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How fund managers can help address the plastic problem

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By Aditi Pai
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4 minute read

As the world grapples with the ever-growing plastic problem, fund managers are presented with a unique opportunity and responsibility to effect meaningful change through their portfolios.

Plastics, once hailed as a revolutionary material, have become a global environmental menace, polluting oceans, harming ecosystems, and endangering human health. This escalating crisis demands the attention of investment managers who possess the power to steer financial resources towards sustainable solutions.

By recognising the implications of plastic pollution on both environmental and financial landscapes, fund managers play a pivotal role in driving the transition to a more sustainable future.

A burden on both the environment and finances

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The pervasive use of plastics in our daily lives has undeniably enhanced convenience and innovation across industries. From food packaging to medical devices, plastics offer unparalleled versatility and cost-effectiveness. However, the exponential growth in plastic consumption has also given rise to unprecedented challenges.

Plastic waste, with over 8.3 billion metric tonnes produced since the 1950s, is an environmental time bomb. Shockingly, only 5 to 15 per cent of plastic waste is recycled, while the vast majority ends up in landfill, incinerators, or polluting natural ecosystems, particularly oceans. This massive accumulation of plastic waste poses a severe threat to marine life, with countless marine species ingesting or getting entangled in plastic debris.

The environmental consequences of plastic pollution extend to greenhouse gas emissions. Plastics contribute significantly to global warming, with research showing that low-density polyethylene, when exposed to sunlight, releases methane, a potent greenhouse gas, for decades. As global plastic production continues unabated, the trajectory of greenhouse gas emissions is concerning, calling for urgent action to curb the plastic problem’s financial and environmental implications.

Driving sustainable solutions

The plastic problem represents not only an ecological crisis but also a financial risk that fund managers cannot afford to ignore. Companies reliant on single-use plastics may face increasing regulatory pressures, supply chain disruptions, and reputational damage due to mounting concerns over plastic pollution. Consequently, portfolios exposed to such companies may experience heightened financial risks, potential write-downs, and diminished long-term returns.

To safeguard both financial returns and the planet, fund managers must adopt a proactive approach to address the plastic problem by incorporating environmental, social, and governance (ESG) considerations into investment strategies.

Fund managers can identify companies actively embracing sustainable solutions and mitigating their plastic footprint. This responsible investing approach is no longer just an ethical choice, it is also a financially prudent one.

Supporting innovation and sustainable alternatives

Fund managers hold the power to accelerate innovation and drive capital towards sustainable alternatives to plastics. By supporting companies focused on developing biodegradable, reusable, or recyclable materials, they can foster a transition away from conventional plastics towards eco-friendly alternatives.

Innovative start-ups are already making strides in this domain. Companies like Notpla are producing edible and biodegradable packaging from seaweed, while Apeel has introduced a plant-derived coating that extends the shelf life of fruits and vegetables without the need for plastic wrapping.

By investing in such initiatives, not only can fund managers enhance portfolio resilience, but they can also support the development of a circular economy, where waste is minimised and resources are used efficiently.

Shaping corporate practises and policies

Through active shareholder engagement, fund managers can use their influence to encourage companies to adopt more sustainable practises and policies concerning plastic usage. By engaging in dialogue with corporate leaders and using their voting power at shareholder meetings, investment managers can advocate for greater transparency, accountability, and environmental stewardship.

Encouraging investors to allocate capital towards companies that prioritise sustainable practises sends a powerful signal to the corporate world. As investor demand for sustainable solutions grows, companies will have a greater incentive to reduce their plastic footprint and integrate sustainability into their business strategies.

Collaborative efforts for a plastic-free future

The plastic problem is too vast and complex for any single entity to tackle alone. It requires collaborative efforts from governments, businesses, and civil society. By aligning investment decisions with sustainable practises, fund managers can play an instrumental role in combating plastic pollution, driving systemic change, and preserving the planet for future generations.

Fund managers have a unique opportunity to address the plastic problem and encourage sustainable change while safeguarding financial interests. Embracing ESG considerations, supporting innovation in sustainable materials, and shaping corporate practises can all contribute to a plastic-free future.

As stewards of financial resources, fund managers have the power to be agents of positive change by turning the tide on plastic pollution and steering us towards a more sustainable and prosperous future.

Aditi Pai, senior sustainable research analyst, American Century Investments

How fund managers can help address the plastic problem

As the world grapples with the ever-growing plastic problem, fund managers are presented with a unique opportunity and responsibility to effect meaningful change through their portfolios.

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