This article was first published in Environmental Finance.

Water quality issues only occasionally bubble to the surface of public debate. Yet where they pose systemic risks to biodiversity and human health – and, by extension, the global economy – they can no longer be overlooked.

Governments and regulators are increasingly paying attention to per- and polyfluoroalkyl substances (PFAS), a family of thousands of synthetic organic chemicals that have been widely used since the 1940s. These ‘forever chemicals’ have a spectrum of applications: from non-stick pans to fire resistant foams, and from pesticides to sportswear. Yet the chemical properties that make them so useful – their high stability and resistance to oil and water – mean they are extremely resistant to degradation.

The health risks associated with PFAS now drive a wave of regulation and litigation that is restricting their future use and setting ambitious targets for levels in public drinking water. It is estimated that confronting the PFAS issue will involve more than US$250bn in spending globally.1 We see this already creating a tide of opportunities for companies whose products and services can detect forever chemicals, remove them from treated water and safely dispose of them.

PFAS, PFAS, everywhere

The chemical persistence of PFAS means they have spread to all corners of the world – including polar regions and the oceans – and have accumulated in water sources, soil and within animals and humans.2 The US Centers for Disease Control and Prevention has consistently found PFAS in 99% of the sampled population since it began testing human blood for the chemicals in 1999.3 The UK’s Environment Agency has found PFAS in 96% of samples taken from surface water.4

The potential costs to human health are sobering: one study estimated that the health costs associated with PFAS at between €52bn and €84bn annually in Europe alone.5 Forever chemicals have been linked to increased incidence of some cancers, hormone disruption, damage to the liver and immune system, birth defects and delayed child development.6 Research suggests that exposure to PFAS is also leading to health issues among animal species, from oceanic plankton to alligators.7

Forever chemicals’ bioaccumulation and persistence make it extremely challenging for their presence in drinking water to be reduced to levels deemed safe for consumers. Encouragingly, proven solutions that can detect, treat and dispose of PFAS exist and are creating opportunities for the innovative companies behind them.

Forever chemicals, today’s solutions

We break down the opportunity set into three broad categories of technological solution to the PFAS challenge: detection, treatment and disposal.

1. Detection

Absent technologies that can accurately and reliably measure PFAS levels in water samples in the field and in real time, detection is currently a costly, laboratory-based process. Sophisticated mass spectrometry machines are the standard technology used to analyse samples for the presence of PFAS particles.

Agilent Technologies is one of the leading providers of advanced spectrometry machines, including extremely sensitive systems that can identify targeted PFAS levels as low as 0.1 parts per trillion (which is below levels deemed safe).8 Its instruments can also identify unknown PFAS by comparing samples with an extensive database. Alongside these machines, the US company supplies laboratories with consumables, software and methodologies for the detection and quantification of PFAS to enable an end-to-end workflow for water sample analysis.

2. Treatment

The water treatment process will be pivotal in capturing PFAS and reducing levels to lower limits mandated by regulations. Existing removal technologies, in descending order of effectiveness (and cost), include reverse osmosis filtration, ion exchange resins – which work by binding negatively charged contaminant molecules to a positively charged resin – and granular activated carbon filtration – through which PFAS particles are absorbed to a carbon surface.

Many utility companies already employ these technologies in their water treatment plants. Xylem, through recent acquisition Evoqua, is a specialist provider of advanced water treatment products and systems. One of its solutions for removing PFAS from water supplies, using granular activated carbon from coconut shells, can demonstrably offer utilities lower life cycle costs and longer bed lives than coal-based alternatives.9

Over time, we expect significant opportunities to emerge for PFAS water treatment solutions at the point of use. After all, it should be most cost-effective to treat only drinking water from household taps rather than the entire water supply in a treatment plant, given the many uses that do not necessarily require PFAS to be removed.

3. Disposal

PFAS-rich residues from the treatment process must be disposed of safely. Problematically, much ends up in landfill without effective controls. One US study estimated that 11% of PFAS leach out into the water table from landfill sites.10

Destruction is generally preferable to disposal. Despite significant environmental concerns, in the form of air pollution and energy-intensity, incineration is typically seen as the most suitable commercially available alternative.

Other technologies are being developed, including electrochemical oxidation and plasma treatment, but are not yet commercially viable. Supercritical water oxidation, which uses high temperatures and pressure to break the chemical bonds in PFAS, has been successfully demonstrated but only a handful of commercial-scale SWO plants are in operation.

Regulatory and legal tailwinds

Supporting demand for these solutions are regulatory moves to reduce PFAS levels in water and the environment at large.

The US Environmental Protection Agency (EPA), which first regulated PFAS in the early 2000s, has proposed limits on PFAS in drinking water under the National Primary Drinking Water Regulation.11 Under the proposals, which are due to be finalised in 2024, water providers would have to ensure levels of two major groups of chemicals, PFOA and PFOS, do not exceed four parts per trillion (ppt).12

The EU is considering banning the production, use and sale of PFAS in non-essential applications, having already restricted and phased out certain chemicals. The revised EU Drinking Water Directive of 2020 includes provisions for member states to monitor and limit PFAS in drinking water to protect public health.

Rising public awareness of the potential impacts of these contaminants should reinforce the tightening of regulation. One study found that PFAS-related social media posts increased by 670% over a two-year period ending 2019, the year when Dark Waters, a film dramatising a legal case involving PFAS-maker DuPont, was first screened.13

Litigation concerns are fuelling investment in on-site wastewater treatment by companies that make products using PFAS. The health impacts associated with PFAS are triggering class actions brought against the manufacturers of these chemicals on behalf of communities exposed to dangerous levels. Water utilities are also bringing claims against PFAS manufacturers to compensate them for the costs of meeting emerging standards for drinking water. For example, in 2023, 3M agreed to provide US$10.3bn in funding for public water suppliers in US to detect and treat PFAS.14

Lawsuits like these could be the tip of the iceberg. As with action against the asbestos and tobacco industries, PFAS litigation may stretch over decades.

A multi-decade opportunity

A rapid increase in expenditure to remediate PFAS pollution and reduce levels in drinking water is expected across major developed economies.

The US Infrastructure Investment and Jobs Act of 2021 contained US$4bn specifically to address PFAS and other emerging water contaminants. Yet it has been estimated that the costs of complying with the EPA’s proposed drinking water standards could be US$48bn.15 Taking wastewater treatment and remediation into account, the addressable market for PFAS solutions in the US alone could excess US$200bn.16

Source: Environmental Business Journal / AECOM, 2023

The high-value PFAS opportunity

Estimated lifecycle costs of addressing PFAS pollution in the US (US$bn)
CategoryCost (US$bn)
Wastewater / biosolids75.4
Industrial remediation64.4
Federal remediation36.9
Drinking water31.1

Overview: This bar chart shows the breakdown in forecast spending required to address PFAS pollution in the US.

Category one: Wastewater / biosolids
Category two: Industrial remediation
Category three: Federal remediation
Category four: Drinking water

Overall, the chart shows that wastewater treatment is the highest-value area of opportunity, following by industrial remediation

This bar chart shows the breakdown in forecast spending required to address PFAS pollution in the US.

As money flows from governments and polluters to address the PFAS challenge over the coming decades, there should be a well of opportunities for providers of solutions.

This includes the development of substitutes for PFAS which are vital for key industries, including some that are playing an important role in the transition to a more sustainable economy, such as semiconductor manufacturing, and others that are expected to, including hydrogen production.

Initiatives such as Chemsec, the International Chemical Secretariat, are working to promote viable alternatives which already exist across a range of applications, including in food packaging, textiles and firefighting agents.17

While alternatives are developed, the imperative to reduce PFAS levels in water and soil will only grow more pressing. We believe this creates a multi-decade opportunity for investors focused on leaders in water testing and treatment technologies and on innovations that can make the issues arising from ‘forever chemicals’ a thing of the past.

1 AECOM, June 2023
2 Hartz, W.F., et al., 2023: Levels and distribution profiles of Per- and Polyfluoroalkyl Substances (PFAS) in a high Arctic Svalbard ice core. Science of The Total Environment
3 Centers for Disease Control and Prevention, 2022: National Health and Nutrition Examination Survey
4 Fidra, 2022: PFAS Contamination of the UK Environment – where are the gaps, and what can be done?
5 Nordic Council of Ministers, 2019: The cost of inaction – A socioeconomic analysis of environmental and health impacts linked to exposure to PFAS
6 US Environmental Protection Agency, March 2024: Our Current Understanding of the Human Health and Environmental Risks of PFAS
7 Environmental Working Group, 2023: Global danger – Wildlife at risk from PFAS exposure
8 US Government Accountability Office, 2022: Persistent Chemicals – Technologies for PFAS Assessment, Detection, and Treatment
9 Xylem, 2023: Xylem solution removes PFAS compounds from water utility’s supply well
10 US Environmental Protection Agency, 2023: A Critical Review of Perfluoroalkyl and Polyfluoroalkyl Substances (PFAS) Landfill Disposal in the United States
11 US Environmental Protection Agency, 2023: Biden-Harris Administration Proposes First-Ever National Standard to Protect Communities from PFAS in Drinking Water
12 Perfluorooctane sulfonate (PFOS) and perfluorooctanoic acid (PFOA) are two of the most common PFAS compounds in various applications. Their production has been phased out globally.
13 Tian, H., et al., 2022: Understanding Public Perceptions of Per- and Polyfluoroalkyl Substances: Infodemiology Study of Social Media. Journal of Medical Internet Research
14 Mindock, C., 31 August 2023: 3M’s $10.3 billion PFAS settlement gets preliminary approval. Reuters
15 BofA US ESG Research, American Water Works Association, January 2024
16 Environmental Business Journal / AECOM, 2023
17 ChemSec, 2024: Marketplace

References to specific securities are for illustrative purposes only and should not be considered as a recommendation to buy or sell. Nothing presented herein is intended to constitute investment advice and no investment decision should be made solely based on this information. Nothing presented should be construed as a recommendation to purchase or sell a particular type of security or follow any investment technique or strategy. Information presented herein reflects Impax Asset Management’s views at a particular time. Such views are subject to change at any point and Impax Asset Management shall not be obligated to provide any notice. Any forward-looking statements or forecasts are based on assumptions and actual results are expected to vary. While Impax Asset Management has used reasonable efforts to obtain information from reliable sources, we make no representations or warranties as to the accuracy, reliability or completeness of third-party information presented herein. No guarantee of investment performance is being provided and no inference to the contrary should be made.

Lisa Beauvilain

Global Head of Sustainability & Stewardship, Co-Head Sustainability Centre

Lisa co-heads the Impax Sustainability Centre. As the Global Head of Sustainability & Stewardship she is responsible for sustainability and stewardship in Impax’s investments and for the sustainability insights in the firm’s Beyond Financial Returns activities, such as product development and reporting. She co-chairs Impax’s Sustainability Lens committee and is a member of Impax’s Senior Leadership Team.

Lisa joined Impax in 2010. She started working in the financial industry in 1999 and previously worked as an executive director in the Investment Management Division of Goldman Sachs in London.

She is actively participating in industry working groups and advisory councils furthering sustainable practices in industry organisations such as the Glasgow Financial Alliance for Net Zero (GFANZ) and the International Corporate Governance Network (ICGN). She is a member of the Nominations Board of Kemira Oyj, Finland and a former Trustee of the International Institute of Environment and Development (IIED).

Lisa has an MSc in Environment and Development from the London School of Economics and an MSc in Finance from the Hanken School of Economics, Finland.

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Justin is a co-Portfolio Manager of the Impax Water and Sustainable Infrastructure strategies. Justin analyses businesses globally with a particular focus on water, other environmental markets, and sustainable infrastructure, across the industrials, utilities, and materials sectors.

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He holds a bachelor’s degree in Engineering from the University of Queensland and a master’s in commerce from the University of Sydney.

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Sjunde AP-fonden AP7 are a Swedish public pension fund with whom Impax has partnered since 2018 to investigate how best to assess, measure and report on water impact. The partnership between AP7 and Impax offers an investment practitioner’s perspective that will contribute to the investment industry’s understanding of water as a sustainability and impact topic.

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