Pack it in

Growing public alarm about plastic pollution has provoked a war on packaging. What began as a simple concern for the environment has matured into widespread apprehension. Younger generations realise they will have to pick up the pieces of our obsession with single-use plastics.

Millennials and Generation Z are the most environmentally and socially ‘aware’ consumer markets. Generation Z will be the biggest spending group by 2020, and the war on packaging has become as much of a marketing campaign for companies as a sustainability initiative. A 2015 global survey by Nielsen found that 66% of respondents were willing to pay more for sustainable goods. This figure rose to a whopping 73% of millennials, with Generation Z expected to be higher still. And it’s not just their consumer habits; millennials and Gen Z want to work for companies that are taking sustainability seriously too.

Single-use packaging is great; it keeps our food fresh, it’s cheap, you don’t have to clean it and can just throw it away, then it magically disappears right? Wrong. Not enough plastic is recycled, not even close. Just around 30% of plastic is collected for recycling in the EU. It’s now in our oceans, it’s killing our wildlife, it’s even been reported people could be ingesting scores of tiny bits of potentially toxic polymers without realising. But this is old news, right?

The focus is now, rightly, shifting to solutions. And, of course, cutting out the use of ‘pointless packaging’. If only bananas, oranges and avocados came with some natural outer inedible packaging that meant you didn’t need to wrap them in anything…

Whether it’s recyclable plastics, soluble or even edible packaging, we believe there is massive opportunity for innovation in this sector.

But it’s important that the whole product lifecycle is considered. Using alternatives in place of plastic doesn’t necessarily guarantee a positive environmental benefit. It doesn’t take a genius to work out that an increase in paper-based packaging will see a rise in demand for timber and simply harm the environment in a different way. Crucially, companies are finding innovative ways to reduce the environmental impact of their packaging.

Just Eat is running a trial of using sachets made from seaweed for sauces, which will apparently decompose in just 6 weeks

Mondi has created a water soluble film with a range of uses (for dishwasher / laundry tabs etc) which is biodegradable and non-toxic

Mohawk is one of the largest recyclers of PET bottles in the US, recycling over 5.5 billion bottles every year to make its EverStrand carpet

Avery Dennison CleanFlake labelling solution improves the yield in the PET recycling process. Millions of bottles go unrecycled every year due to the contamination of non-recyclable labels, a problem CleanFlake can address

Kingspan use 250 million recycled plastic bottles annually in the production of building fabrics and aim to double that number by 2023. The plan is for a large proportion of these bottles to be ‘ocean-harvested’, which would help to address the scourge of plastic pollution in the world’s oceans.

Recycling PET (Land & Ocean)


Source: Kingspan

About the author

Euan Ker is a sustainable investment analyst. He is responsible for analysing and monitoring environmental, social and governance factors within the Global Sustainable Equity Strategy. Euan joined us in 2014 as an investment implementation analyst with responsibility for implementing macro investment decisions across a number of fund-of-fund mandates, totaling some £13 billion under management. Prior to moving to the ESG Research team in 2018 his responsibilities also included asset class, regional and currency hedging overlays through derivatives. Euan has a 1st Class Honours degree in Management with Economics from Robert Gordon University. He has the IMC professional qualification and has 4 years’ industry experience.*

*As at 30 June 2018.

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More than just a damn good sailor

Dame Ellen MacArthur is a brilliant sailor. In 2004 she became the fastest person to circumnavigate the globe singlehanded and has competed in and won many of the hardest offshore sailing races in the world. But Dame Ellen isn’t just a star in the sport of sailing (or for that matter in her support of young cancer sufferers via www.ellenmacarthurcancertrust.org ), she is also an absolute legend in the arena of sustainability.

In 2010, Ellen MacArthur launched the www.ellenmacarthurfoundation.org and she passionately explains why in her Ted Talk here . Working with academia, business, governments and agencies on sustainability issues is her key focus these days. The foundation has popularised the concept of the ‘circular economy’ and @circulareconomy are well worth following on Twitter. Through their research they have built some very thought provoking frameworks for thinking, acting and investing sustainably. They continually remind us that sustainability is a multi-dimensional problem and cannot be solved with one-dimensional thinking (remember my thematic spin soapbox).

I really like the concept of the ‘circular economy’ and  in particular, the RE.S.O.L.V.E framework outlined below. It clearly shows the role that disruptive technology plays across the spectrum of sustainability solutions. Sharing, Optimising, Virtualising and Exchanging are all enabled by innovative business models that are leveraging innovative technologies and philosophies. Such frameworks encourage us to think about the second, third and fourth order impacts of our decisions (and it fits with our thinking on impact see second order impact soapbox). The companies highlighted by Ellen and her team (see below) are household names that we can all identify with, but RESOLVE also enables us to see them as sustainable value creators in ways that we think are ignored by one dimensional approaches to sustainable investing (and the market in general).

Moving beyond the obvious in terms of investible companies we believe such frameworks are even more powerful in helping smart investors to identify unappreciated long-term disruptive investment ideas (see #SustainableDisruptors soapbox).

Ellen reminds us that investing sustainably isn’t just about restricting and constraining. It’s about identifying disruptive companies that capture value from doing things better and like Ellen, we have a plan.

About the author

Craig Bonthron is an investment manager in the Equities team, responsible for co-managing global equities portfolios. He joined us in 2014 from SWIP, where he was investment director in global equities. In addition Craig also had analysis responsibilities for the tech, energy and utility sectors. Prior to SWIP, he was a portfolio manager at Kleinwort Benson Investors, a member of the global environmental equity team. Craig has a 1st Class honours degree in Building Surveying, an MSc with Distinction in Business Information Technology Systems from Strathclyde Business School. He has 16 years’ industry experience*. (*As at 28 February 2018.)

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Fashion! Turns to the right…

David Bowie, Madonna, and Depeche Mode all made a song and dance about fashion, at a time when more and more designers became household names. But it coincided with a backlash against the use of furs and the appalling working conditions of those as far removed from the catwalk as it may be possible to get.

But in an inside pocket of the modern fashion industry there are further problems. Clothing costs have risen slower than other consumer goods, enabling fast fashion and feeding our insatiable appetite for the latest trends. The number of times a garment is worn before being tossed has fallen 36% in the last 15 years.

Which means a lot of waste (a truckload of clothing is wasted every second across the world apparently – yes that did say ‘second’). Very little of it is recycled (less than 1% of clothes are recycled into new clothing).

And much like China doesn’t want dirty air, it no longer wants to have dirty water either. The China link? Well, the fashion industry needs both China’s raw materials (thirsty cotton – 4x more water intensive than rice and dirty from pesticide overuse) and its textile processing (also both thirsty and dirty). Beautiful China + limited water ‘budget’ = only one likely winner in a food/energy versus fashion showdown.

The sustainability leaders in the fashion industry have recognised this and have begun to move towards a more circular economy. Inditex has committed to a circular economy model through all phases of the product cycle, from offering free returns of old garments to supporting research into technology that can turn recycled garments into new textile fibres. Adidas AG, Stella McCartney and the Ellen MacArthur Foundation, Vivienne Westwood, Gucci and more leading brands are all at the forefront of driving the industry towards higher standards and a more circular economy.

A Nielsen global survey showed that 66% of respondents were willing to pay more for sustainable goods, with millennials being the most willing to pay more for sustainable goods at 73%. Consumer behaviours are potentially changing, and China is getting serious about pollution. Fashion’s dirty secrets are out.

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Life in plastic… ain’t fantastic

Initially hailed for its non-decaying, cheap to manufacture, lightweight properties, we are now heavily reliant on plastic. It’s everywhere. Including our oceans.

For those of you who are still watching X-Factor on a Sunday (really people, come on), please turn over. Unfortunately, Sir David Attenborough can’t make a documentary about our Blue Planet (II) without sounding a stark warning of the detrimental effects our increasing use of plastic is having on marine life and the wider ecosystem. An adult albatross trying to feed her chicks with a belly full of plastic is unfortunately an increasingly common occurrence.

By 2050 there will be more plastic in the sea than fish (by weight). Yes, you did read that right; 8 million tonnes of plastic a year are dumped in the sea and by the way, plastics production is expected to double again over the next 20 years.*

Surely, a situation so awful deserves immediate collective action? You would hope so. 95% of material value in plastic packaging is lost in the economy shortly after first use.* It’s not unreasonable to expect businesses to start thinking about their waste streams.

This is why we focus on the practices of a company throughout our analysis for our sustainable fund. Waste management and recycling is one part of the process – a number of companies are already achieving zero waste to landfill (we own a number of Japanese examples).

Companies are thinking about how they can maximise efficiency and minimise waste, using science and investing in R&D to attempt to find innovative ways to reduce the environmental impacts of their products.

A couple of examples…The plastics in our waters are not always visible; toxic fibres from our clothing come away when we wash them, and 40% of them end up in our rivers and oceans. Inditexis using a more sustainable alternative – a biodegradable fibre made through transforming cotton waste into high-quality sustainable fibres, making 6.3 million garments from the material in 2016 alone.

Mohawk wouldn’t come through a screen if you were to focus on exposure to waste management, yet they are one of the largest recyclers of PET bottles in the US. Recycling over 5.5 billion bottles every year to make their EverStrand carpet, that’s around 14 bottles a second being turned in to a premium product. And Mohawk’s activities are even more admirable in the context of the woeful levels of recycling generally achieved in the US. Finally, EverStrand is actually better than other polyester carpets because the FDA expects such high standards of plastic bottles in the US (Bonus!)

*Source: Ellen MacArthur Foundation