The world dumps 2.12 billion tons of waste each year, with 99 percent of what we send to landfill less than six months old, according to environmental-focused data aggregator The World Counts. As the fight against single-use plastic gathers pace, investors are turning to the opportunities that waste can offer the recycling industry.
Louise Roper, executive director of Volans, an advisory firm working at the intersection of innovation and sustainability, believes companies are waking up to the possibilities. “Innovative companies recognise the value in what is now considered waste to create new feedstock both for energy and the production of materials that can remain in a somewhat closed loop,” she says.
This is the first step towards a circular economy in which ultimately nothing will be wasted. Evan Nahnsen, investment director on the infrastructure debt team at AMP Capital, argues that companies and projects that contribute to a cleaner environment always appeal to investors.
“Despite volatility in the regulatory environment in specific jurisdictions and sectors, most people would agree that the arc of the macro-environment is bending towards sustainability and beneficial reuse,” he says. “The investible universe and opportunity set varies by jurisdiction, but thematically we pay a lot of attention to water and wastewater. Those have proven to be areas with more stable regulatory protection and financial support from counterparties – whether they be municipal or private sector.”
Michael Martella, chief executive at waste management firm Anergy, says that as communities demand that their waste has a chain of custody, many practices, such as exporting it to countries with lax disposal regulations, have come to light.
“Additional to the above trend there is a drive towards utilising waste as a resource,” he says. “Waste can be used to produce electricity, fuels, heat and carbon products, yielding good benefits. The limitation here has been that the minimum scale of economical production is higher than the scale of waste that is typically produced, making viable investments few and far between.”
Governments are also promoting recycling. “Led by the European Union, governments are implementing both carrot and stick incentives to accelerate the move to a no-waste economy, where we also sequester more carbon than we emit,” says Roper. “In short, leading companies will be those that are activist – actively engaging in changing the current system.”
In recent years, waste has become a more complex issue. Previously it was unseen after pick-up and went through a complex route of disposal, nearly always resulting in incineration or landfill.
However, the Scottish government’s pledge to introduce a deposit return scheme as part of plans to tackle plastic waste is an example of how leaders can help things to change.
Coca-Cola European Partners is currently the largest user of recycled plastic in the UK’s food and drink industry, having invested significantly to help transform the country’s PET recycling and reprocessing capabilities over the past decade.
Iain Gulland, chief executive of Zero Waste Scotland, says: “There is an increasing demand for quality recycled content and people don’t want to see plastics being used once and needlessly discarded.”
According to Martella, the future lies in building small-scale local waste transformation plants, which can demonstrate a clean and clear chain of custody over waste to all stakeholders.
For investors, the case for allocating capital to protecting the environment has never been stronger. Jon Forster, manager of the Impax Environmental Markets investment trust, claims the “positive disruptions” are accelerating growth.
“The science of climate change is no longer in doubt and what is clear is that, on its present trajectory, the economy cannot react quickly enough to the climate challenges we are facing,” he says. “Governments will turn up the ratchet of regulation, which will in turn encourage action – we’ve seen this most recently with the war on plastic, for which the regulatory response has been unprecedented”.
“I have been co-managing IEM for 17 years and the growth trajectory for environmental markets really has never looked as compelling to me as it does now.”