3M (NYSE: MMM) and a Cautionary Tale of Ignoring ESG
Thirty billion dollars.
That’s how much 3M (NYSE: MMM) could lose as a result of litigation tied to environmental damage from some specific types of chemicals the company produces.
These chemicals are known as PFAS, or per- and polyfluoroalkyl substances. They’ve also been dubbed “forever chemicals” as they are incapable of decomposing.
PFAS chemicals are used primarily in cookware and fabrics. They’ve been associated with a variety of serious medical conditions, such as liver damage, thyroid disease, obesity, fertility issues, and cancer, and they’ve been detected in the blood of nearly every American as well as marine and land animals.
While no chemical company is immune from lawsuits, some are more exposed than others, and it is the fiduciaries' job to investigate this type of risk in an effort to provide proper risk assessments for investors.
Fiduciaries that don’t properly investigate such risks are not only incompetent but in many cases open themselves up to lawsuits.
In other words, this is serious stuff and not taken lightly by professionals.
Now, here’s the rub…
In the case of protecting investors from a $30 billion liability tied to environmental damage, a fiduciary must acknowledge environmental risk as a potential red flag.
And if you’re familiar with ESG investing, you know that the “E” stands for environmental.
Anti-ESG zealots are often critical of this strategy because they believe there is no intrinsic value in this type of analysis and that it is merely the result of “being woke.”
In 3M's case, ignoring environmental risk because one could consider it “woke” would be, for lack of a better word, stupid. Our analysts have traveled the world over, dedicated to finding the best and most profitable investments in the global energy markets. All you have to do to join our Energy and Capital investment community is sign up for the daily newsletter below.
Our analysts have traveled the world over, dedicated to finding the best and most profitable investments in the global energy markets. All you have to do to join our Energy and Capital investment community is sign up for the daily newsletter below.
To put this in perspective, 3M did $34 billion in sales in 2022. Its potential liability from the environmental damage tied to its chemicals is nearly 90% of its 2022 sales. And, of course, this doesn’t include what the company is paying in legal fees to fight these lawsuits.
Now, I’m not saying 3M is going to shit the bed, but its legal battles will weigh on its ability to grow profitability in any significant way this year and likely well into 2024. By how much is anyone’s guess, but the risk is real.
I don’t know about you, but I’m not a fan of risk, especially when there’s little in the way of reward.
That’s not to say you should avoid risk altogether.
It’s just that it should be carefully calculated and coupled with safe, income-generating investments in an effort to hedge against any potential downside.
To give you an example of what I mean, I’m quite bullish on one solar technology company that has built a special type of solar panel that can power an electric car — and not just for a few miles, either.
When integrated into the roof of an electric car, this particular solar panel can provide enough range to get more than 60% of the nation’s daily commuting public to and from work, every single day, without ever having to plug in.
Now, this particular stock offers a lot of bang for your buck, but it does carry some risk.
So along with this one, I’m also bullish on a company that builds and operates small power plants all over the world... and pays investors monthly income, with internal rates of return as high as 14%.
This is steady income generation, for as long as 20 years in some cases, and that steady income adds up fast.
For instance, consider this one solar project in Brazil that is delivering an estimated $403,000 in dividends in just 10 years:
As an Energy and Capital member, you can get access to this monthly income opportunity here.
Look, it’s all about balance.
You want some calculated risk along with safety and steady income.
It’s how the richest people in the world build their wealth, and it’s how I do too.
Jeff is the founder and managing editor of Green Chip Stocks. For more on Jeff, go to his editor's page.
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