Study Benchmarks Chemical Companies' Relative Exposure to REACH

Study Benchmarks Chemical Companies' Relative Exposure to REACH

Most large capitalization companies in the chemical sector indicate that the new REACH regulations will have a relatively minor effect on variable operating costs, according to a new survey by Innovest Strategic Advisors.

The chemical industry has previously claimed that the European chemicals policy termed REACH (Registration, Evaluation, and Authorization of Chemicals) will result in thousands of lost jobs and have sweeping economic impacts. For example, industry titan BASF AG estimates that, barring any effects on the labor market and the competitive situation, investors can expect REACH to cost the company EUR 0.5 billion over a period of ten years.

As part of its normal annual sector evaluation, Innovest interviewed and scored more than 70 companies in the unified chemicals sector (diversified, commodity and specialty). Comparative assessment tools included six (three qualitative and three quantitative) indicators of risk and exposure. For example, on the qualitative side, Innovest reviewed the on-time status and comprehensiveness of company submissions to the OECD's High Product Volume chemicals testing program, as a litmus test for understanding relative readiness for the reporting requirements posed by REACH.

The effects of REACH will be felt more intensely by the mid-cap and small cap companies, according to the report. Some smaller specialty firms indicate that approximately 30% to 40% of intermediates used in production could be affected.

This year's Innovest chemicals sector report focuses directly on market dynamics that open the door for alternative and replacement chemicals in the building materials, paper, healthcare, personal care, electronics, and retail sectors.