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  Home News and events General environmental news Toxic shock threatens investors in Asia
Toxic shock threatens investors in Asia

London, 15 February: Investors have been warned that an estimated 70% of listed companies in Asia – excluding Japan – are exposed to risks associated with toxic chemicals.

The Association for Sustainable & Responsible Investment in Asia (ASrIA), which made this estimation based on the FTSE Asia ex-Japan All Cap index, has warned in a report that the use of toxic chemicals dangerous to human health and the environment is a "classic sleeper issue" for Asian companies.

"While product scandals and groundwater problems are rising, the broader economic and social implications for human health have largely been ignored by policymakers and the financial community," the report says.

ASrIA puts this down to government failure to put in place policies on chemicals, or effectively police existing policies. With a "policy vacuum" across much of Asia, developments are driven by EU and, to a lesser extent, US legislation on chemicals safety.

But companies are also failing to act on, or embrace, the concept of the precautionary principle to competitive advantage – which is behind tough new chemicals legislation in the EU.

"Internet bulletin boards in China have become a fast-paced source of consumer views on products. While the reports are not always correct, they can create a high-speed viral response which can dismantle a company's brand equity in a matter of days," the report warns. "Similar patterns are evident in Korea and Japan where product quality problems are frequently raised first on the web before making their way to the traditional media."

In addition to threatening investors in Asian companies, this situation also affects US and European firms with supply chains in the region, the report warns.

Dubbing the supply chain "brittle and unprepared to address many of the emerging toxic chemical issues", the report says: "In part this reflects the history of limited local market regulation, but it is also a by-product of the punishing economics of the supply chain where new, higher cost solutions can be undercut by lower cost producers."

In particular, as the supply chain extends its reaches into more remote parts of China, it has become ever more difficult to police. The report says that it is common practice for suppliers to substitute locally-available chemicals for those specified by the buyer "on the view that the end consumers will not be able to detect the difference".

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