Three questions ESG investors need to ask this Plastic Free July

UBQ Materials executive chair says ESG investors need to stay vigilant for companies with quick fixes

As a veteran of the plastics industry, I have spent decades searching for a level of sustainability that matches plastic’s practicality, one that protects the planet from destructive waste streams. For too long, society has operated on the basis of take-make-throw away. We take finite resources, make consumable products, and discard the waste either in the hope it will magically disappear or with indifference to the fact that it doesn’t. Out of sight, out of mind.

Initiatives like Plastic Free July bring home to us that we need a rapid shift to a sustainable model. While plastics themselves constitute a small proportion of the total waste stream, all waste is significant enough to warrant serious attention.

While the present generation has been burdened with seeing the impact of waste on our planet, it is also the first capable of solving the problem of waste in its totality.

Company leaders and investors are becoming increasingly familiar with the circular consumption model, by which we make products that can be recycled at the end of their lifecycle. This model is not some far-off dream – it is happening now. Unsorted waste can now be processed with virtually no emissions and turned into a feedstock for recyclable, climate-positive thermoplastics.

Investor role

So, what role do ESG investors play in expediting sustainable practices and introducing solutions at scale?

First, we are all consumers. We can choose products with a high level of recycled content over their non-recyclable competitors. This applies as much to cars, mobile phones and fashion items as it does to fast-moving consumer goods like soft drinks. Manufacturers respond to consumer pressure.

Second, we are all citizens. We must encourage governments and NGOs to create policies that incentivise the circular consumption model and disincentivise disposal of products in landfill sites. Carbon taxes and other fiscal measures are being levied across Europe and should be encouraged everywhere.

Of course, industry leaders and investors play larger roles. ESG fund buying power is now a force to be reckoned with. According to the OECD, more than $17.5 trillion has been invested using ESG principles. Further investment is rising quickly, and the focus is on the environment. Leverage is being applied in boardrooms globally, directly through investment and disinvestment and indirectly through other financial organisations such as banks and insurers.

ESG investors need to ask three questions:

  1. Is the target company serious about integrating sustainable practices? If so, does it have a comprehensive sustainable business strategy?
  2. Is that strategy being applied end-to-end, throughout its supply chain from raw materials, through production, to end-of-life disposal?
  3. Finally, are the key performance indicators measurable and independently verifiable?

As ESG investors we need to stay vigilant for target organisations adopting quick fixes that fail to address the root of waste. Just because a company has solar powered panels and recycles its office water doesn’t mean it has developed a sustainable end-of-lifecycle strategy that contributes to a circular consumption model.

Shifting investments to companies that adopt sustainable practices – and away from those that don’t – can make a world of difference. We have the tools needed to ensure a healthier Earth for future generations. Ultimately, investors and those who wield organisational influence will determine if and how we use those tools. The power is at our disposal.

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Natasha Turner

Natasha is global deputy editor at ESG Clarity, part of the Bonhill Group, and has been a financial journalist for six years. She has been shortlisted for Story of the Year and Investment Journalist of...