COVID-19 Has Exacerbated the Plastic Waste Crisis. How Can Investors Help?

For many, the global plastic waste crisis seemed to come out of nowhere. Even though single-use plastics began their rise to ubiquity in the 1990s, many consumers spent most of the last three decades unaware of the hundreds of millions of tons of plastic garbage piling up in landfills and pouring into waterways.

Over the past few years, newfound public awareness has prompted government bans on single-use plastic items and calls for big brands such as Coca-Cola and Nestlé to purge fossil fuel–based virgin plastic from their packaging.

However, the coronavirus pandemic has severely complicated this trajectory away from plastics. Here is a look at the consequences and how investors can help get the planet back on course.

COVID-19 Fuels Uptick in Plastic Waste

Across healthcare, food, and manufacturing supply chains, COVID-19 has strained fragile and ineffective systems in the US and elsewhere. Waste management is no different. The global recycling industry was already struggling, in part due to China’s decision to stop accepting imported waste. Now, the pandemic has only sharpened these issues.

In the US, COVID-19’s economic toll on municipal budgets has accelerated the demise of municipal recycling programs. Roughly 90 cities have suspended recycling since 2017, a third of these since January 2020, according to Waste Dive. In developing countries whose waste management systems had been unprepared for personal protective equipment wrapped in disposable plastic to pour into local markets, the pandemic has dumped more plastic waste on already porous systems.

Indeed, attempts to stem transmission of COVID-19 have triggered an estimated global monthly use of 129 billion face masks and 65 billion gloves, which often contain plastic. Bars serve drinks in disposable cups, and supermarkets are wrapping even more produce and baked goods in plastic than before. In some parts of the US, bans on plastic bags have been reversed based on the theory that reusables could spread the virus. That claim has been disputed by more than 100 health experts from around the globe, who released a statement in June arguing that reusables are safe even under pandemic conditions. Lockdowns and business closures have also changed the way consumers shop and eat: increases in e-commerce and restaurant takeout are creating a surge in plastic packaging.

Much of this plastic cannot be recycled. Researchers estimate that 2020 could see 30% more waste than 2019.

Roughly 90 cities have suspended recycling since 2017, a third of these since January 2020.

Reversing Course on Plastic Waste

Since oil and gas companies have lost ground to renewables and electric cars, their petrochemical divisions have doubled down on plastic. Even before the pandemic, the petrochemical industry was investing in expansion. This trend is concerning from both a pollution and a climate perspective. That said, environmental investors are taking steps to help change this trajectory.

To tackle the crisis that already exists, innovations in recycling infrastructure and technologies have opened new avenues to help turn waste into final products such as fuel and roads. Investors seeking to avoid future plastic waste can find additional opportunities for progress in circular systems that feature reusables as well as alternative materials, including bioplastics sourced from biodegradable materials such as seaweed.

At the height of the pandemic, biotech company RWDC Industries raised $133 million in a two-stage Series B funding round. The Singapore-based startup uses renewable sources like cooking oil to produce a material that can replace plastic in a variety of products, including straws and fast-food containers.

In all, 20 companies focused on sustainable packaging and materials have raised more than $850 million over the past three years. According to CrunchBase, even more investment is expected.

September 2020 saw the release of a report on trends driving the circular economy in North America, circulated by Closed Loop Partners, a New York–based circular economy specialist with funds that include venture capital, growth equity, private equity, and project finance. Earlier, Encourage Capital released a report on investing in the reduction of ocean plastics in 2017.

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