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Tackling the challenge of plastic pollution

The value of investments can fall as well as rise and you could get back less than you invest. If you’re not sure about investing, seek independent advice.

Public awareness of the impact of plastic pollution is growing, boosting demand for products and solutions to help tackle the problem.

Click to toggle accordion What you’ll learn:

What changes were announced in the Budget to tackle plastic waste.

How impact investing allows investors to contribute to environmental solutions.

How to invest in companies taking a proactive approach to reducing plastic waste.

The Chancellor Philip Hammond promised a new tax on plastic packaging in this year’s Autumn Budget, in a bid to tackle "the scourge of plastic littering our planet and oceans."1

Subject to consultation, the tax would be imposed from April 2022 on the manufacture and import of plastic packaging which contains less than 30% recycled plastic.

However, the Chancellor stopped short of introducing a levy on the production of disposable plastic cups, saying he would "monitor carefully" what the takeaway drinks industry is doing to reduce single-use plastics.

The challenge of plastic pollution has come under intense scrutiny in recent months, sparked in part by images showing its effect on marine life, in the BBC's 'Blue Planet II' series.

Growing public awareness around the amount of plastic we use and throw away has led to increased demand for recycling and alternative materials and solutions. This demand provides investors with opportunities to contribute to, and potentially benefit from, these solutions. Here, we explore some of the steps currently being taken to tackle the issue of plastic waste, and the investment opportunities these may create.

Initiatives already tackling plastic waste

Businesses and the UK government have already taken significant steps to reduce the amount of plastic packaging and other forms of plastic waste.

For example, in 2015 the 5p levy on single use plastic bags was introduced in England to encourage people to re-use bags and to cut down on the litter associated with them, following the introduction of similar charges in Scotland, Wales and Northern Ireland. According to the government, since the introduction of the scheme the number of bags used has fallen by more than 80% in England.2 Over the next 10 years the scheme’s benefits are expected to include £60m savings in litter clean-up costs and carbon savings of £13m.3

In January this year, the use of plastic microbeads was banned in the manufacturing of cosmetics and personal care products in the UK, and a ban on sales of products containing them will come into effect in July.4

The government is currently consulting on plans to ban the distribution and/or sale of plastic straws, stirrers and plastic-stemmed cotton buds in England, with the consultation due to close on 3 December 2018.5

How retailers are reducing plastic waste

This year saw the introduction of the UK Plastics Pact, launched by sustainability campaign group WRAP, the most ambitious business-led plan yet to fight plastic pollution and change packaging standards.

More than 40 companies, including Coca Cola, Procter & Gamble and Unilever, along with Britain’s biggest supermarkets Tesco, Sainsbury’s, Morrisons, Waitrose, Aldi and Lidl, have pledged that by 2025 all their plastic packaging will either be recyclable, reusable or compostable. These companies are currently responsible for over 80% of the plastic packaging on products sold through UK supermarkets.6

 The government has also given the green light to a new deposit return scheme in England. Under the scheme, consumers who return plastic, glass or metal containers to retailers, who are then responsible for recycling them, receive a small cash payment in return.

How investors can help tackle plastic pollution

Reducing the use of plastic will require a behavioural change, and this will take time, but is greatly helped by changes already in place, such as charges for carrier bags, and discounts on coffees for consumers supplying their own cup.

Many companies stand to benefit from concerted action on plastics pollution, potentially creating opportunities for investors. These may include companies which place the ‘circular economy’ at the heart of their businesses. The circular economy works to ensure materials are kept in use for as long as possible and the maximum value is extracted from their use. Unilever, for example, last year developed new technology called the CreaSolv process, which can recycle used single-use sachets – which allow consumers to use smaller amounts of products, such as washing powder – and channel them back into the supply chain.7

Other companies which may reap the rewards of a clampdown on the use of plastic include those which are developing new, sustainable packaging and parts using technologies such as bioplastics, a type of biodegradable plastic derived from biological substances rather than petroleum.

Investing in individual companies, however innovative their approach, is high risk. If these companies fail investors may lose all of their money.

The role of impact investing

One way to generate financial returns whilst tackling the problem of plastics is to consider ‘impact investing’, where your money is invested in companies and funds with the aim of generating positive social or environmental outcomes, alongside financial rewards.

There are several different impact funds to choose from, which are required to measure and report their societal and environmental performance, or in other words, the non-financial impact they have.

The Barclays Multi-Impact Growth Fund, for example, invests primarily in specialist third-party funds which have been chosen based on both their potential for strong financial returns and the consideration of their impact around key social and environmental issues.

Among the underlying funds held by the Barclays Multi-Impact Growth Fund is the Jupiter Ecology fund, which invests thematically in companies that are developing innovative solutions for the environment.

The manager of the Jupiter fund, Charlie Thomas, tries to identify well-run companies that correlate long-term environmental drivers with a company’s potential to generate sustainable returns. The fund’s holdings include Norwegian company Tomra Systems, which is a world leader in reverse vending, recycling both plastic and glass.

Another underlying fund in the Multi-Impact Growth fund is the Allianz Global Sustainability Fund, which seeks to invest in companies with sustainable business practices. The manager of the Allianz fund, Paul Schofield, considers the impact of their investments on society by measuring the performance of the companies it invests in by using certain environmental, social and governance (ESG) metrics, which the manager believes may create long term value. Additionally, negative screening is used to ensure investments are not made in companies which make more than 5% of their revenues from particular industries such as armaments, tobacco and nuclear power. Current holdings include Unilever, which as discussed is creating sustainable products that form part of its vision to make sustainable living commonplace, through three key goals of improving health and wellbeing, reducing environmental footprint, and enhancing livelihoods.

There are many problems facing society and our environment, with plastic pollution one of the most pressing. Impact investing allows investors to protect and grow their assets, whilst contributing to solutions to make a positive contribution to our world.

Please note that our mentioning these funds does not constitute a recommendation and the specific holdings in a fund can change at any time. Remember too that that no matter whatever approach you take towards investing, investments can still fall in value and you may get back less than you invest. If you’re unsure where to invest, seek professional financial advice.

Investments may fall as well as rise in value; and you could get back less than you put in. It’s also important to remember that, ideally, you should avoid relying on the fortunes of just one sector, and create a diversified investment portfolio with a wide range of assets, to include other sectors. Please be reminded that this article serves to illustrate how it is possible to invest in line with this theme. In using the funds and companies as examples, this does not constitute a recommendation to invest in these, or any other investment. Barclays has not undertaken a review of these funds, nor are they part of a Barclays Select list. Smart Investor does not offer personal financial advice. If you’re not sure where to invest, you may want to seek independent advice.

Impact investing

Through impact investing you can combine your financial goals with your societal and environmental ambitions.

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