Opinion: Can investors stop fuelling the plastic crisis?
By Arthur van Mansveld, senior engagement specialist at Achmea Investment Management (Achmea IM)
Ending the plastic crisis we face immediately may be difficult, but investors can help redirect its course and constrain it fundamentally. Plastic pollution impacts land and sea and threatens biodiversity as well as human health.
Plastic waste is expected to triple worldwide by 2060, according to a 2022 report by the OECD¹. And leakage of such waste to the environment is expected to double to ca. 44 million tonnes per year. These figures reflect that plastic-related investments by financial institutions are exposed to rising risks. These risks are by no means priced in, warns a recent Planet Tracker report².
The external costs of plastic production are estimated to amount to $350 billion per year; when calculating these for carbon emissions, ocean pollution, waste collection, and public health. An increasing number of reports show evidence of how plastic waste and microplastics are present in seafood and even in the human body³. In short, plastic risks include regulatory, reputational and more and more plastic-related litigation risks, which all may have a significant financial impact on companies and their investors. It should be a serious concern for financial institutions that these risks are not priced in.
Creating system change
To stop fuelling the plastic crisis, investors need to think, act and engage in a systemic way to help bring the systemic change we need. This includes halting the growth of the ‘linear’ single use plastics, and shifting to circular business models including the use of sustainable materials. To facilitate, and accelerate this shift, we need regulatory frameworks that align financial flows with the overall goal of reducing plastic waste.
Fortunately, the UN has started drafting a United Nations Treaty on plastic pollution (plastics treaty). The next round of negotiations on this treaty is in November, in Nairobi, Kenia. And the treaty should be ready by end of 2024. Globally, we see that more regulation of single-use plastics and packaging is being introduced. However, so far, this is nowhere near enough to bring the systemic change we need. An ambitious Plastics Treaty is essential, to set the bar for national regulation.
Turn off the tap
A value chain approach, applying systemic thinking, is central to solving the crisis. UNEP recently published the report ‘Turning off the tap’⁴, which provides input for the UN plastic treaty, and lays out ways how to end plastic pollution. The report offers insightful guidance for businesses and investors how to align their efforts, set ambitious targets and coordinate their work towards plastic solutions.
But while the report suggests mostly ‘midstream’ and circular economy solutions, ‘reuse, recycle, reorient and diversify’, it unfortunately does not sufficiently address the ‘upstream’ part of companies’ value chains. It lacks a clear scenario for how investors can stop fuelling the plastic crisis at the source, where oil and gas majors are extracting and drilling for fossil fuels used in plastic production. As oil and gas majors hope to replace reduced fuel demand with booming plastics demand, this is where investors should focus more, to stop fuelling the plastics crisis. With adequate fiscal measures, governments can speed up this process, providing the financial incentives that drive financial flows in the direction of sustainable solutions.
Aligning financial flows
The concept of aligning all financial flows, public and private, with the UN plastic treaty’s overarching objective is a crucial element. This point was also stressed in a recent paper by the ‘Finance Leadership Group on Plastics’, UNEP FI and Minderoo Foundation . It recommends “decreasing financial flows from all sources which contribute to plastic pollution, including but not limited to virgin plastic production”; in other words, to remove financial support for the production of virgin fossil fuel-based plastics.
Additionally, to strengthen investors’ impact, governments need to also turn financial flows away from fossil fuel-based plastics, such as shifting fossil fuel subsidies towards innovative sustainable materials. As long as the ‘business case’ for virgin plastic production provides short-term profits, the private sector could lack incentives to reorient its investments. For example, Dutch newspaper ‘De Volkskrant ’ reported recently that Dutch tax exemption for virgin plastics amounts some 14 billion Euro per year. Removing such exemptions would directly improve the business case for recycled plastics.
Rising investor action
Meanwhile, we are already seeing a growing understanding by investors that the plastic crisis needs to be stopped. A recent investor statement supports the UN plastics treaty and stronger EU packaging and waste regulation. It was signed by more than 180 investors representing over $10 trillion in assets under management. A large group of signatories of this statement has already started collaborative engagement with about 30 leading single-use plastic manufacturing companies.
The UN plastics treaty provides a unique opportunity to draft a global framework to end plastic pollution. Investors should publicly call for this treaty to become ambitious. For this purpose, a group of institutional investors have joined the Business Coalition for a Global Plastics Treaty .
In the meantime, investors can use their influence to call on their investee companies, to stop this plastic crisis. Every single investor engaging on plastics counts.
Arthur van Mansvelt is senior engagement specialist at Achmea Investment Management (Achmea IM). He engages with companies in the plastic value chain since 2020. Achmea IM was among a first group of investors publicly expressing support for the UN plastics treaty, and in 2023 joined the Business Coalition for a Global plastic treaty and signed the investor statement mentioned in the article. Achmea IM continues to engage with investee companies in the plastic value chain.