Closing the loop on plastic pollution: Tackling plastics in oceans

Investment

“Plastic waste is not just a marine issue; it is a global crisis that requires urgent action at every level. Each year, millions of tons of plastic enter the oceans, choking marine life, polluting beaches, and threatening ecosystems that provide vital services to billions of people.” – Erik Solheim, Head of UN Environment

This is our latest blog in our circular economy series, where we seek to raise awareness on the topic and consider potential investor action.

The circular economy is a systemic approach to economic development designed to benefit businesses, society, and the environment by decoupling economic growth from resource use. Circularity intersects with climate, nature, and social issues, making it highly relevant for investors. In this blog, we focus on the critical linkages between the circular economy and nature action; using plastics within oceans as a case study.

Over the last decade, the media has driven a ‘clean up our oceans’ narrative which has heavily focused on plastic pollution. Images of seals getting trapped by plastic bags have circulated the internet many times, particularly as the United Nations estimate that 11 million metric tons of plastic enter oceans annually, and this is expected to triple in the next 20 years[1]. While this alone is an indisputable issue, the sheer magnitude of plastic consumption and our heavy reliance on plastic has accelerated this issue tenfold. Plastics not only pose a significant risk to marine organisms and ecosystems but the production process is highly carbon-intensive and a large contributor to climate change.

Investors are increasingly engaging with nature on a holistic basis, seeking opportunities across areas such as natural capital that address the climate and nature crisis, as well as utilising frameworks such as the Taskforce on Nature-related Financial Disclosures (‘TNFD’).

In this blog, we will be using plastics as a case study to highlight the nature challenges associated with single-use plastic and provide investors with key insights into the risk-mitigating and nature positive opportunities that are emerging in this area. Whilst we recognise there are negative implications of plastics across the climate, nature and social spheres, we have chosen to focus here on the negative impacts of plastics on marine ecosystems and organisms as plastics account for 85% of marine litter[2].

Why have we put plastics in the spotlight?

Plastic production has increased at an exponential rate due to its versatile and durable qualities. It is a relatively cheap material to produce, making it a popular choice for packaging consumer goods. However, plastic production and usage is at odds with the transition to a circular economy as it largely consists of single-use plastic. Arguably, there has been little improvement in the use of biodegradable and reusable materials, as well as a lack of focus on recycling methods. With only c.16% of plastic being recycled[2], more action is needed to aid the transition to a circular economy.

Within oceans, the amount of plastic waste is expected to increase each year[2], creating significant environmental issues, depending on its form and size. For example, plastics release harmful chemicals as it breaks down and becomes a microplastic. Consequently, marine ecosystems become contaminated with toxic chemicals and additives that can harm its inhabitants including fish, sea turtles and seabirds. This exacerbates the biodiversity crisis, with the interlinkages between a linear plastic economy and biodiversity loss clear. Biodiversity is essential for ecosystems to thrive and maintain balance and loss of this is an environmental issue that is increasingly becoming a concern for investors and policymakers.

Furthermore, entanglement in larger plastic items such as fishing nets and six-pack rings causes physical harm, restricted movement, and often death for many marine mammals. This entanglement disrupts feeding, breeding, and migration behaviours, impacting broader ecosystems, particularly for endangered species.

Plastics can also cause harm through food chains as marine organisms are known to inadvertently ingest plastic by mistaking it for food. This has environmental and social implications as these toxins can be passed throughout each stage of the food-chain, from phytoplankton through to the fish that we eat. For example, studies have found that 60% of global fish species contain plastics in their organs[3]. Studies have shown that plastic can cause changes to feeding behaviour when ingested by marine species, however the impact of plastic on human health is less understood[4] but is widely believed to increase the chance of long-term health complications.

Oceans are an important tool to combat climate change, particularly within their role as carbon sinks. Marine species such as whales form a critical role in this process, as whales are known to store carbon[5]. Plastics, whether ingested or absorbed from the environment, risk the survival of these species and subsequently the oceans’ ability to support climate change mitigation.

Why should investors care about plastics?

The negative impacts of plastics on ocean life are clear, and we believe that the transition from a linear, single-use plastic model to a more circular approach is increasingly important for investors to consider. By utilising a circular model, investors can seek to mitigate regulatory and reputational risks associated with the plastic sector, while tapping into a growing market for sustainable solutions. Investors should be increasingly aware of the risks and opportunities associated with single-use plastic.

Risks of maintaining a linear approach in plastics

Market Risk

The market for single-use plastics is evolving rapidly due to changing consumer preferences, technological advancements in sustainable materials, and innovations in recycling and waste management technologies.

Investments in traditional single-use plastics may become less competitive or obsolete as demand shifts towards biodegradable alternatives or reusable materials. Companies that fail to innovate and adapt to these changes risk losing market share and facing declining revenues. Investors in these companies may face diminished returns or potential write-downs on investments as the economic landscape for plastics undergoes transformation.

Regulation Risk

Governments worldwide are increasingly implementing regulations aimed at reducing plastic waste and pollution, for example by placing bans on certain plastic products or requirements for extended producer responsibility.

In 2021, the US government introduced the Break Free from Plastic Pollution Act which made plastic producers and distributors responsible for their products and packaging until the end of its life. One of the most notable examples, is the United Nations Treaty on Plastic Pollution, in which 175 nations will negotiate a legally binding agreement on plastic pollution, plastic use and disposals, as well as mitigate the greenhouse gas emissions generated from plastic production. It is set to be in place by the end of 2024 and estimated to potentially reduce plastic pollution by 80% by 2040[6].

Reputational Risk

As highlighted, plastic pollution has significant negative environmental impacts. With increasing awareness, it is expected that consumer preferences may shift towards sustainable alternatives.

Companies involved in single-use plastic are therefore expected to face increasing scrutiny and pressure to innovate. Investors may also encounter backlash from stakeholders, including consumers, NGOs, and institutional investors with an increased focused on ESG factors.

Social Costs

It is estimated that the social costs of plastic pollution are estimated to surpass $100 billion globally, between 2022 and 2030[7].

This covers the impact on health and social welfare, for example the effect of ingested microplastics via commercial seafood and drinking water. It also covers the exposure to plastic chemicals, which place plastic production workers at an increased risk of long-term health complications[8].

Opportunities in transitioning to circularity

It is not all doom and gloom when it comes to plastics. Investors can play a key role in the transition to a circular plastic economy by providing capital that funds innovation, natural capital solutions and impact strategies.

Innovation & Technology

Investors may seek to invest in companies that are focusing on technological advancements for recycling, biodegradable plastics, and the development of alternative materials. In our view, companies at the forefront of this transition will benefit from growing demand for sustainable packaging solutions and shifts in consumer preferences. Investors could seek to capitalise on this trend by supporting companies that are exploring alternatives to single-use plastics, such as reusable packaging systems, refillable containers, and compostable materials.

Natural Capital

We have seen investors increasingly seek nature-based investment opportunities, from commercial forestry, to afforestation, to peatland restoration, and much more. Whilst a smaller market, we have seen the introduction of ocean-based solutions focusing on such opportunities as sustainable fisheries, plastic waste removal and marine biotechnology.

Impact & Sustainable Development Goals

We’ve seen investors increasingly engage with the United Nations’ Sustainable Development Goals (‘SDGs’), both from a prioritisation perspective as well as in seeking investment opportunities. With such SDGs as SDG 14 ‘Life Below Water’ and SDG 6 ‘Clean Water and Sanitation’, we hope to see increasing funding towards improving water quality and conservation practices across coastal and marine areas, all of which must factor in plastic considerations. [9]

Conclusion

The importance of transitioning to a circular economy is becoming increasingly clear, particularly the positive impact it could have on our oceans and marine life. Investors can play a key role in driving positive change within the plastic industry by encouraging innovation and regulatory changes.

Insight

Our blog series

Our next blog within our circular economy blog series will put fast fashion in the spotlight, highlighting the interlinkages of the circular economy and the broader social impacts of the fashion industry. Within our final blog in the series, we will consider key investor action within this space.