Plastic-free investing

One million plastic bottles are bought every minute globally. In Europe, a total 58 million tonnes of plastic is used each year – 40% of which is packing. But only 30% is recycled. Indeed, since the invention of plastic, some nine billion tonnes have been produced globally, but almost seven billion has become waste.

As Neil Goddin, a fund manager at Kames, pointed out – and as evidenced in the BBC documentary ‘War on Plastics’ - “We can’t continue to export this problem.” We’ve been shipping our waste to Asia for years, but while we may be diligently recycling our plastic for roadside collection, if it ends up as landfill, or burning rubbish in Thailand, it’s a literal waste of time!

So I thought I’d try to do my bit last month and attempted ‘plastic-free July’. It was challenging to say the least. While small changes could be made relatively easily, the weekly food shop was impossible. I avoided quite a bit of plastic packaging by walking to the local market to get fruit and veg, but sourcing most other plastic-free food items proved either too time consuming, too expensive, or there was no other alternative.

Plastic is simply everywhere and we literally consume it by the tonne. A recent world-first pilot study examined stool samples of eight people from around the world. It found that every single sample contained micro plastics. This is hardly surprising when scientists have found plastic in a variety of food ranging from fish, to honey and 83% of tap water worldwide contains microplastics.

Awareness of the problem has increased rapidly in the past 12 months or so. People want to do more, and some governments too – India, for example, has banned all single-use plastics by 2022.

The likes of Carrefour, Colgate-Palmolive, Nestle, Coca-Cola and Unilever are publicly disclosing annual plastic packaging volumes and are committed to increasing their recycled content. Some major UK supermarkets are introducing Tomra reverse vending machines. But what other initiatives are there?

I decided to ask the people who know best – the ethical fund managers looking to invest in companies that act responsibly.

Aberdeen Standard Investments (ASI)

ASI conducts an annual survey of investors to ask them what ‘ethical’ means to them and what issues are front of mind when it comes to responsible investing. The most recent survey revealed that investors are indeed concerned about plastics. So ASI has started to factor in these considerations when making investment decisions.

ASI said: “Traditional plastic is, unfortunately, more efficient than many of its bio-plastic counterparts. It's light, low-cost and great at protecting food and products. Biodegradable and compostable plastics are more sustainable, but they're also more expensive. The bottom line is that customers are often unwilling to pay more.

“Because plastic alternatives are off to a somewhat slow start, there is renewed interest in recycling efforts. And, over time, as companies continue to address the problems of global reliance on single-use plastic, there will be new risks and opportunities.”

ASI gave an example of its engagement with Starbucks. The group launched its greener cup initiative and promotes (with customer discounts) the use of reuseable cups. This is good. But in terms of scaling back on plastics, it has missed targets set in 2015. Starbucks had aimed to reduce plastic by 25%, but only managed 1.4%. It has since reset this at a lower target, which ASI says is disappointing, but at least shows they are still committed to some reduction. ASI is currently engaging with them more about eradicating ‘non-essential’ items like plastic stirrers.

EdenTree

Edentree is part of the ‘Plastic Solutions Investors Alliance’ and pointed out that governments do not target industries in the same way. While building and construction used 72 million tonnes of plastic in 2015, the average time those plastics are used before being discarded is 35 years. Compare this with 65 million tonnes for textiles, that are only used for 5 years, or 161 million tonnes for packaging that is used for less than six months, and you can see why there are ‘priorities’.

Esme van Herwijnen, a Responsible Investment Analyst at the company, told us:“We believe retailers have an extended responsibility to the packaging that they put out on the market, which is why at the beginning of this year we engaged with our holdings Tesco, Sainsbury's, M&S and Morrison's to understand what they are doing to address the plastic packaging challenge.

“It is encouraging that all four of these UK supermarkets have signed up to the UK plastic pact and have set ambitious targets to ensure packaging is fully recyclable or compostable by 2025, and also to increase the use of recycled materials in their packaging.

“We believe however, that more progress is needed to meet the targets which will require collaboration within the sector, as well as working in partnership with other stakeholders including the waste management sector and customers.”

Stewart Investors

Stewart Investors recently decided to take a more strategic approach to engagement with companies and identified three priorities across all portfolios, one of which was pollution and a focus on plastics and packaging.

At the end of 2018, the fund manager launched two new collaborative initiatives one of which is focused on tackling plastic pellet loss throughout supply chains. Plastic pellets, flakes and powders (referred to collectively as pellets) are the raw materials and building blocks of the plastic industry. They are also the second largest direct source of marine micro-plastic pollution, with over 200,000 tonnes entering the ocean each year.

“We chose this topic for two reasons,” they told us. “ First, it is a problem with a simple, albeit not easy, solution; namely eradicate spillages! Second, our belief is that large, daunting challenges such as climate change, plastic waste and poverty alleviation are best addressed by tackling small, discrete, manageable parts of the broader problem. As such, this specific initiative compliments the broader work going on more generally on plastic pollution.

“Our aim with this initiative is twofold. The first is to raise awareness of the topic with companies who are perhaps less familiar with it. The second is to see if we can inspire a small number of companies to take the lead and get involved themselves directly in the development of industry standards that allow companies to manage and report on pellet loss effectively.”

While the plastic problem is ongoing for the foreseeable future, it presents opportunity - and necessity - to innovate. As ASI concluded: “It is a rare and exciting circumstance to have such momentum to address an environmental problem, that also provides clear opportunities for industry.”

Past performance is not a reliable guide to future returns. You may not get back the amount originally invested, and tax rules can change over time. The views expressed are those of the author and individuals quoted and do not constitute financial advice. All information as at July 2019.