A new report from a shareholder advocacy group says that with consumer brand companies cutting back on virgin plastics, and concerns rising over climate change, financial institutions should be worried about overinvestment in petrochemicals.
The April 8 report from As You Sow argues that addressing climate change and moving to a net-zero carbon economy will lead to significant reduction in demand for fossil fuel-based products, creating the risk of stranded assets over the long-term for plastics and petrochemicals.
"In the face of crises like climate change and global plastic pollution, shareholders must scrutinize whether investments in the production of plastics and other petrochemicals will live up to inflated expectations," said Lila Holzman, report coauthor and senior energy program manager at AYS. "Investors are likely to find that companies' reliance on plastics to recoup lost demand for fossil-based energy is problematic."
But the American Chemistry Council responded to the AYS report by arguing that plastics will be critical to addressing environmental and social challenges and reducing carbon consumption.
"Plastics enable advanced technologies such as wind turbines, electric vehicles and solar panels," said Joshua Baca, ACC's vice president of plastics. "As our standards for sustainability and the world's population grow, we'll need more plastics to live better and with a lower carbon footprint — not less.
"Today's plastics help to dramatically reduce greenhouse gas emissions by significantly lowering energy use in our homes and vehicles; efficiently delivering clean drinking water; and helping keep our food fresh and medicine and medical supplies sanitary," he said.
But the As You Sow report argued that the growth of plastics globally will make it an increasingly significant part of the world's remaining carbon budget.
It said that a "business as usual" growth for plastics could see it accounting for 19 percent of the world's carbon budget by 2040.
AYS also said that the buildout of plastics resin production on the U.S. Gulf Coast leaves the sector "increasingly vulnerable" to weather-related climate risk.
"Having more clarity on how companies plan to mitigate such risks is critical," Holzman said.
The report also said that 61 percent of the greenhouse gas emissions from plastics come from resin production, with 30 percent from the conversion to products and 9 percent at the end of life.
AYS Senior Vice President Conrad MacKerron pointed to recent announcements from consumer brand companies like Unilever, Nestle, PepsiCo and Procter & Gamble to reduce virgin plastics use.
He also told an online webinar announcing the report that AYS has negotiated an agreement with Keurig Dr Pepper to reduce its virgin plastics use by 20 percent.
"This report highlights how pressure to reduce the use of virgin plastics may deflate overly optimistic demand growth assumptions for the sector," he said.
Oakland, Calif.-based AYS has filed shareholder resolutions with plastic and consumer product companies for several years around various plastics issues.
For example, it filed a resolution this year with ExxonMobil asking for the company to report on how it intends to reduce risks from stranded assets, particularly with rising concerns about plastic pollution.
But the group said the Securities and Exchange Commission ruled that ExxonMobil did not need to include that resolution in its shareholder proxy this year.