Plastic is a durable and versatile material that has transformed industries and delivered substantial societal benefits.
It will also play a role in the transition to a low carbon economy, for instance through ‘lightweighting’ in the transport sector – essentially, making vehicles less heavy by using lighter materials such as plastics.
Yet there is growing consumer awareness of how mountains of plastic waste have a damaging impact on biodiversity, and potentially human health. Policymakers are responding, and aspects of the industry may soon be exposed to significant disruption.
Hermes EOS has identified plastics as a key issue that illustrates the need to shift to a more circular economic model - one that captures material value rather than producing waste. How can investors play a positive role in transforming this complex system?
At present, the low price of virgin plastic is stunting innovation. However, growing consumer awareness of plastics pollution presents companies with investment opportunities, such as developing advanced recycling systems or using innovative materials.
Unfortunately, companies are still lagging behind regulators and consumer pressure groups on this issue. Hermes EOS is engaging with companies to encourage collaboration and has urged individual companies to step up and evaluate their approach to plastic.
Also, we have joined the PRI’s working group on plastics to foster a better understanding of the complexity of the issue in light of the evolving regulatory environment and the viability of alternatives.
We are an active member in other collaborative initiatives such as the Plastic Solutions Investor Alliance, led by non-profit foundation As You Sow. This brings together investors engaging with consumer goods companies on the threat posed by plastic pollution and the associated corporate brand risk. Initial engagements with several consumer goods companies have taken place.
We also joined an Investor Forum initiative focused on improving the handling of microplastic pellets or 'nurdles' in the plastics supply chain by engaging with standard-setting bodies.
Plastic pellet loss is a critical issue due to the small size of the particulates leaking into the marine environment and entering the food chain. We have co-signed investor letters as part of a PRI initiative to tackle the issue.
This encourages companies to commit to zero pellet loss within their own operations and those of their supply chain and to disclose their progress. Plastic producers, plastics packaging manufacturers, transport and logistics companies, retailers and consumer goods companies are all being targeted.
Hermes EOS is also encouraging companies to join the Ellen MacArthur Foundation’s New Plastics Economy Global Commitment, set up in 2018. This aims to eliminate plastic waste and pollution at its source and has been signed by over 250 businesses, governments and other organisations, including companies that together account for 20% of all plastic packaging produced worldwide.
Identifying and monitoring plastics pollution is only the first step on the road to getting companies to address this issue - now it is time for concrete commitments.
This is the second part of a two-part blog on plastics. Click here to catch up on the first part.