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Companies fail to apprise investors of potential nanotechnology risks
(Nanowerk Spotlight) Following just two days after we wrote about the food industry's deafening silence on their nanotechnology research and development (Food nanotechnology - how the industry is blowing it), the Investor Environmental Health Network today released a report that demonstrates that sectors affected by product toxicity risks are doing a poor job of informing shareholders of market risks they face due to toxic chemicals in their products. The report specifically addresses the situation for companies dealing with nanomaterials by noting that manufacturers are not disclosing the evidence of health risks of nanotechnology products, nor the lack of adequate product testing prior to their sales.
An interesting observation is that some nanomaterial manufacturers are more open to communicating potential uncertainties than their customers. These customers of the nanomaterials are the manufacturers of an array of products from electronics to food and cosmetics - and they tend not to disclose the potential health and financial risks. IEHN's conclusion is that investors should be apprised of the state of the science by a company, instead of being misled to believe that the serious questions have been answered.
The Investor Environmental Health Network (IEHN) is a collaboration of investment managers with more than $41 billion in assets. For their report, titled "Toxic Stock Syndrome: How Corporate Financial Reports Fail to Apprise Investors of the Risks of Product Recalls and Toxic Liabilities" (pdf download, 1.7 MB), they reviewed thousands of SEC filings and analyzed 25 individual company annual reports for 2006 and 2007. Not limited to nanotechnology, the report examines disclosures on supply chain weaknesses before and after the 2007 toy recalls due to lead paint, on scientific studies showing products causing asthma, and on the new European chemical regulatory program, REACH (Registration, Evaluation, Authorization and Restriction of Chemicals).
In its section on nanotechnology and nanomaterials, the IEHN authors extensively quote from a widely circulated 2004 Swiss Re report "Nanotechnology - Small matter, many unknowns". One key quote addresses the fact that professional risk assessors already recognize the inherent danger in fast-emerging technologies such as nanotechnology, where risks and liabilities are not immediately apparent:
"Risks arising out of the introduction of new products or innovative technologies need not reveal themselves immediately and may occur after an interval of years. Nanotechnology is set to spread to such a wide range of industries and in such a large number of applications and at such speed, that the individual claims conceivable on the basis of experience and resulting from defects can hardly expect to be long delayed. Things will become critical if systemic defects only emerge over time, or if a systematic change in behavior remains undetected for a long time. In that case, an unforeseeably large loss potential could accumulate, for example, in the field of health impairment."
Confirming what we have written in the past here at Nanowerk regarding certain industry sectors' (food, cosmetics), shall we say – "reluctance" to share information about their products' nanomaterial ingredients, the authors write that "in general we observed that some of the specialists in the manufacture of nanotechnology products tended to engage in broader disclosure of potential health risks than those using nanotechnology as part of established consumer product lines."
Some companies address potential nanotechnology risks
The report specifically mentions nanomaterial and equipment manufacturers like Arrowhead Research Corporation, Luna Innovations, Nano-Proprietary Inc., and CVD Equipment Corp. as addressing potential health and safety concerns about their nanomaterials in their communication to the public.
Arrowhead is quoted as disclosing that "nanotechnology-enabled products, such as those used in our chemical detection technologies, are new and may be viewed as being harmful to human health or the environment...Because of the size, shape or composition of the nanostructures or because they may contain harmful elements, nanotechnology-enabled products could pose a safety risk to human health or the environment. The regulation and limitation of the kinds of materials used in or to develop nanotechnology enabled products, or the regulation of the products themselves, could harm the commercialization of nanotechnology-enabled products and impair our ability to achieve revenue from the license of nanotechnology applications." The firm also discusses health risk concerns surrounding nanotechnology, and how these could affect market value.
Luna Innovations acknowledges the limited safety record of nanomaterials, and foresees federal regulations surrounding nanotechnology. In an August 2007 quarterly report, the company states: "Our nanotechnology-enabled products are new and may be, or may be perceived as being, harmful to human health or the environment. While none of our current products are known by us to be hazardous or subject to environmental regulation, it is possible our current or future products, particularly carbon-based nanomaterials, may become subject to environmental regulation."
Nano-Proprietary Inc., a company that focuses on carbon nanotube applications, makes a similar prediction of future regulations on nanotechnology in its 2007 10-K: "Products using our technology will be subject to extensive government regulation in the United States and in other countries...We do not believe that carbon nanotube field emission products will present any significant occupational risks to the operators of such equipment...Nevertheless, OSHA, the EPA, the CDRH and other governmental agencies, both in the United States and in foreign countries, may adopt additional rules and regulations that may affect us and products using our technology."
IEHN quotes CVD Equipment Corp. as going the furthest of any company in acknowledging the concerns about its nanotubes products: "The health and environmental effects of nanotechnology are unknown, and this uncertainty could adversely affect the expansion of our business...There is no scientific agreement on the health effects of nanomaterials in general and carbon nanotubes, in particular, but some scientists believe that in some cases, nanomaterials may be hazardous to an individual?s health or to the environment...Since part of our growth strategy is based on sales of research equipment for the production of carbon nanotubes and the sale of such materials, the determination that these materials are harmful could adversely affect the expansion of our business."
Some companies don't
The IEHN authors point out that carbon nanotubes are an example of a nanotechnology that may have some of the most serious risks, and manufacturers are making some vague references to potential health concerns and regulatory risks. In contrast "our review of SEC filings showed that the users who add these substances to their products are making few if any disclosures of the uses, the potential health risks based on their structures, and the financial risks to user companies."
NaturalNano Inc. is quoted as talking at length about its use of nanotubes technologies in health and beauty products and clothing, without flagging the health risk concerns relative to nanotubes.
Another example listed is Procter & Gamble whose website includes a discussion of nanotechnology in its research and development section. "The summary on the website focuses on the documented safety of ultrafine metal oxides used in sunscreens, implying that nanoscale products should be equally safe, although ultrafine particles are generally much larger than nanoscale particles. P&G concludes, 'With a long history of safe use in FDA-regulated products and a demonstrated lack of dermal absorption, there is extensive confirmatory evidence that nanoscale zinc oxide and titanium dioxide may be safely used in cosmetics and OTC drug products'."
IEHN writes that the cosmetics company Avon has made similar claims of product safety. In its spring 2008 statement in opposition to a shareholder resolution requesting a report on Avon?s policies on nanomaterials product safety, the company broadly asserts in the proxy that these materials are safe. "Avon?s evaluation included a specific assessment of the potential for nano-sized particles of these materials to be absorbed through the skin (several scientific studies have demonstrated that nano-sized titanium dioxide and zinc oxide do not penetrate the skin). In the opinion of Avon?s scientists (toxicologists and other safety professionals) each of these materials can be used safely in cosmetic products."
IEHN says that neither Avon nor Procter & Gamble gives a balanced presentation of the scientific concerns about nanoparticles. "Some recent research on sunscreen ingredients in humans supports Avon?s and Procter & Gamble?s safety claim that the nanoparticles in sunscreen do not penetrate the skin, but others question whether testing is thorough enough to determine safety."
The report goes on to list several uncertainties concerning safety of the nanoparticles used in sunscreens and the concludes: "Users of the sunscreen nanoparticles such as Avon and Procter & Gamble may be prematurely asserting safety, and neglecting to present a balanced picture of the limitations of testing conducted to date. Untested variables could influence the ability for nanoparticles to penetrate the skin or otherwise enter the body, including incidental consumption of the particles applied to the face, via the mouth."
The report concludes with recommendations to companies, investors, and the SEC, including the following:
  • Companies should provide to shareholders additional information on chemical supply chain issues, including sources of materials, risk areas, and control systems.
  • Investors should press for better disclosure from companies, through direct correspondence and support of shareholder resolutions seeking such disclosure.
  • The SEC should issue new guidance to companies requiring them to more specifically report their product lines vulnerable to Europe's REACH regulation and should report more fully on credible adverse scientific findings that may impact the company.
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    Michael Berger By – Michael is author of three books by the Royal Society of Chemistry:
    Nano-Society: Pushing the Boundaries of Technology,
    Nanotechnology: The Future is Tiny, and
    Nanoengineering: The Skills and Tools Making Technology Invisible
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