Banks wade into chemical recycling at Davos forum

It was the kind of question that's right on target for the World Economic Forum in Davos, Switzerland, as it debated how to deal with plastic pollution: Should global banks invest in chemical recycling as part of strategies to mitigate plastic waste?

ING CEO Steven van Rijswijk told a Jan. 17 panel at the annual gathering of financiers, politicians and celebrities that ongoing negotiations toward a plastics treaty should give banks like his guidance on investing in chemical recycling technologies.

"The advantage of a chemical recycling process is that you get a lot of different types of plastics [to recycle], as opposed to mechanical recycling," he told the online panel. "But at the same time … there is no guidance yet in terms of [if] you should actually be financing the process of chemical recycling because it's a very energy-intensive process.

"More clarity in the treaty, clear direction and regulation is helpful for all industry, but also the finance industry," he told the panel. "When we talk about the recycling process, it would be good to understand ... what is a good process and what is a bad process, and we can focus on what should we finance [and] what should we not finance."

ING was one of four global banks that launched a Finance Leadership Group on Plastics on Jan. 17 at the gathering, to provide formal input into the ongoing negotiations for a global plastics treaty at the United Nations. They hope to attract other banks.

At the same time, van Rijswijk joined a panel at Davos, along with a senior executive from food giant Nestlé SA, Peru's foreign minister and the head of the World Wildlife Fund, to debate what should and should not be in a plastics treaty.

The first round of negotiations wrapped up in early December, with a second session planned for Paris in May, with a goal of finishing the treaty by 2024.

At the panel, Nestlé General Counsel Leanne Geale said the Vevey, Switzerland-based food giant wants a strong treaty that sets global rules, beyond the patchwork that exists now, so that companies can make larger investments.

"A patchwork of voluntary provisions that didn't set a global baseline would be very problematic, because that's what we have now," she said. "Not having a harmonized global baseline prohibits economies of scale in terms of manufacturing solutions."

Geale said it's a challenge for Nestlé to explore new packaging models and alternatives to single-use plastics. It's set up a packaging institute to help it explore things like reusable packaging and more paper-based options.

"It is a big challenge because, of course, as a food and beverage company, plastics also serve the role of safety and quality, especially in transportation over long distances," Geale said. "We focus research and development on different packaging solutions.

"Paperization is one of them, monomaterials is another, but also reuse and refill, because those two elements also have a big role to play," she said. "For example, [for] the good plastics that we want to keep in the circular economy because they play a very good role, how do we make sure reuse happens."

She said Nestlé worked with groups like the Consumer Goods Forum to develop design rules for packaging to maximize its value in the recycling marketplace, and has worked with the group PR3 on 10 standards for reusable packaging.

"How do containers need to be made, how do they need to be collected?" Geale asked. "How do they need to be washed and sanitized? How do you label them? It's much more than the container itself, but the holistic system around reuse, refill [and] recycle."

WWF CEO Kirsten Schuijt said financing for the waste management changes in any global agreement will be important, and she called for the treaty to include commitments on recycling as well as phase-outs of toxic plastics.

"The ban on single-use plastics is an important one, and the phasing out of other toxic plastics, I think, is important," Schuijt said.

"Not all plastic is bad; we're all using plastic," she said. "It's about banning the bad plastic but also finding a way to recycle the good plastic that we're all using."

Schuijt said a plastics treaty also needs to help pay for the systemic changes that will be needed and should avoid the funding shortcomings of the Convention on Biological Diversity adopted by international negotiators at a conference in Montreal in mid-December.

"I would also hope that we get enough financing on the table," she said. "We just finished a great global agreement in December in Montreal on biodiversity, and it's wonderful, but all the targets and all the financing are missing."

ING's van Rijswijk said plastics policy is a new area for financial institutions, but he said banks and financiers are looking for opportunities in the systemic changes needed to build up recycling and waste management.

He said banks are interested in details like what level of recycled plastic companies should have in their products when they're evaluating investments.

"There's enormous investment that needs to be made in terms of the standardization or the design, the production, the collection, the sorting and then the recycling of plastics," he said. "The financial industry can actually help in financing each of those steps in the value chain."

His question around whether banks should finance chemical recycling echoes other debates about the role of the technology in policy, from debates in the Environmental Protection Agency to the halls of Congress.

He suggested the treaty should consider subsidies in early-stage technological development, as was done with renewable energy like wind and solar.

"What you will see in transitioning this part regarding plastic is that the most difficult part is to invest in something that is not proven," van Rijswijk said. "The question is who is going to pay for that, because companies will be saying, 'OK, I have a business model, and I have a certain amount of money that I spend on R&D. But there's still a big chance it will go wrong.'

"Is there a bridge to that, and ... also we need the equity funds but also the governments who step in where the return profiles are uncertain, to really get that kick-started as otherwise it will take a long time to really create an impact," van Rijswijk said.