Investing in innovation to reduce plastic waste

A linear plastic waste issue

Plastics today are one of the building blocks of modern life. We rely on the versatility and durability of the material to such an extent that our production of plastic has exploded since commercialisation in the 1950s, growing nearly 9% per annum¹. This means vast quantities of plastic waste – more than 350 million tons per year. 

Most plastics are technically recyclable, but today’s linear model means most plastic waste goes into landfill. Continuing this trend will have significant consequences. In a business-as-usual scenario, we might expect plastic packaging waste to double between 2016 and 2040²; ocean leakage to triple; and plastic stocks in oceans – the total amount of plastic present in the world’s seas – to quadruple.  

FIG 1. Plastic production has risen sharply since the 1950s and most discarded plastic goes unrecycled³

Beyond waste, the linear plastic economy is a significant contributor to global greenhouse gas emissions, and microplastics pollution – with microplastics present in food, the air and throughout the human body – is causing increasing alarm. 

Read also: Plastic wrap: private markets, public policy for circularity

Investing in a circular model

A major effort, involving stakeholders across society as well as public and private investment, is needed to transform the plastic value chain into a circular model. Crucially, increasing circularity in plastics mitigates the industry's impacts on climate and biodiversity. The Circulate Initiative estimates a total of USD 17 trillion of investment will be needed by 2050 to significantly reduce mismanaged plastic waste. 

Fortunately, new and innovative solutions designed to address plastic waste are coming to market with increasing frequency, driven by policymaking, consumer demand and technological developments.

Innovation and private equity

Our Plastic Circularity strategy is built to support the firms addressing the plastic waste crisis while aiming to generate reliable returns for investors. As governments and companies around the world move to tackle plastic waste, we expect more and more attractive opportunities to arise in the dynamic sub-industries exposed to plastics sustainability. Figure two provides a snapshot of some of the technologies and solutions being explored.

FIG 2. A wide range of plastic waste solutions are in the pipeline⁴

The strategy is supported by the Alliance to End Plastic Waste, a major industry body working towards plastic circularity; the portfolio managers work closely with the AEPW on research and analysis, including site visits, deal sourcing and transactions. 

We have an upper limit of 20 to 25 holdings and invest globally with a focus on European firms and a growth-stage bias. Current investment targets include companies developing lower-carbon circular materials; firms working on repair, reuse and refill processes; and recyclers⁵. To date, the strategy has made investments in four exciting firms. 

• 900.care⁶, a French company that produces refillable bathroom products, received lead funding to accelerate its global expansion. We are impressed by the firm’s capacity to reduce plastic waste and greenhouse gas emissions, as well as its potential to shrink industrial production footprints 
• The strategy also co-led funding for Calyxia⁶, which develops biodegradable microcapsules. The firm’s innovative solution significantly reduces the need for plastic microcapsules, which are currently found in an enormous range of products 
•  Other portfolio companies include Wattron⁶, a provider of efficient digital heating and sealing systems used in the packaging industry; and AMCS, a software firm focused on the waste and recycling industries. 

From new usage models to sustainable alternatives, innovation with strong investment potential in this space presents ample opportunities for private equity investors.