A circular economy for plastics

The backlash against plastic is building momentum; plastic waste and pollution present an ever-evolving, systemic risk for investors. The need for change we recently covered, with some recommendations for fund managers. In a nutshell; at current rates, by 2050 the world’s oceans may contain more plastic than fish, and more than 99% of seabirds will have ingested plastic.

The topic has been thrown into the spotlight in the UK as the government has once again delayed the introduction of a nationwide DRS (deposit return scheme). As part of these schemes, customers are required to pay a small deposit when purchasing drinks, which is then refunded on return of the drinks packaging for recycling through a verified channel.

Scotland’s Deposit Return Scheme goes live in August, but following a string of delays DEFRA has confirmed that England, Wales and Northern Ireland will have to wait until 2025. 

As noted in the government’s consultation response, many countries (including Germany, Finland and Norway) have successfully used DRS to increase recycling rates of drinks containers, with well-functioning schemes achieving collection targets of 90% or higher. The consultation confirmed widespread support for a DRS, with 83% of respondents saying they would be in favour of it. 

Reduce, reuse, recycle

But the news isn’t all good. As well as concern about the delay, environmental groups have  expressed disappointment at the likelihood glass bottles will be omitted from the scheme in England and Northern Ireland. There is a missed opportunity to scale glass reuse systems where bottles are washed and refilled, rather than recycled.

The scale of the government’s proposals seems at odds with core circular economy principles. Refillable PET bottles can be reused up to 15 times, and refillable glass bottles around 25 times before the need for recycling, keeping valuable resources in the production cycle for a longer time. To refill and reuse would avoid necessitating any additional resources required for recycling. 

Tracking progress

Investors have a crucial role to play in addressing the plastic waste crisis. As well as supporting alternatives, asset managers should engage with companies to help progress a more sustainable circular economy for plastics. Investing in plastics can provide lucrative opportunities for asset managers, however the industry faces risks due to increasing regulations aimed at curbing plastic pollution. Nevertheless, there is a range of innovative companies that are proactively tackling this issue and may offer strong returns if managed correctly. 

Using an engagement tracker, like SI Engage, makes it easier for you to ask your portfolio companies the right questions and report on outcomes, in adherence with the UK Stewardship Code.

SI Engage offers powerful visualisations and insights tailored to various stakeholders, enabling you to gain a deeper understanding of the effects from investments. Additionally, it equips users with abilities for identifying trends and patterns that meet regulatory standards.

Environmental crises and changing consumer preference mean plastic waste is not a theme that’s going away. Get in touch to find out SI Engage can help you manage your portfolio engagements and drive positive change today!

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