Fund managers go to war on plastic waste
Investment groups to challenge companies over packaging and recycling standards Plastic waste in the sea. Some has been found 11km down in the Pacific Ocean
Public awareness of the damage to the world’s oceans and marine environment due to the scourge of plastic waste has soared after David Attenborough’s Blue Planet II television documentary series. Sensing this changing attitude, fund managers have started to take action.
Just last week, it was reported that plastic waste had been discovered at the bottom of the Mariana Trench, nearly 11km below the surface of the Pacific Ocean. The first global analysis, published in 2017, estimated that 8.3bn tonnes of plastics has been produced since the industry began to expand after the second world war.
About four-fifths has been dumped as waste, while just 9 per cent has been recycled. About 12bn tonnes of plastic waste will end up in landfills or the natural environment by 2050 if current production and waste management trends continue, according to academics at the University of California, University of Georgia and the Sea Education Association in Massachusetts.
Investment managers have started to respond to public concern, challenging packaging, consumer and chemical companies on the production and use of plastic as well as stepping up support for recycling and utility companies that deal directly with the problems caused by plastic waste.
BMO Global engaged with 27 companies last year on plastic waste, the first concerted effort by the $240bn asset management arm of Bank of Montreal to address the problem.
BMO asked the companies to reduce the amount of unnecessary single-use plastic, improve the recyclability of plastic and to redesign packaging to reduce waste. It plans to extend its engagements on plastic waste beyond food, beverage and consumer staples producers to companies operating in the household and personal care sectors.
BMO believes that companies will in time have to disclose their entire plastic “footprint” in a similar fashion to carbon footprint reports that provide details of greenhouse gas emissions across an entire organisation.
“Plastic waste is a business risk that companies know they will have to address rapidly. We want to see commitments where they don’t exist already, but now implementation is key,” says Alice Evans, co-head of the responsible investment team at BMO GAM. Schroders, the £421bn London-listed asset manager, encountered a lack of data when it began to examine plastics in 2018.
This encouraged it to send questionnaires to about 100 companies globally across the packaging, food and beverage, chemicals, waste and recycling sectors. “There was a real dearth of information on the variety of plastics used, the volume of plastics used in packaging, and the use of recycled materials.
This makes comparisons between companies in the same sectors problematic,” says Seema Suchak, a sustainable investment analyst at Schroders. Changes in regulations, such as China’s decision in early 2018 to stop importing waste plastic, have helped to raise investor awareness, says Ms Suchak.
“Investors know plastic waste is not a theme that is going away. They see bans on plastic bags being introduced all over the world,” she says. MSCI, the index and data analytics provider, hosted a client meeting in London this month to discuss the issue of plastics and plans to hold similar events in Paris and Frankfurt later this year.
“Virtually no one was talking about the risks of plastic waste just a few years ago but that is changing very rapidly now,” said Sam Block, a senior ESG researcher at MSCI. “We are measuring the share of company revenues associated with plastics across the packaging, consumer goods and chemicals sectors.
We also assess how these companies deal with the risks. Changes in regulations could require companies to reformulate plastic products or even lead them to being shut out of market. Disclosure standards do vary so we have also been using alternative data sources to help refine our model,” said Mr Block.
The discovery of more than 400m pieces of plastic debris on the coastline of the remote Cocos (Keeling) Islands has provided more shocking evidence of the scale of the waste problem. Hugely ambitious targets to reduce plastic waste by 2025 have been drawn up by the Ellen MacArthur Foundation, founded by the former round the world sailor, in collaboration with UN Environment Programme.
This initiative has drawn support from 16 governments, 26 financial institutions and more than 150 companies that produce or consume plastic packaging. The signatories have pledged to eliminate unnecessary plastic and to ensure that remaining plastics are designed to be safely reused, recycled or composted.
Signatories from the consumer goods sector include Coca-Cola, Nestlé, PepsiCo, Unilever, L’Oréal and Mars. As part of this initiative, six boutique investment companies have pledged to invest a total $275m towards addressing the problems of plastic waste. The investors include Fifth Season Ventures, Closed Loop Partners, Creolus and Ultra Capital.
However, no well-known asset management company has signed up yet. Their absence reflects doubts about the scale of the commitments needed to meet the foundation’s ambition to ensure that plastics never become waste, according to a fund manager who did not want to be named.
Efforts by governments to improve plastic recycling are accelerating. The Scottish government announced this month that it planned to create the UK’s first deposit return scheme for plastic bottles, which aims to capture 90 per cent of drinks containers for recycling within three years.
Maxime Le Floch, an analyst on the £179.4m Impact Opportunities fund run by Hermes, the London-based asset manager, says: “The issue has been that plastic waste was not collected, but there are companies such as Tomra of Norway that can provide solutions to this problem that also offer a compelling investment thesis.”
Tomra specialises in reverse vending machines, which are already used in 60 countries to collect used plastic drink containers. Hopes are also growing that chemicals companies will develop compostable, bio-based plastics that can replace some conventional plastics.
“Bioplastics have their flaws as they can be more expensive to make and are not yet available in large quantities. Improvements in cellulose conversion technology should enhance the quality, quantity and cost of bioplastics,” says Ms Suchak. Bioplastics also present significant problems.
Increased production could lead to higher demand for arable land needed for food production. Carbon emissions from biodegradable plastics could also contribute to climate change. Mr Le Floch says tackling plastic waste requires a multi-dimensional approach.
“Bioplastics may look like a good alternative but if they lead to an increase in land use against forests or competing with food crops, then they may not be an appropriate substitute for conventional plastics,” he says. “The issue of plastic waste cannot be looked at just in isolation as the impact of alternatives, such as bioplastics, on the wider environment also needs to be considered.”
Where is the useless billionaire Warren Buffet in all this? As a major shareholder in Coke is this 88 year “genius” content to let the oceans be swamped in his company’s waste, whilst he revels in his wealth and the planet rots? Thought so… enjoy your McDonalds breakfast and your Diet Coke whilst the companies you support destroy our children’s future and the eco system! Do pontificate more on your investment brilliance because that will save endangered species and the environment. What a fraud.
It is possible to recycle plastic, and household waste in general, to new materials at reasonable cost. Look at technology developed by Enerkem of Canada. It requires public-private collaboration to deploy these technologies.
Over 180 countries have agreed to address the problem in a UN lead accord agreed in Basel as usual the polluter in chief refuses to co-operate. https://www.usnews.com/news/world/articles/2019-05-10/un-plastic-waste-pact-approved-with-us-among-few-holdouts.
Packaging is too important to marketing (conning people) for private companies to stop generating megatons of plastic of their own accord. How do you successfully sell a few ounces of some substandard industrial foodstuff without pimping it up (and increasing its apparent size) using colorful and structurally clever packaging, a lot of which is plastic? Look at cheese puffs, for example.
The manufacturer has already made the things as insubstantial and full of air as possible, then puts a small handful in an oversized, colorful plastic bag, then pumps the bag two thirds full of air and seals it. Do you think anyone would pay $1.39 for a handful of lab-flavored and -colored aerated corn pulp if it weren’t disguised in eye-catching plastic packaging?
Two excellent reasons to ‘legislate’ against such products then. Unhealthy (virtually zero nutritive value = empty calories + excessive salt) and a hugely polluting supply chain. The only reason such products exist seems to be as a way of ‘disposing’ of excess maize production into the human herd. ‘Disposing’ as animal feed won’t have nearly the same margins.
I agree with you in spirit. Not sure if you can (or should want to) outlaw cheese puffs or other junk food; but, we should require simpler, biodegradable packaging wherever possible.
Some myths for you… https://www.dailymail.co.uk/news/article-5910011/Plastic-bag-ban-criticised-90-cent-plastic-waste-comes-rivers-Asia-Africa.html
The waste in the Ocean is not a European/North/South American problem. The correct way for the investment management community to frame this is to invest in waste mgt in Asia.
Recycling is a pipe dream… there is no recognized standard even in the UK there are >20 different standards. Oh and by the way we have shifted our waste from China to Malaysia, Vietnam and other small Asian countries article in FT a few months ago. Ask yourself why are the O&G so happy to see Recycling on the agenda? because hardly any plastic can be recycled back to its virgin state, if it can the standard fresh plastic is much cheaper.
There is however a BioPlastic which can be recycled back to its virgin state and does not pollute the environment, in fact, a study by Plymouth University has shown that it will break down in the ocean as well. And it can be produced very efficiently and in some situations with no Carbon footprint.
If a rich north-western country found a cost effective way to manage plastic waste, would it trickle down to Asian countries? If EU/US exports its plastic to Asian counties who dump it in the sea, is it truly an Asian problem, or a global problem?
There is no way of recycling plastic economically due to inks in labels, mixed plastic used in packaging and other contamination The Swiss forbid landfill and exporting waste, in fact they import solid municipal waste and incinerate the waste to produce heat for heating and cooling and to generate electricity.
If they had bought oil to generate the same energy it would have cost $ 150 million. Holland Denmark Sweden Noway Finland Singapore Germany Belgium Japan….. do the same….. the incineration is in the cities so you waste no money transporting and handling garbage. New York sends its garbage between 600miles and 7000 miles away wasting $1.5 billion in the process instead of solving the problem AT HOME.