Will a global plastics treaty attract investments in sustainability?

Some big financial firms and groups like the Alliance to End Plastic Waste say that a global plastics treaty could help attract investments to deal with waste and environmental challenges.

With talks on a treaty set to start Feb. 28 at a major United Nations environmental conference in Kenya, social investment funds backed by the plastics industry, like AEPW and Circulate Capital, are arguing that a treaty could push new government policies worldwide that make green investment more viable.

There are dollars-and-cents challenges right now that make it harder for investors to justify putting money into waste management and recycling, they say.

Market volatility, underfunded waste management systems around the world and a disconnect between demand for recycled content and the available supply create very challenging conditions, said Ellen Martin, chief impact officer for Singapore-based Circulate Capital.

"All of these factors combine to create greater risk," she said. "It really scares a number of investors. I think policy plays a critical role in de-risking and unlocking investment."

Circulate Capital, which is funded by Dow Inc., Chevron Phillips Chemical Co. LLC and consumer product companies, launched a $106 million fund in 2019 to invest in waste management in Asia.

It's a message also coming from financial firms like Achmea Investment Management, a Dutch company that manages about $230 billion in assets.

Achmea last month joined 70 financial firms, consumer product companies and a few plastic packaging makers in a public call for a global plastics treaty. Achmea said institutional investors want to reduce financial risks from plastics pollution in their portfolios.

The investment groups all spoke in a Feb. 10 webinar looking at financial mechanisms a plastics treaty could use to bring in more money to address those challenges.

The packaging firms and petrochemical companies that Achmea is in contact with say that unless regulations and laws change, it'll be harder for them to make their case for investment in new solutions, said Arthur Van Mansvelt, a senior engagement specialist for Achmea.

"They mentioned that as long as the business as usual is cheaper than the sustainable solutions, they cannot really bring their potential solutions up to scale," he said. "That's also the reason why many businesses support this business call for a better global and harmonized framework."

An executive with the Alliance to End Plastic Waste, a $1.5 billion effort launched by plastics firms and other businesses in 2019, agreed a treaty could make policies and laws worldwide more attractive to investment.

"A well-structured treaty on marine litter and plastic pollution can help to mobilize capital and accelerate innovation and the development and deployment of solutions," said Nicholas Kolesch, vice president of projects with AEPW.

"It's about the consistency and stability of a regulatory environment," Kolesch said. "A global treaty can really provide the benefit of harmonizing policy frameworks across the world, which as we know are very fragmented today."

It's not yet clear what direction the plastics treaty talks could take, but the webinar, which was organized by the Norwegian government, looked at potential financing mechanisms the agreement could use.

The webinar included a speaker from the Global Environment Facility, a multinational body that has coordinated investment programs coming from other treaties, including climate agreements, the Stockholm Convention and the Convention on Biological Diversity.

The Nordic Council, a group of Scandinavian governments, also released a report on finance mechanisms in conjunction with the webinar.

One of the authors, Per-Olof Busch, a researcher at the Berlin-based climate think tank Adelphi, said it's important for the treaty to send "strong market signals" to push investment.

"If nobody knows in what direction and at what speed this transition will develop, then the chance and also the expectations are lower than if there's a clear signal," Busch said. "It's important that there is a strong signal we will move towards a more circular plastics economy. The direction has to be given by policymakers."

He said options for a treaty could include recycling targets, caps on virgin resin production and a global tax on plastic production.

The agreement in 2021 on a global minimum corporate tax shows that it's "not completely unfeasible" to negotiate an agreement on a plastics tax, and he pointed to other international mechanisms that collect money from industry, like the Oil Pollution Compensation Fund.

But he said that because it took years to reach agreement on a worldwide minimum corporate tax, plastics treaty negotiators may be better served to look at other tools, rather than spend 20 years negotiating on a global tax.

"In my view, it's better to start with targets on virgin plastic production and targets on recycling, because this gives signals to the markets and actors that they have to move in another direction, to a more circular and sustainable plastics economy," he said.

Busch argues that it's important to focus on solutions beyond waste management because it won't be possible to build collection systems fast enough to keep up with the expected growth in plastics waste.

"Even if we invest lots of money and the Alliance to End Plastic Waste helps in distributing this money and finding effective technologies, we won't be able in the future to manage all the plastic waste that is generated," he said. "If you think about the projections for the next 20 or 30 years, it's to quadruple, and I don't know how investments from private or public actors can catch up with this speed."