We use cookies to improve your experience on our website.  By continuing you are agreeing to our cookie policy.

 
 

Sign up for our free newsletter to stay up to date with EdenTree:

Responsible investing in a plastic age

By Esmé van Herwijnen, Responsible Investment Analyst
Share this insight:

In the UK, the recent Blue Planet 2 documentary series became the most watched TV show of 2017, alerting over 14 million viewers to the challenges our oceans are facing, including reef bleaching, overfishing and noise pollution. The most shocking of all was the harm humans are doing to marine ecosystems, where plastic pollution has become a serious threat to underwater life which the United Nations have called “irreparable damage.”

Although plastic has been around for barely a century, it has rapidly taken over every aspect of our lives. Over 8 billion tonnes have been produced since it was invented and only a fraction has been recycled.1 Only 14% of plastic packaging is collected for recycling and according to the Ellen MacArthur Foundation, 32% of plastic packaging escapes collection systems altogether, leaking into the environment.2 One of the advantages of plastics is that it is durable and designed to last a long time, however that also means much of the plastic that has ever been produced is still in existence. The “great pacific garbage patch” floating in the middle of the Pacific Ocean has become a well-known sight, to such an extent that a petition was launched to recognise it as a country. However much of the plastic debris is less visible and can be found suspended throughout our seas and oceans as microplastics. Plastic pollution harms marine life in many ways. Plastic particles get mistaken for food by some species and increase toxicity in the food chain. Animals get trapped and strangled in plastic packaging and birds have been found dead with their stomachs full of plastic waste. Plastic is eponymous and plastic waste has been found on the shores of uninhabited islands.

This is not an easy issue to solve and will likely require action from a wide number of different angles. Single use plastics need to be reduced and the most harmful forms of plastics should be banned - as some countries including the UK have already done, by interdicting the use of microbeads in cosmetics and other hygiene products. Using less plastic will not be sufficient on its own, so we also need to manage our waste better. China recently announced it will no longer accept recyclable waste from other countries, which means we urgently need to find alternative solutions for dealing with our plastic waste. Collection, separation and recycling infrastructure need to be improved, not just in the UK but also in other parts of the world, especially in markets where waste management is less advanced. Globally only 65% of the urban population is served by municipal waste collection.3 Waste management, collection and transport will need to adapt. An obvious way to reduce plastic pollution however is to change the packaging that is brought to market and redesign it for reuse and recyclability rather than for single use and throw away.

So why does it matter to investors and what can shareholders do about this? As plastic pollution increases and affects natural capital, it bears a significant cost to the economy. According to the United Nations, plastic pollution is estimated to have a yearly financial damage of at least USD 13 billion.4 Various industries benefiting from the ocean’s ecosystem services bear this cost, including tourism, fisheries, businesses and marine life. This year’s World Economic Forum once again highlighted the dangerous impact of human activity on the environment in its Global Risks Report 2018.  Biodiversity loss and ecosystem collapse also featured among the top 10 risks with the biggest impact and likelihood. For companies it also makes sense from a business perspective to find innovative solutions and reduce resource costs. For plastics, being able to recycle existing materials from waste streams with the right process would be beneficial in terms of costs and also reducing exposure to a volatile oil price – the benefits of recycling should be seen not just as altruistically, but as an economic incentive. Recyclable plastics are too valuable to be sent to landfill, instead finding a new use as part of a circular approach, will help reduce environmental impact whilst reducing costs too.

Ultimately this is a human health issue as toxic pollutants enter the food chain. The risks will accumulate in our bodies as microplastics ingested by fish end up on our plates and flow through our taps. More than 80 percent of water samples collected on five continents showed a presence of plastic particles.5

Businesses should think about their dependency on plastic as well as the impact their plastic packaging has on the environment. Responsible investors who take environmental issues into account should integrate plastic waste into the wider array of environmental concerns. At EdenTree, one of the pillars of our Amity positive screening criteria is environmental management. We look at a broad range of environmental issues that are relevant to a company’s operations including climate change and emissions as well as water, waste and energy management. We equally assess a company’s ability to make sustainable products and avoid resource depletion and pollution. The positive screening can therefore act as a brake on investment and where companies do not meet our strict criteria, we will be unable to invest. This leads to our funds having no direct exposure to oil, gas and mining and we also apply a clear ban on companies involved in Arctic drilling and oil sands.  

At EdenTree we have long acknowledged plastic as an important ecological issue, but there has been no viable investor coalition around it until very recently. As part of our analysis we consider manufacturing, use and ultimate disposability and will discuss this with companies. Conversations with companies would be around the traditional streams of reduce, reuse and recycle. The anticipated investor coalition is to be focused on engagement with leading retailers and hospitality companies around alternatives to plastic, and this will fulfil a long held wish by us to see investors take action to address public and societal concerns.

We believe that the way we engage with businesses enables us to make sound, responsible investment decisions and act as a catalyst for change. We form constructive relationships with the companies we are considering investing in and continue to engage with them after we have invested as part of our monitoring program. Responsible investors can be effective in addressing various environmental, social and governance (ESG) risks with the companies they invest in and changing corporations for the better. For example, shareholders have contributed powerfully to putting climate change on boards’ agendas, encouraging companies to explore the benefits of diversity and urging companies to assess working conditions in their supply chain. As new ESG issues such as plastics emerge, shareholders should continue to use their voice to influence business and address some of the challenges our economy faces.

The responsible investment market keeps growing, both in terms of assets under management as well as the ever expanding range of different responsible investment labelled products. Whether the goal is to invest in line with your values, to steer clear of investing in harmful companies, to avoid certain risks or to achieve stable returns, there are many compelling reasons to invest in a responsible manner.


1 http://www.bbc.co.uk/news/science-environment-42264788
2 WEF, Ellen MacArthur Foundation and McKinsey & Company, The New Plastics Economy — Rethinking the future of plastics
3 https://sustainabledevelopment.un.org/sdg11
4 https://www.theoceancleanup.com/about/
5 https://orbmedia.org/stories/Invisibles_plastics

 

EdenTree Investment Management Limited (EdenTree) Reg. No. 2519319. Registered in England at Beaufort House, Brunswick Road, Gloucester, GL1 1JZ, UK. EdenTree is authorised and regulated by the Financial Conduct Authority and is a member of the Investment Association.