Ticking Toxic Timebomb

Forwarded this email by a friend? Subscribe here.

Welcome to May!

Hollywood writers are on strike, JPMorgan Chase bailed out a bank, and Rihanna graced the Met Gala carpet in a white gown, making us wonder if we’re caught in a time warp back to 2007 or 2008. But we checked the calendar and nope, it’s still 2023 and the economy is still on edge. Here are a few articles we’ve found helpful for understanding the major market news of the week:

• Interest rates peaked (maybe): Yesterday, the Federal Reserve raised interest rates for the tenth time in just over a year. The quarter-point rise is unwelcome news for anyone looking for a loan (as The New York Times explains), but the Fed did hint that this could be its last hike for a while. That said, in a press conference (which wasn’t a prank), Fed Chair Jerome Powell said it would still “take some time” to get inflation back down to 2% and did not completely shut the door on future increases.
• Bank fire sale: If you haven’t read all the details of JPMorgan Chase’s buyout of First Republic Bank yet, the AP breaks down what led to the fire sale. While we all hope the worst of the banking crisis is behind us, Axios explains why the banking system might feel shaky for a while.
• TFW your wallet’s empty: Treasury Secretary Janet Yellen warned the US may run out of cash to pay its bills sooner than expected (by June 1), a familiar predicament for some of us on the FWIW team. The Brookings Institution walks through the possible impacts if Congress fails to reach a deal to lift the debt limit.
• Earnings season rolls on: Pfizer and Uber both beat analyst expectations in their Q1 earnings reports — as did Ford, even though its EV business posted a huge loss. Meanwhile, big oil companies reported another quarter of strong earnings driven by climbing oil and gas production — though some shareholders are ratcheting up pressure for oil companies to set tougher climate targets, as demonstrated at BP’s annual meeting last week. (ICYMI, we have some helpful tips for reading corporate earnings reports.)

We’ve got more news below, along with some ideas for investing in a less toxic future. Until next week, may the fourth be with you!

News you can use

• It’s the season of the worker at annual company meetings, according to Bloomberg. Over 140 shareholder resolutions filed this year are employee-related, and the focus has shifted from racial equity audits and board diversity to issues like paid leave, safety, and labor rights. Amazon and Walmart will face multiple resolutions later this month, and Starbucks investors voted for a labor practices review in March. Workers are also a top priority of the American public when it comes to business behavior, according to JUST Capital.
  
• Fast Company is out with its latest World Changing Ideas awards. Dell Technologies tops the list for its efforts to infuse sustainability across its businesses. Alongside lots of nonprofits and startup ventures, you’ll also spot some familiar names, like Match Group and Pandora (both featured in our Investing in Love edition), Goldman Sachs, Ally Financial, and Shopify.
  
• Shares in Eli Lilly and Co jumped this week on the success of its Alzheimer drug trial. The pharma company’s medicine slowed cognitive and functional decline by 35% in patients. So far, only two drugs, both from Eisai and Biogen, have received accelerated FDA approval for slowing the progression of the disease that affects more than six million Americans. Meanwhile, the FDA approved the first vaccine for respiratory syncytial virus (RSV), after a surge in cases last year. Investors pushed GSK stock higher in reaction.

Asking for a friend….

We know there is a lot to think about these days, and it can sometimes be a bit overwhelming. To help with those nagging questions, and so you have useful resources at your fingertips, here are a few links to resources and past stories relevant in these turbulent times:

• FWIW’s Guide to Long-Term Investing
• Some of our favorite inflation-fighting strategies (and a few more)
• Investing in Women: A Guide to Gender-Lens Investing
• FWIW Guide to Cleantech Investing: Sectors to Watch (covering over a dozen innovative sectors to anchor your research on sustainable investing options)
• How to Practice Faith-Based Investing
• “Siri, What Is a Recession?”

That’s, like, so toxic

If you’ve ever scrutinized a product’s ingredients list and ultimately picked something “natural” or “organic,” you’re part of the growing movement to curb the use of man-made chemicals. Chemicals improve our lives in so many ways, but they also pose grave risks to our health and environment.

Scientists say the problem of chemical pollution, which causes almost two million early deaths a year, is little understood and underreported because too many new compounds are being invented and released into the atmosphere before they can be evaluated for safety. Lately, they’ve been raising the alarm about a group of commonly used “forever chemicals.” Keep reading to learn more about them and how you can make a difference as an investor.

What are forever chemicals?

Back in 1938, a young chemist at DuPont accidentally invented the world’s first perfluoroalkyl and polyfluoroalkyl substance (PFAS). It was later trademarked as Teflon, a word you may recognize if you’ve ever been in the market for a pan.

PFAS is a class of chemicals that resist heat, stains, moisture, and grease. Since their discovery, we’ve created thousands of PFAS and found uses for them everywhere, like food packaging, paints, clothes, furniture, non-stick cookware, firefighting foams, cosmetics, and carpets. They are also used as industrial lubricants. But like so many other things (cigarettes, DDT, little kids’ drum sets), the dangers of these durable and versatile chemicals were revealed and understood much too late. Some companies kept their medical research secret for decades.

Why are they a problem?

Part of what makes PFAS so great also makes them dangerous to humans. Called “forever chemicals,” they can take centuries to break down in the environment and remain in the human body for years. They’ve been linked to serious health issues, including cancer, kidney damage, increased levels of cholesterol, high blood pressure in pregnant women, and reduced vaccine response. It’s close to impossible to avoid exposure to PFAS since they’ve been found in drinking water, certain foods, and even the air. A CDC report said that 97% of Americans have PFAS in their blood.

As awareness grows, companies are making changes, and regulators are also stepping in. California has banned PFAS use in food packaging, textiles, and cosmetics, and the EPA has proposed a rule that would require public water systems to monitor for these chemicals. This week, UN delegates are discussing adding more forever chemicals to the list of toxic substances to be banned or restricted.

Investing in a healthy future

If you want to say no to PFAS with your portfolio — whether for values-aligned reasons or to avoid the impact of potential regulatory crackdowns — there are a few ways you can approach picking stocks:

Saying no to PFAS in consumer goods: Starbucks, McDonald’s, Chipotle, Panera Bread, Sweetgreen, and Whole Foods Market are some of the chains that have committed to stop using PFAS packaging. You can check whether a company is making changes or ignoring the problem, and remember, no firm can claim to be 100% free of PFAS. They have the nasty habit of sneaking in somehow, but a promise to keep levels extremely low is probably the most realistic pledge at this point. PFAS are obviously great for outdoor clothing, but companies are finding alternatives. Those that have announced plans to transition away in the coming years include Canada Goose, Columbia Sportswear, Patagonia, Lululemon Athletica, and VF.

Saying no to PFAS production: Besides being bad for the planet, PFAS may also prove bad for business, considering new regulations proposed in Europe and the wave of lawsuits headed to court. After being sued last year by California's attorney general to recover clean-up costs, industrial conglomerate 3M said it will stop PFAS production by 2025. The decision will cost $1.3 billion in annual sales but help the company avoid billions of dollars in legal liabilities and investor pressure in the future. DuPont spinoff Chemours has said it will remain a producer and last month became the first-ever PFAS polluter to have EPA enforcement action taken against it.

Destroying the indestructible PFAS: Companies and researchers are working on ways to get rid of PFAS in the environment. The first commercial-scale operation to destroy forever chemicals in the US began earlier this month at a facility owned by Heritage-Crystal Clean, Inc. The solution is being marketed to the landfill and industrial waste management markets. Meanwhile, the Fortune 500 infrastructure consulting firm AECOM says the technology it developed and is trialing has also shown success with real-life samples.

Reducing chemical pollution: Agtech companies, including AgEagle Aerial Systems and Trimble, build equipment like drones to precisely spray pesticides, which have been found to contain PFAS, to reduce their impact. Battery recyclers like Li-Cycle Holdings will reduce the need for mining metals, an activity known to cause chemical pollution.

Clean water: The National Sanitation Foundation’s list of home filtration systems that reduce PFAS in drinking water includes products from the publicly traded A.O. Smith Corporation and Tupperware Brands. (Be careful with the latter since it’s in a world of pain right now.) Ecolab’s Purolite and Evoqua Water Technologies (which is being acquired by Xylem) are examples of companies that can help water providers, like municipalities, remove PFAS.

As you can see, there are almost as many ways to invest with a PFAS lens as there are uses for the chemicals. The first step is being aware of what they are and reading the “ingredient list” on your assets.

Before you go -

In honor of Star Wars Day (and inspired by the latest twist in the Wes Anderson mimicking memes, a trend we are a little too excited about), here are 10 money lessons from a galaxy far, far away.

** FWIW team members own shares of 3M, Amazon, JPMorgan Chase, Lululemon, Pfizer, Sweetgreen, and Walmart. We also probably have too many items from Patagonia in our closets…

Want to learn a bit more about the writers behind FWIW? Have an idea you would like us to cover in the future?