Impact Blog
PFAS emerges as ESG risk in US water utility space

The views expressed in these posts are those of the authors and are current only through the date stated. These views are subject to change at any time based upon market or other conditions, and Calvert disclaims any responsibility to update such views. These views may not be relied upon as investment advice and, because investment decisions for Calvert are based on many factors, may not be relied upon as an indication of trading intent on behalf of any Calvert fund. References to individual companies for Engagement or Research purposes are provided for illustrative purposes only and may not be representative of the results of all of Calvert’s engagement efforts. The discussion herein is general in nature and is provided for informational purposes only. There is no guarantee as to its accuracy or completeness. Past performance is no guarantee of future results.

  • All Posts
  • More
    Topics
      Authors

      Filter Insights by Date:   Start Date   End Date   or  Show recent results
      The article below is presented as a single post. Click here to view all posts.

      By John MillerVP and ESG Senior Research Analyst, Calvert Research and Management

      This two-part series will examine the ESG risks associated with water utilities.

      Washington -- In the United States, more than 50,000 water utilities, including public, private and public/private mixed ownership models, provide drinking water services to 95% of Americans.1 These utilities source, treat, store and deliver safe drinking water via integrated water distribution systems.

      Preservation and upgrading of that drinking water system to protect against emerging environmental, social, and governance (ESG) risks is a key responsibility for all water utilities - no matter what the ownership structure.

      The dollar value of these critical investments has been sized at $225 billion through 2030, with nearly 20% of this spend directly dedicated to water treatment.2 If appropriately managed, these risks can serve as a significant driver of regulated asset base growth at water utilities and as a demand catalyst for contaminate mitigation technology developers.

      PFAS emerge as ESG risk

      PFAS, or per - and polyfluoroalkyl substances, are a group of man-made chemicals that includes perfluorooctanesulfonic acid (PFOS) and perfluorooctanoic acid (PFOA). There are more than 5,000 known types of PFAS. These chemicals have been used since the 1940s and have historically been found in a varying array of consumer and industrial products. PFAS' "non-stick" attributes, making the chemical resistant to grease, oil, water, and heat, made the chemical popular for "stain- and water-resistant fabrics and carpeting, cleaning products, paints and fire-fighting foams," in addition to cookware, food packaging and processing. 3

      Because PFAS chemicals have been specifically engineered to resist decaying, they are often termed "forever chemicals." PFAS contamination has been identified across much of the US, with higher concentrations in former industrial centers within the US mid-Atlantic and Midwest.4

      Effects on human health

      Analysis of long-term human health effects related to PFAS contamination remains underway. According to the US EPA and multiple state health authorities, associations "between PFOA exposure and high cholesterol, increased liver enzymes, decreased vaccination response, thyroid disorders, pregnancy-induced hypertension and preeclampsia, and cancer (testicular and kidney)" have been reported. Similarly for PFOS, epidemiological studies have reported associations between exposure and "high serum cholesterol and reproductive and developmental parameters." Both PFOA/PFOS can be transmitted between mother and fetus via cord blood.5

      Regulation begins

      On February 2, the US Environmental Protection Agency (EPA) took the much-needed - but much-delayed -- step of preliminarily determining that PFOS and PFOA, require regulation.6 While the EPA's decision is only the first step in a multiyear regulatory process, any movement toward an eventual national maximum contaminate limit (MCL) is positive and would represent the first new chemical addition to the Safe Drinking Water Act since 1996.

      In the absence of a national MCL, 10 states have taken unilateral action. These states, through their regulatory commissions and health agencies, have mandated maximum PFAS treatment levels. State-level PFAS treatment mandates have either followed the EPA's nonenforceable health advisory standard of 70 nanograms per liter (ng/L) or established more strident treatment requirements, down to as low as 5-6 ng/L.7

      Mitigation strategies

      Water utilities have reported success in treating PFAS contaminated water down to the EPA's health advisory standard, as well as in achieving success against more stringent state-level requirements. The EPA has identified granular activated carbon (GAC), anion exchange resins, reverse osmosis and nanofiltration as effective technologies for the removing of a wide range of PFAS chemicals.8 Each is a proven, and commercially deployed, water filtration technology. The underyling type of PFAS, along with water quality and presence of additional contaminates, will drive selection of the most cost-effective technology on a utility-by-utility basis.

      To scale the capital costs that would be required to treat PFAS down to the EPA health advisory, the American Water Works Association has estimated that industrywide capital costs required for treatment would exceed $3 billion. This figure could surpass $38 billion if a more strident 20 ng/L MCL was established. 9

      Bottom line: US water utilities must balance the requirement of basic access against the financial necessity of recovering short-term costs and making the future investments needed to mitigate emerging risks. These challenges present investment opportunities for water utilities and contaminate mitigation technology developers who successfully manage financially material ESG risks.