Advantage Capital Strategies identifies industries that have detrimental environmental, social, and economic effects and takes action to mitigate risk through screening and advocating for change.
We are not currently divested from single-use plastics but are monitoring the industry as a possible screen in the future.
What Are Single-Use Plastics and How Are They Made?
Single-use plastics are plastic products designed to be used only once, and they include items like plastic shopping bags, straws, plastic plates and cutlery, and cotton swabs, among other items. While some plastics are produced for multiple uses and are found in electronics and even aircraft frames, single-use plastics make up 40% of all plastics produced and are designed to be thrown away after one use . Problematically, these plastics often end up in landfills or our oceans.
Plastics can be made using a variety of primary chemicals including cellulose, coal, natural gas, salt, and crude oil . However, of these primary chemicals crude oil is the foundational component, and crude oil is used to make petrochemicals for plastic production. Further stages of processing are required to make plastics of various types, but ultimately conventional plastics and crude oil are inseparably intertwined.
The Economic Rationale for Divestment
Plastic production companies are at risk of becoming stranded assets. According to the Financial Times, the petrochemical industry “is the only major source of oil demand where growth is expected to accelerate. These forecasts assume a steady, strong demand for plastic will translate into increasing consumption of feedstock” .
However, there are many factors that may prohibit this anticipated growth, including decreased demand for single-use products as well as government intervention. For example, Canada has announced its plan to ban single-use plastic products by 2021 . Kenya has already banned plastic bags , and the European Union recently announced a sweeping ban on single-use plastics that will come into place in 2021 .
The Financial Times acknowledges that these factors – decreased demand and government intervention – have the “potential to halve the standard assumed growth in plastic demand of 3 per cent annually for 2017-40” . If plastic companies continue to assume increased demand, “stranded assets may lie ahead” .
The Social Rationale for Divestment
As mentioned above, the single-use plastics industry is at risk of being negatively affected by consumer habits and government regulation. As the discussion surrounding single-use products grows, consumers adjust their shopping habits in small ways, such as by swapping plastic bags at the grocery store for reusable cloth bags. Public pressure also influences government to enforce new regulations, as seen in Kenya, Canada, and France.
Consumer pressure can also influence large corporations: Coca-Cola, PepsiCo, Amcor, and Unilever are just a few of the companies who have “pledged to convert to 100 percent reusable, recyclable, or compostable packaging by 2025” .
Many environmental activists are advocating for single-use plastics producers to pay for the environmental costs of their waste, a discussion that is similar to the one demanding cigarette manufacturers bear responsibility for the cost of cleaning up cigarette butts. As part of the Canadian ban on single-use plastics, the Trudeau government has also floated the idea of requiring plastic packaging companies to pay for the collection and recycling of the plastic products they produce . If imposed, this “polluter pays” principle brings with it inevitable economic consequences for plastic producers.
The Environmental Rationale for Divestment
While single-use plastics may be convenient for consumers, their environmental impact is undeniable: there are 9.2 billion tons of plastic in the world, 6.9 billion tons of which have become waste . It is estimated that at least 8.8 million tons of plastic ends up in the ocean each year, and this plastic goes on to kill millions of marine mammals, including turtles and whales . According to National Geographic, “on some beaches on the Big Island of Hawaii, as much as 15 percent of the sand is actually grains of microplastics,” which are miniscule pieces of broken up plastic that can be almost invisible to the naked eye .
The profound amount of plastic waste in our oceans and in our communities is a serious problem that affects us all, and it can only be addressed by reducing plastic consumption and improving recycling programs.