A Swedish investor is pressing the world’s biggest drug companies to be transparent about their supply chains, after it alleged that some suppliers to those firms were dumping toxic waste into the environment.

Nordea Asset Management, the investment arm of the Nordic region’s largest bank, manages roughly $300 billion in investments, of which $6 billion is spread across Big Pharma companies. Last week it wrote to the 27 drug makers in which it is an investor demanding they publicly report who their suppliers are and how they monitor them.

The letters, seen by The Wall Street Journal, followed a Nordea-commissioned investigation last year, which tested water samples outside some Indian factories exporting drugs and drug ingredients. The samples were tainted with metals and industrial solvents associated with drug production, according to a copy of the investigation’s report seen by the Journal. Contaminated wastewater from the factories joined rivers and lakes feeding local villages, investigators said.

Nordea’s investigation covered seven plants, including two run by Pennsylvania-based Mylan NV and two run by an Indian company that counts Pfizer Inc. as a client. The Indian company has also supplied Takeda Pharmaceutical Ltd. and Novartis AG , according to Nordea. Nordea is an investor in Mylan, Pfizer, Takeda and Novartis.

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The fund said the lack of transparency in the supply chain meant it was unclear if the two plants operated by the Indian company had supplied Pfizer, Takeda or Novartis. Pfizer and Takeda wouldn’t say if those plants supplied them. Novartis didn’t respond to a request for comment.


A Mylan spokeswoman said Nordea’s report was “factually incorrect” and that the company planned to “vigorously challenge the findings.”

A spokesman for Takeda said: “We take the allegations made against some of our current suppliers very seriously and will be working as quickly as possible, both internally within our own teams, and with those companies mentioned in the report, to establish the facts.”

A spokeswoman for Pfizer said it was committed to operating its supply chain “in an environmentally responsible and safe manner.” She added that the company recently drove an Indian supplier to remove “non-hazardous waste materials from a vacant lot adjacent to the facility.”

The Bulk Drug Manufacturers Association of India responded to disagree with the findings on behalf of the three Indian companies whose five plants Nordea surveyed. It said their facilities “have been complying with all the regulatory requirements,” including disposing hazardous waste “in a responsible manner.”


India’s environment ministry didn’t immediately respond to request for comment.

In addition to testing water samples collected outside the factories, Nordea-commissioned investigators also collected, and tested, water samples from lakes and rivers near the facilities. Photo: Changing Markets

Nordea said its investigation was aimed at safeguarding its own interests. “The underlying objective is to make better investments,” said Sasja Beslik, Nordea’s head of sustainable finance. “The entire industry is sourcing from India. So, we need to know what is happening in India if we want to make better decisions,” he added.

Pharmaceutical companies have faced the heat over drug prices. Like tech companies and garment manufacturers, drug makers outsource production to a sprawling network of suppliers—many in poor countries, where oversight can be spotty and cost of production is low.

Executives at some big pharmaceutical companies acknowledge manufacturing oversight in India isn’t as stringent as in the West. Rather than sever ties, which they fear would place them at a cost disadvantage against rivals, companies work with suppliers to gradually raise standards, the executives say.


Other investors say they are concerned about potential drug supply chain risks. Helena Viñes Fiestas, head of sustainability research at BNP Paribas Asset Management, said the French asset manager last year asked its investee drug companies “more about supply chain management,” with the goal of benchmarking them based on their responses. Companies have “not yet given it the level of seriousness that it deserves” said Ms. Fiestas.

Some 80% of companies that make ingredients for drugs sold in the U.S. are based overseas, mainly in India and China, the U.S. Food and Drug Administration says.

India is also one of the biggest suppliers of inexpensive generics to the U.S. Roughly a quarter of the warning letters the FDA issued to factories for violating their so-called good manufacturing practises last year went to facilities in India, an FDA spokeswoman said.

Nordea’s Mr. Beslik last year commissioned a U.K.-based investigative agency, Ecostorm, and a nonprofit called Changing Markets to test water samples outside seven facilities in Hyderabad. The samples, collected in September, were tested at an Oregon-based laboratory, according to a copy of the investigation’s report. The lab tested for concentrations of metals such as arsenic and hexavalent chromium.


The investigation alleged the samples contained levels of metal and commonly used industrial solvents higher than the maximum exposure limits set by the Indian Bureau of Standards, the U.S. Environmental Protection Agency and the World Health Organization. The U.S. EPA classifies arsenic and hexavalent chromium as human carcinogens.

Samples collected outside the two Mylan plants tested positive for dangerously-high levels of hexavalent chromium, according to the investigation, which Mylan said “we don’t use or generate in our processes at these facilities.” Its spokeswoman said it uses its facilities in India “to supply to our internal network and to sell to third parties,” including the WHO.

Investors say it is unclear if Nordea’s investigation would prompt change. Ronnie Lim, who heads Asian investments for Robeco Institutional Asset Management B.V., a Dutch asset manager, says investors typically engage with companies invested in on such matters, rather than immediately divest.

The engagement route is “a slower process,” he said. But if companies are unwilling to change, that could negatively impact investor sentiment, and their stock, in the long-run, he said.

Write to Preetika Rana at preetika.rana@wsj.com