Published 2019-10-07

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Plastic: a challenge for asset managers

Assessing what sustainable development is and what has a practical impact is a challenge, not least for the financial sector.
To encourage collaboration between scientists and investors, and to discuss sustainable plastic systems, Mistra and Swesif, the Swedish sustainable investment association, held a seminar in mid-September.

Mistra is a research funder that supports long-term, interdisciplinary programmes with the aim of solving significant environmental problems, while being an asset owner seeking to invest sustainably and achieve a good return. This gives Mistra a unique opportunity to link research and asset management.

To enable investors and fund managers to deepen their knowledge of plastic, Mistra and Swesif issued invitations to a seminar in mid-September.

The seminar’s main item was a presentation of an ‘investor brief’ written by Fredric Bauer and Tobias Nielsen, researchers at Lund University and IVL Swedish Environmental Research Institute respectively, who are active in Mistra STEPS.

The brief, intended to disseminate knowledge about sustainable investments connected with plastic, was developed in consultation with asset managers. The focus was on investors’ role and scope in promoting a transition to a sustainable plastic system. Another key purpose of the brief was to provide an up-to-date picture of legislative trends and technological innovations related to plastic.

At the seminar, a mature version of the report was presented and discussed. It will be fully ready for publication in the autumn.

Bauer opened the seminar by clearly stating that plastic is a challenge for investors in a post-fossil society, and that the trend to date has not always been towards sustainability.

‘Big investments are still going to companies that are dependent on fossil-based plastic. These may prove to be risky investments.’

He also spoke about the three main challenges of plastic: heavy dependence on fossil raw materials, poor waste management and low recycling rates.

Recycling is the area where the need for investment is greatest, he argued. One purpose, for example, is to develop chemical means of recovery, a method now increasingly often highlighted as a way to make operations more efficient.

‘It means that we’ve got to move from seeking simple solutions to dealing with systemic issues, which will affect various sectors.’

In a short address, Swesif’s Chair Anita Lindberg said that investors must be involved in influencing the adaptation needed.

‘We can do that only through dialogue with the companies we invest in. But to achieve it, we must learn more. That’s the only way we can make informed decisions, and go from managing risks to influencing development.’

During a debate with both researchers and investors on the panel, it became clear that people care about plastics, but that the road ahead is not entirely clear.

Questions raised were what future business models should be like, which tools investors can use to influence companies, and how to include a company’s exposure to plastic in its valuation.

‘It’s largely about seeing where the plastic is in the value chain. To do that, investors must include the material in their dialogues with companies,’ said Emma Sjöström, a researcher at the Mistra Centre for Sustainable Markets (Misum), Stockholm School of Economics, and Deputy Programme Director at the Stockholm Sustainable Finance Centre (SSFC).’

Åsa Stenmarck of IVL Swedish Environmental Research Institute, the Government’s special investigator on the environmental effects of plastic, thought the growing interest among investors is highly positive.

‘But the plastics industry is just as unfamiliar to them as financial markets are to me, I suppose. That’s precisely why this seminar’s exciting, and I hope we have a lot to learn from one another.’

To be able to make sustainable investment decisions, we need access to more and better data, as panel member Erik Eliasson of Danske Bank pointed out. Ylwa Häggström emphasised that her employer, Öhman Fonder, manages other people’s money, and that return on investment is a crucial factor. Policies and regulations can promote investment in new business models in the sharing economy, for example.

The importance of ensuring that policy, at both national and EU level, drives and creates prospects for the financial sector to contribute to sustainable development was also highlighted by Aaron Maltais, a research fellow at the Stockholm Environment Institute (SEI) and Programme Director at SSFC.

The need to understand and the desire to learn about plastic are great. This was reflected in the attendee list: employees from most leading fund managers were present. Another indication was that in the closing question-and-answer session, many attendees referred to the need to gain further in-depth knowledge and maintain the dialogue between researchers and the financial sector.