Plastic waste and climate change go together. In fact, the mismanagement of plastic waste is a serious contributor to climate change and a significant — but often overlooked — investment opportunity for climate investors. Investors have (understandably) focused on opportunities directly related to climate change, such as renewables, fuel cells, or energy efficiency, to fight climate change. But that approach is wholly insufficient: climate change is a systems problem that demands a system solution. That means we have to think broader.
According to The Ellen Macarthur Foundation, moving to renewables can result in a 55% reduction of global greenhouse gas emissions. The remaining 45% of emissions will need to come from the complex systems that produce, deliver, and use our products and food. Adopting a circular economy framework in plastics, as well as other key areas like steel, aluminum, cement, and food can achieve a reduction totaling 9.3 billion tons of greenhouse gases in 2050.
Climate finance and circular plastic investing are going to need to come together to address the climate crisis in a comprehensive way. Only by looking beyond renewables and closing the gaps and improving the production of materials like plastics, aluminum and so on can we develop the kind of circular economy we need to solve both the climate and plastic pollution problems.
Plastic waste is an aggravating factor to climate change, so investment in innovative waste management and recycling solutions must be part of the climate solutions. According to UNESCAP, global emissions linked to the global lifecycle of plastic amounted to 1.7 Gt of CO2e in 2015 and are expected to grow to 6.5 Gt by 2050 under the current business as usual trajectory.
The significance of the nexus between plastic and climate change took me by surprise back when I was at Walmart WMT in 2013 leading a supply chain investment initiative.
Walmart had committed to measure and eliminate 20 million metric tons of carbon from its supply chain. Our cross-functional team was on the hunt for GHGs across one of the world’s biggest supply chains. Using science as our guide, we conducted a complicated carbon footprint analysis of every product on the shelf – from t-shirts to bananas to laundry detergent. In addition to looking at the lifecycle of individual product categories (e.g. what is the biggest contributor to carbon in the paper towel or soda categories?), we had the ability to do a unique horizontal analysis to find the largest carbon contributors by ingredient (e.g. fertilizer or plastic) across all products AND weight by sales.
The results were surprising. It turned out that the single largest contributor to Walmart’s product carbon footprint came from the food and agriculture sector, specifically from fertilizer used in the production of food. It also turned out that packaging and plastics was a top five contributor to Walmart’s footprint, and that if we increased the amount of recycled content in packaging, it would significantly improve the footprint of every product on the shelf.
Climate Investing and the Circular Economy
We will need a whole range of solutions to solve our climate crisis. When it comes to developing a circular economy for ocean plastic, capital at every stage is necessary for the type of expansion that can convert waste into value. Analysis shows that catalytic capital can fill this gap.
● Using blended finance to address carbon and plastic pollution – Blended finance seeks to unlock more money from public and private sources of capital to achieve critical development goals like climate change at scale. Some solutions are more appropriate for philanthropic capital. For example, we partnered with the US Agency for International Development and the US Development Finance Corporation to provide a credit enhancement for our debt investments in the South and Southeast Asia region (SSEA) where we operate. Using this type of public finance support enables our fund to take on more risk and achieve more impact.
By applying blended financing mechanisms to demonstrate investment viability, impact-focused investment management strategies can facilitate connections to public and private sources and unleash unlimited additional funds.
● You need to know if you’re making a difference: metrics matter – A lot of critical impact investing sectors, particularly in emerging markets, lack the reliable measurement techniques that we need to attract investment at scale in these important solutions. For example, in SSEA there are no ESG or sustainable investment metrics that are appropriate for the waste management sector here, so we’re pioneering this field for the region. We are working with a network of experts on building the first open access tool to model greenhouse gas reduction benefits associated with investments in ocean plastics pollution prevention that would benefit decision makers seeking to build and improve solid waste management and recycling solutions.
● A local economy IS a circular economy (and will help us fight scourges like CV-19). The COVID-19 crisis has reminded everyone of the importance of investing in local supply chains. By developing the plastic waste and recycling industries here in SSEA, we’re driving capital to local SMEs that are creating jobs that help make communities more resilient.
As I recently wrote, if there’s a bright spot to the COVID-19 crisis, it’s that it has focused our attention – including that of traditional, institutional investors on the next crisis, climate change. But if we truly want to stem the climate crisis, we must approach climate investing holistically and deploy capital at scale into systemic solutions. We need wholesale systems change and plastics and climate change have this in common.
This article originally appeared on Forbes.
