which are durable, efficient and versatile) in buildings

Linde(Germany), a company that is well positioned with its engineering division working on carbon capture and storage (CCS)

Dexia Asset Management is a pan-European firm managing €73.2 bn (at end March 2013) in assets, distributed among a full range of investment vehicles, including traditional management, alternative management and sustainable management. It has management teams in Brussels, Luxembourg, Paris and Sydney.

The manager said SRI is a “key strategic business” with about 22% of our assets under management (€ 16.2 billion at end of March 2013) involving sustainable and responsible approaches in all asset classes.

To view the executive summary of the research paper “Solutions for Today’s and Tomorrow’s World: The Hidden Talents of the Chemical Industry”, click here.


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