By Citi Private Bank,
October 17, 2018Posted InCiti
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Will biodegradable plastics be an eco-friendly opportunity for investors?
The Indonesian island of Bali is a dream destination for holidaymakers from around the world. Famous for its bright blue seas and white sand coasts, Bali is one of the most beautiful places on earth. However, this paradise is under threat from mankind. In 2017, the island declared a ‘garbage emergency’. Many of its beaches are swamped with plastic water bottles, food packaging, and carrier bags. Rubbish collectors frequently have to resort to heavy machinery to clear the detritus.
This type of devastation is not simply a problem in Bali, but across the world. Each year, an estimated 8 million tonnes of plastic waste ends up in our oceans. Turtles and dolphins are among the most prominent victims, suffering gruesome injuries or death when they mistake plastic bags for food. Urgent action is therefore needed to avert this environmental tragedy.
Governments and consumers are increasingly alert to the problem. In 2015, the UK imposed a small charge on disposable plastic bags. In 2018, the Indian city of Mumbai brought in a particularly strict ban, outlawing the use of bags, cups, and bottles made of plastic. Penalties for infractions range from a fine up to jail time. Meanwhile, consumers appear increasingly keen to do their bit. Some three-quarters of individuals aged 15-20 have indicated they would be willing to pay more for a product that comes from a company committed to making a positive social and environmental change.
Despite such progress, more needs to be done. The packaging industry needs to embrace further new solutions. Over the years, many plastic packaging producers have reduced the plastic content of bags and have invested in plastic recycling facilities. However, the next major shift may be towards biodegradable plastics, which can be made from materials such as corn starch or synthetics. While durable enough to perform the tasks required of them, biodegradable plastics decompose within half a year or so, rather than over several centuries like many conventional plastics.
Consumption volumes of biodegradable plastics are currently low because they cost more to produce than traditional plastics. However, the growing consumer appetite for eco-friendly options and increasing government legislation may create an attractive incentive for many firms to switch over. This could create a potential opportunity for certain biodegradable plastics producers – and for their investors. To learn more, please see Citi GPS: Rethinking single-use plastics.
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