Engagement essential for schemes to turn the tide on plastic waste

The transition to net zero requires a multifaceted approach over how we use non-renewable materials. Up to 12.7mn tonnes of plastic enter the oceans each year causing damage to marine life and ecosystems, according to the journal Science, and while the scale of the problem is significant, concentrated efforts from a range of industries can help turn the tide.

The pensions world, including individual savers, has a role to play, says Richard Gillham, financial planner at Progeny. 

He says turning the tide on plastics is more “complex and nuanced” than simply increasing institutional allocations to new technologies, such as sustainable packaging solutions, recycling infrastructure or natural alternatives.  

Many schemes are reliant on covenant support from companies that are involved in the plastics value chain, and are therefore affected by these global policy shifts

Mark Armstrong, BlueSphere Wealth

“It’s time for decisive action in the shape of corporate investment, innovation and transformation programmes to really tackle plastic waste and pollution at source — and at the very least, have an impact by 2025 to meet government targets,” Gillham says.

“This is particularly important as the regulatory spotlight appears to reflect a growing focus on producer responsibility, and this is extending across the lifecycle of a product.”

Likewise, Donald Fleming, a partner in covenant assessment services at RSM UK, says increased investment in technology, recycling infrastructure and natural alternatives each have an important role to play in accelerating the move away from plastics, yet “none of these is sufficient alone”.

He points to the UN Environment Assembly’s resolution on March 2 — End plastic pollution: towards an internationally legally binding instrument — as a “major turning point” in how the world deals with plastic pollution. 

“It establishes an intergovernmental negotiating committee aiming to draft a global, legally binding agreement by 2024 which will address the full lifecycle of plastics, so there is a developing framework that recognises the need for all investment and rethinking across the whole value chain, from design, production, use and recycling,” Fleming notes.

Engaging with the problem

Issues on the environmental consequences of plastics, and the role pension schemes can have in overcoming them, are dependent on trustees “educating themselves on what the circular economy is and what they can do with their assets,” says Mark Armstrong, founder of BlueSphere Wealth. He points towards organisations such as the Ocean Plastic Leadership Network as a “great starting point”.

But he adds that the scope and extent of engagement activities must be a carefully considered move. 

“It is important not to just look at this through an investment lens. Many schemes are reliant on covenant support from companies that are involved in the plastics value chain, and are therefore affected by these global policy shifts,” Armstrong stresses.

An investment’s reliance on plastic products may be seen by some as credible ground for divestment, should engagement activities not result in satisfactory change.

Gillham warns that should pension schemes divest from such businesses, they “diminish their considerable power to influence corporate behaviour”, as the industry-wide shift to embrace sustainability linked policy is yet to reach maturity.

Engagement with companies can also present new opportunities for growth and transformation, Armstrong adds. 

He views schemes as having the opportunity to invest in businesses to develop alternative materials, products and recycling infrastructure to set up a clear route of transition to sustainable alternatives. 

“Some great examples of this have been companies such as Less Mess in the UK, which created a deposit-return scheme for plates and cutlery at events and festivals,” he says.

Gillham adds that most pension funds are currently only in the process of setting up a formal policy that includes the UN’s Sustainable Development Goals, or have yet to decide to do so. He notes that the implementation of the SDGs in voting activities or exclusion policies is still rare.  

“As investors, we need to continue to engage with companies to encourage them to strengthen their practices in this area. It’s important to note, however, that pension funds can’t just invest in sustainable investment strategies without exhaustive due diligence, so it’s a marathon rather than a sprint,” he says.

Lessons can be taken from other advanced pension markets, namely the Netherlands as “leaders” in the area, Gillham argues.

Communicating change

Research from Nest Insight found that successfully communicating environmental successes can help build trust between members and scheme providers, yet there is ambiguity in how this can best be done.

Fleming says progress against specific sustainability objectives, such as a reduction in plastics, should form part of schemes’ wider communications with members on environmental, social and governance issues. 

To facilitate this, “schemes should include clear targets that will serve as a tool to monitor and track progress for stakeholders. There is also greater scope for using the UN’s SDGs as a criterion in responsible investment instruments, but embedding them remains challenging”. 

Plastic pollutants are not an issue that can be solved solely by investments, but, through a multifaceted approach, schemes can help build a brighter future for their members in more ways than one.