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How to invest in the war on plastic

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Written by: Joel Dungate
17/05/2018
As the UK government has declared war on plastic pollution over the next 25 years, what opportunities are there for the environmentally-conscious investor?

Earlier this year the Prime Minister pledged to eradicate all ‘avoidable plastic waste’ by 2042. Plastic straws, cotton buds and wet wipes are items which could potentially be banned in England.

This is likely to have an adverse effect on consumer goods companies that will need to reduce plastic use in their packaging.

Packaging companies are the most likely to be affected by the moves to reduce plastic waste and depending on their adaptability and innovation, they could be winners or losers.

Those packaging companies that are considering new, more environmentally-friendly technologies will benefit from the phase out of plastic, while those that are slow to change could be left behind.

RPC is an example of a packaging company which is also committed to sustainability. The group seeks to create products that provide a sustainable solution while still being fit-for-purpose.

Reducing plastic is just part of a wider effort on the part of many companies to become more socially responsible. It is actually in the interests of many companies to secure their long-term sustainability.

There are signs companies have already considered ways to adapt, with the likes of Unilever committing to 100% recyclable plastic packaging by 2025.

Other companies to make a similar commitment include Marks & Spencer, The Coca-Cola Company, L’Oréal and Nestlé. So these companies, given their adaptability, may be long-term winners in the war on plastic.

Some investors may question whether they should abandon plastic producing companies altogether. As noted above, these companies are making a concerted effort to reduce their plastic waste, so it may be more beneficial to work with these firms and make them accountable for the promises they have made.

Another question from investors may be ‘is it wrong to profit from plastic?’ That might be one for a philosopher. But, if the future is premised on sustainable investment – as many argue it has to be –  then it might not be financially advantageous in the long run.

The best place to start for investors new to this space, I would say, is with those funds which market themselves as ‘ethical’ or ‘sustainable’ or ‘renewable’ and benefit from the expertise of a professional manager.

There’s Impax Environmental Markets which seeks growth via exposure to cleaner and more efficient energy, water and waste services or the Renewables Infrastructure Group for instance. Other renewable infrastructure funds include Greencoat UK Wind or Bluefield Solar.

Joel Dungate is investment analyst at Redmayne Bentley

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