Momentum to take action against plastic pollution

The circular economy[1] is a key area of LGIM’s work on nature change, particularly natural resource use and pollution, as highlighted in our recently published Nature Framework. While the circular economy covers a broad range of topics, plastic pollution is a matter of global concern.

Over recent decades, the production and consumption of plastic, particularly single-use items, has surged. The resulting increase in plastic waste and pollution is a significant and growing threat to the climate, biodiversity, human rights and public health, which exacerbates system-level risks. We believe that action by the financial sector could play a role in tackling plastic pollution, and in enabling a sustainable, safe and just circular economy.

When we engage with companies in the plastics value chain, companies often cite a lack of necessary infrastructure, alternative materials and regulatory support as key barriers to addressing plastic pollution. As a universal owner, it is our view that system-level risks such as plastics pollution requires a system- and market-wide approach and that transitioning to a circular economy requires thoughtful governance and regulatory conditions.

That is why a vital part of our stewardship approach is engagement with other stakeholders and market participants, such as other investors, policymakers, regulators and non-governmental organisations (NGOs). A binding treaty such as the Global Plastics Treaty ensures relevant regulations address plastics pollution across borders and unites various stakeholders including governments, businesses and financial actors.

Global Plastics Treaty – a call for action

It is in this context that LGIM has co-signed a collective statement[2] to take action against plastic pollution ahead of the next round of negotiations (Intergovernmental Negotiating Committee on plastic pollution or INC-4). The purpose of the statement is to demonstrate support from the financial sector for an ambitious, international legally binding instrument (ILBI) to end plastic pollution.

As signatories to this statement, we each acknowledge that the financial sector can play a role in mitigating material financial risks related to plastic pollution through our financed activities and investments, where to do so is consistent with relevant legal frameworks and aligned with our fiduciary duty.

Below we lay out some key highlights of the statement:

We call on governments to agree an ambitious ILBI that sets a clear objective to end plastic pollution and that is supported by binding rules and obligations for governments to address the full life cycle of plastic.

A robust ILBI agreement in our view would:

• Set an objective to align financial flows, public and private, with the objectives of the ILBI
• Set harmonised targets and binding obligations across the plastics value chain
• Enable and ensure companies assess and disclose plastic-related risks and potential opportunities
• Promote an enabling policy environment for the transition to a sustainable and equitable economy that addresses plastic pollution, such as through the provision of well-designed schemes that help scale collection, sorting and recycling system
• Catalyse further private investment to end plastic pollution through public-private partnerships, blended finance and de-risking mechanisms
• Identify and optimise the co-benefits and synergies between financial flows addressing plastic pollution, climate action, and biodiversity preservation and restoration

LGIM’s position on plastic pollution

In addition to the Global Plastics Treaty, we also advocate for the following policies and regulations, all of which are covered under the treaty.

• Extended Producer Responsibility (EPR)[3] related policies: EPR policies establish obligations for producers to manage the entire lifecycle of the products and packaging they place on the market. EPR shifts the financial responsibility for managing products and packaging at their end-of-life from taxpayers and local governments to producer companies, thereby incentivising design for recycling and securing steady financing for necessary infrastructure
• Single-use plastics related regulation: Several countries and cities around the world have enacted or are planning to introduce regulations that ban the use of single-use plastics
• Nature-related (disclosure) regulation: We are supportive of the introduction of nature-related domestic and international policy that supports the circular economy. For example, Taskforce on Nature-related Financial Disclosure (TNFD)

LGIM commits to advocating for better outcomes at INC negotiations as we approach 2025. We will continue engaging with investee companies with appropriate escalation pathways to push companies in the plastics value chain to help better manage their risks and potential opportunities.

Source: LGIM views 18 April 2024. Assumptions, opinions and estimates are provided for illustrative purposes only. There is no guarantee that any forecasts made will come to pass.

[1] A circular economy is a way of using resources that minimises waste, pollution and environmental impacts and aims to decouple economic activity from the consumption of finite resources. Transitioning to a circular economy entails rethinking how products are designed, produced and discarded, with a view to optimising resource loops across the value chain.

[2] This statement was drafted by UNEP FI, PRI, Finance for Biodiversity Foundation, Business Coalition for a Global Plastics Treaty, Dutch Association of Investors for Sustainable Development (VBDO) and CDP. The full version of the statement is available here.

[3] Extended Producer Responsibility – OECD