#2 Plastic waste
Plastic waste has become a serious threat to the ecosystem of the oceans and to mankind. More than 5.25 trillion pieces of plastic are floating around in the oceans, killing animals, polluting beaches and, ultimately, endangering human health. The issue of plastic waste is also of concern to the ESG Capital Markets & Stewardship team at Union Investment.
The ‘Great Pacific garbage patch’ between California and Hawaii is a collection of floating waste material. Primarily plastic. Around 80,000 tonnes of it swirls around in an area covering 1.6 million square metres, which is roughly four times the size of Germany. And that is only the tip of the trash-berg: every year, up to 13 million tonnes of plastic waste ends up in our oceans. “Unless there is a drastic change in our oblivious production and disposal of single-use plastic packaging, by 2050 there will be more plastic (by weight) than creatures living in the sea,” warns Duy Ton, a portfolio manager in the ESG Capital Markets & Stewardship team. Experts estimate that by 2025 there will be one tonne of plastic for every three tonnes of fish.
The World Bank is already warning of the risks in a report: if plastic waste is not properly collected and managed, our waters and ecosystems will be contaminated and harmed for centuries, if not millennia. From the perspective of a sustainable investor there is therefore an urgent need for action. Investments can be used to counteract the current trend in a variety of ways, including preventing the further accumulation of waste and reducing it through the use of alternative materials and better recycling systems.
The microplastic cycle
Thanks to their material properties, plastics actually offer many benefits. They are light, inexpensive, hygienic, and long-lasting. Their durability means they can be reused multiple times, but in practice this rarely happens. The recycling rates for plastic are still very low. In Europe, around 30 per cent of plastic waste is recycled, in China it is around 25 per cent and in the US just 9 per cent. However, experts reckon that around 95 per cent of plastic products are only used once and then thrown away.
There are several promising approaches for stemming the flood of plastic:
- Reduction of plastic waste: In the past, Europe has always exported the majority of its plastic waste to China but on 1 January 2018, China introduced tighter import restrictions for waste recycling and put an end to the trade in plastic waste. This step was instrumental in the decision of the European Parliament to vote in favour of the European Commission’s proposed ban on single-use plastic products. From 2021, certain products for which alternatives already exist will be banned. These include, for example, plastic cotton buds and disposable plates and cutlery. Notwithstanding this move by the EU, however, it is vital that companies and consumers reduce their reliance on plastics.
- Research into alternative materials: In order to halt the pollution of the oceans and the environment, biodegradable alternatives must be developed and used. There are already a number of promising approaches here. Companies that are already researching and developing sustainable solutions are of particular interest to sustainabilityoriented investors.
- Improving the recycling system: Recycling is also an investment issue. Plastic can be recycled and reused more times than virtually any other material. Improved recycling systems offer opportunities for reducing the number of single-use products. It is particularly important to make sure that the plastics are properly sorted to ensure the purity of the recycled materials. Some companies, such as Tomra, are well on their way to meeting this challenge. With the necessary incentive systems from the regulators, significant progress is possible in this area. This also includes a ban on landfill sites. In order to ensure that recycling systems are given more state support, it is important to put an end to the permanent storage or incineration of waste at dumps.
This issue was a key aspect of Union Investment’s engagement activities in 2018. Duy Ton discussed plastic waste with numerous companies in order to raise their awareness of the issue and press them to look for solutions. “We are seeing some companies looking into very promising alternatives, and some have even brought solutions to market already,” says Duy Ton. The Finnish company Stora Enso, one of the world’s largest forestry companies, specialises in the development and manufacture of packaging materials. The company is a major provider of solutions in the fight against plastic waste. Many of its products are biodegradable replacements for plastic packaging. One of its major challenges is to find alternatives for plastic bottles. The company is working on the development of a material made from wood fibre and starch that can match plastic in terms of weight, hygiene, looks and price.
The issue was also addressed at several AGMs, where Union Investment made use of its voting right to support promising initiatives. “At the McDonald´s AGM, we used our vote to call for greater transparency in the battle against plastic waste,” says Duy Ton. The fastfood giant signalled that it takes the issue of plastic waste seriously and promised that by 2025, ifferent types of packaging will be in use and packaging waste generally will be reduced. McDonald´s is focusing, in particular, on finding alternatives to plastic straws. Adidas, too, has launched a number of initiatives. For example, the company hopes to be using only recycled plastics by 2014. “I am confident that we are well on our way to stemming the tide of plastic waste. Solutions and new approaches will give rise to business models that are attractive to investors”, says Duy Ton.
In conversation with Vera Bürgi, Managing Director of OceanCare
To what extent is the pollution of the oceans with plastic waste also a risk to people?
Every year, around nine million tonnes of plastic waste ends up in our oceans. Countless marine creatures starve to death with bellies full of plastic, accumulate toxins in their bodies or become tangled up in plastic and drown. Plastic waste is a massive threat to the marine ecosystem. All life on Earth depends on the health of the oceans. And that includes human life.
What should investors do to help prevent the oceans from becoming choked with plastic?
Investors can get involved philanthropically and support organisations such as OceanCare. Our organisation sits on international committees and works to ensure that binding regulations for the production, disposal and classification of plastics are formulated and implemented. OceanCare also seeks to reduce individual plastic use by changing attitudes and raising awareness around the world about more responsible use of plastics. The United Nations’ sustainable development goals (SDG) offer companies an opportunity to make a commitment to the UN concerning their own individual contribution to reducing plastic. Plastic is a problem that affects us all. The only hope for improvement is if every part of society works to contain the ever-growing mountains of waste.
How are investors responding? Do you see any grounds for optimism?
According to scientific calculations, the global peak in plastic production has not yet been reached, which means that marine pollution will continue to increase. On the positive side, the problem has become the focus of public attention in recent years and people are genuinely concerned. The growing realisation of companies and investors that they have to live up to their corporate responsibility makes us optimistic. However, the extent of the plastic problem means that a lot more engagement is needed in this area. In any event, rapid and fundamental reorientation to create a genuine circular economy is required.
OceanCare is a non-governmental organisation based in Wädenswil, Switzerland. OceanCare works globally to protect the oceans and the creatures that live in them. Special Consultative Status on marine issues with the United Nations since 2011.
Sending a signal to investors
We live in a throwaway society. The use of plastics has increased ex- ponentially with global trade and online shopping. One example of this excess is the coffee-to-go culture. Around 40,000 tonnes of plastic waste is generated each year in Germany alone through the use of d isposable coffee cups.
We cannot go on like this! Policymakers are beginning to respond: At EU level the initiative to ban single-use products from the European Union by 2021 is an important step in the right direction. However, this agreement will only be effective if it is implemented at national level in the member states. The French energy transition law will ban all plastic disposable plates and cutlery from 2020, for example. The Federal Environment Ministry in Germany is relying on voluntary restrictions for now. So only time will tell whether the EU directive will have sufficient impact. One of the strictest plastic bans in the world is in place in Kenya, where the manufacture and import of plastic carrier bags has been a criminal offence since 2017. Overall, more and more countries are implementing measures to stem the rising tide of plastic waste. This is really encouraging and gives us hope. The political decisions send a signal to companies and investors. The course has been set and investors who are early to take a critical position against the use of plastics will not only find sufficiently attractive alternatives to invest in but will also minimise the risk of stranded assets, i.e. investments that lose their value if demand for plastics is curbed by regulation, for example.
Portfolio Manager in the Sustainability and Engagement Team at Union Investment
Unless otherwise noted, all Information and illustrations are as at 8 May 2019.