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PRI Supports Investor Push Against Plastics

New guides on plastics engagement aim to augment asset owners’ stewardship activities to address risks, accelerate shift to circular economy.

The UN-convened Principles for Responsible Investment (PRI) has published a set of engagement guides for investors in companies in the plastic packaging supply chain. The guides cover four sectors: petrochemicals, containers and packaging, fast-moving consumer goods (FMCG), and waste management.

“Investors should address plastic waste and pollution through their stewardship activities,” said the PRI. “Failing to do so impacts the environmental systems and ecosystem services that support economic performance, investor returns and beneficiary interests more broadly.”

Addressing the risks associated with plastic packaging – policy and regulatory, reputational, climate-related, wider environmental and human health – will create investment opportunities for investors, according to the PRI. The greatest opportunities will be in transitioning to a circular economy – where plastic production is decoupled from fossil fuel use and all plastic packaging is reused, recycled or composted.

Proponents argue transition to a circular economy will also reduce the impact of plastic packaging and meet consumer needs, while contributing to United Nations Sustainable Development Goals (SDGs), including SDG 12.5 (substantially reducing waste generation through prevention, reduction, recycling and reuse by 2030) and SDG 14.1 (preventing and significantly reducing marine pollution of all kinds).

Plastic pollution has been steadily rising up the investor and policy agenda in recent years, but has gained greater attention during the first half of 2021. Shareholder proposals on plastic use and disclosure achieve higher levels of support in the US proxy season, including at AGMs held by Amazon and grocery chain Kroger, while investors have also signed up to initiatives including the Ellen MacArthur Foundation’s New Plastics Economy Global Commitment. On the policy front,  the UN Environment Assembly is expected to discuss a treaty on plastic pollution at its in-person meeting next year.

Sector breakdown

Each sector guide provides background information on the sector and the challenges faced, questions investors should ask of companies centred on governance and outcomes, ideas on how to assess the performance of a company in addressing plastic waste and pollution, and examples of best practice by companies.

Topics investors should raise related to governance include a company’s commitment to tackle plastic waste and pollution, risk assessment and management, objectives, targets and action plans, and reporting. On outcomes, investors are urged to ask companies about elimination of problematic or unnecessary plastic packaging (the proportion of current plastic production that is from post-consumer recycled sources and how it will be increased) and how companies will increase recycling and/or composting rates for plastics.

Some questions are common to all of the sectors, such as quizzing companies on whether they have assessed the risks presented by plastics to their business and how much plastic/virgin plastic they produce annually. However, the use of plastic packaging and the contribution to waste and pollution differs across sectors due to their positions in the plastic packaging value chain, the PRI notes.

PRI has also categorised businesses to help investors understand where they fall on the spectrum of actions required to address plastic waste and pollution. A ‘beginner’ is a company that acknowledges plastics as an important issue and has started to take some initial actions; ‘intermediate’ companies have started to systematise their approach, setting ambitions targets and delivering against those, while ‘advanced’ companies have made “significant progress” against their commitments and can provide evidence of innovative action.

Best practice

The guides present examples of best practice within the four sectors. In containers and packaging it cites Amcor, which has committed to eliminate problematic or unnecessary plastic packaging by 2025. The global packaging company is working to eliminate nylon barriers in its rigid packaging portfolio, and replace polyethylene terephthalate (PET) films in personal care products. Another packaging company, Envases Universales de México, opened a recycling plant in 2020 that will process post-consumer PET into food-grade solid-state pellets.

In petrochemicals, Netherlands-domiciled multinational chemical company LyondellBasell and resource management company Suez are partners in Quality Circular Polymers, a mechanical plastics recycling company in the Netherlands. The company aims to increase production of high-quality circular polymers.

According to the PRI, investors should constructively engage with companies in the plastic packaging value chain to determine how they are managing risks and opportunities in relation to plastic packaging and encourage them to act by 2025.

While investors can also address plastic pollution using other stewardship strategies, noted the PRI, such as shareholder resolutions, voting, and policy engagement, these actions are beyond the scope of the guides project. The PRI may consider them in the future, it added.

 

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