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Is plastic waste an opportunity for investors?

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Morgan Stanley's chief sustainability officer, Audrey Choi, outlines the bank’s perspective on tackling the problem of plastic waste


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Audrey Choi,
Chief Sustainability Officer and Chief Marketing Officer, Morgan Stanley

With consumers embracing sustainability and looking to establish a more circular economy around plastics, corporate business models and industry are being forced to respond and, in the process, opportunities are growing for investors.

Since large scale production of plastic began in the early 1950s, it has swiftly become essential to the economy, transforming how we live in ways beyond anything we could have anticipated. It is estimated that over the past 70 years, 8.3 billion metric tons of plastic have been produced with 6.3 billion metric tons becoming waste.i 

Because plastic is non-biodegradable and its use has outpaced our ability to develop recycling and reuse infrastructure, 79% percent of the total amount of plastic waste produced remains with us today in landfills or the natural environment.ii But plastic waste is not solely an environmental problem, it is also an economic challenge with up to $120 billion disappearing from the economy every year through the disposal of single-use plastics.iii

Our focus on the challenge of plastic waste

Finding a solution to the plastic waste problem will require individuals doing their part, as well as collaboration between government, philanthropy, industry and finance. In April 2019, we became the first financial firm to commit to large-scale action around plastic waste when we announced the Morgan Stanley Plastic Waste Resolution to help facilitate the prevention, reduction and removal of 50 million metric tons of plastic waste by 2030.iv  

The data shows that investors care strongly about environmental and social issues, and that familiarity with and enthusiasm for sustainable investing is currently at an all-time high.

As proof of concept, we underwrote a $10 million World Bank blue bond with proceeds focused on reducing plastic waste in oceans and promoting marine resources.v  Six months later, Morgan Stanley was the green structuring advisor and lead underwriter for PepsiCo's inaugural $1 billion green bond, which included a target of reducing Pepsi’s virgin plastic content by 35% across its beverage portfolio by 2025.vi

Investor interest continues to grow

In 2019, Morgan Stanley’s Institute for Sustainable Investing polled 1,000 active individual U.S. investors about their thoughts on sustainable investing. The data shows that investors care strongly about environmental and social issues, and that familiarity with and enthusiasm for sustainable investing is currently at an all-time high. Among the environmental, social and governance (ESG) issues investors have the most interest in are “plastic reduction” and “climate change,” and 85% are interested in sustainable investing.vii

Wall Street is waking up

Morgan Stanley established Global Sustainable Finance in 2009, with a focus on integrating ESG considerations across all core businesses at a time when most financial institutions weren’t paying attention to how such a strategy could create business opportunities. As news headlines have increasingly called attention to the impact of plastic waste to oceans, waterways and the environment, consumers have pushed companies to seek better ways to manage their plastic waste footprints — and now Wall Street is taking notice. The number of earnings calls that included mentions of “plastic waste” increased 340% year over year in 2018,viii and the elevated public awareness of the impacts of plastic waste is driving an evolution in consumer preferences. This, along with increased regulatory pressure, has led many corporations to seek ways to mitigate their plastic waste footprint and has created an opportunity for capital markets to help through the allocation of capital. 

The future of investing in plastic waste is clear

As photographs of beaches buried under mounds of plastic waste continue to go viral, and as the equivalent of a garbage truck’s worth of plastic waste is dumped into the oceans every minute,ix the question is: How do we plan to deal with our plastic waste problem? The search for answers across the plastics value chain is an opportunity for corporations, financial firms and investors to pioneer innovative solutions while mitigating reputational risk, benefiting the environment and bolstering their own financial bottom lines.

i. https://www.sciencedaily.com/releases/2017/07/170719140939.htm

ii. https://phys.org/news/2017-07-billion-metric-tons-scientists-total.html

iii.MacArthur, D. E., D. Waughray, and M. R. Stuchtey. "The New Plastics Economy, Rethinking the Future of Plastics." World Economic Forum. 2016.

iv. https://www.morganstanley.com/Themes/plastic-pollution-resolutionv. https://www.worldbank.org/en/news/press-release/2019/04/03/world-bank-launches-bonds-to-highlight-the-challenge-of-plastic-waste-in-oceans

vi. https://www.pepsico.com/news/press-release/pepsico-prices-us1-billion-green-bond-to-fund-key-sustainability-initiatives10072019

vii. https://www.morganstanley.com/ideas/sustainable-investing-growing-interest-and-adoption

viii. Linda-Eling Lee and Matt Moscardi: “2019 ESG Trends to Watch,” MSCI.

ix. https://www.weforum.org/agenda/2016/10/every-minute-one-garbage-truck-of-plastic-is-dumped-into-our-oceans/


Disclosures:

This material has been prepared for informational purposes only, and is not a solicitation of any offer to buy or sell any security or other financial instrument, or to participate in any trading strategy.

The returns on a portfolio consisting primarily of Environmental, Social and Governance (“ESG”) aware investments may be lower or higher than a portfolio that is more diversified or where decisions are based solely on investment considerations. Because ESG criteria exclude some investments, investors may not be able to take advantage of the same opportunities or market trends as investors that do not use such criteria.

Past performance is not a guarantee or indicative of future performance.

Please note that there is currently no standard definition of blue or green bond. Without limiting any of the statements contained herein, Morgan Stanley makes no representation or warranty as to whether these bonds constitute a blue or green bond or conforms to investor expectations or objectives for investing in blue or green bonds. For information on characteristics of the bonds, use of proceeds, a description of applicable project(s), and/or any other relevant information about the bonds, please reference the offering documents for the bonds.

Morgan Stanley & Co. LLC and Morgan Stanley Smith Barney LLC. Members SIPC.  CRC 2867324 01/20

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