As mainstream investors scramble to catch up to the burgeoning possibilities of climate-tech investing, one area of enormous opportunity stands out — circular plastic. To drive transformational change, we need to break siloed-thinking and invest holistically in the systems we aim to affect. Some of the most exciting innovations happening today include new technologies that are disrupting a cross-section of supply chains and sectors from materials and fashion to food waste to reusable business models while accelerating the circular economy in plastics. And all of them have a significant and direct impact on climate change.
In this piece I discuss the emerging consensus around plastic pollution mitigation and climate change and how investors can use this lens to find many of the most exciting climate-tech innovations out there.
An activist holds a placard depicting planet Earth during a "Youth Strike 4 Climate" protest march ... [+]
Why climate-tech and plastics? Because plastic pollution and climate change are inextricably linked
Until relatively recently, we only had a patchwork understanding of the effects of plastic pollution on climate, and most of that information was limited to developed markets. But, to achieve our goals on both climate and plastic, we need to focus energies on lower-and middle-income economies in Asia, which are desperately seeking new ways to mitigate the flow of more than 50% of the world’s ocean plastic that leaks in the region and reduce their climate impacts. We now have insightful data coming out of the South and Southeast Asia (SSEA) region and it shows that plastic pollution and climate change are inextricably linked. Additionally, according to a recent McKinsey report, Asia stands out as being more exposed to physical climate risk than other parts of the world in the absence of adaptation and mitigation.
Take India and Indonesia. We could eliminate almost 150 million tons of greenhouse gases (GHG) from the environment if we prevented 100% of the plastic leakage in India and Indonesia by 2030. This is the same amount of GHG savings derived from shutting down 40 coal-fired power plants.
Open burning, incineration, or burning of plastic waste in factories result in the largest carbon footprint out of all end-of-use fates for plastic waste. In India, 8% of all plastic waste is estimated to be managed through burning. However, it contributes 38% to the total carbon footprint of plastic waste.
The investment opportunity at the nexus of climate-tech and plastics
Climate change and plastic pollution may be the problems we are solving for, but the solutions are much broader. By widening the lens of climate-tech beyond the intuitive applications — such as carbon capture or renewable energy — and also focusing on the root-causes of plastic pollution, we can identify a range of high growth opportunities at the nexus of climate-tech and plastics that can help us take recycling into the next century. Many of these companies are located in Europe and the United States and have proven technologies and ambitions to expand into Asia where the problem is so acute.
We must apply disruptive, deep technologies like synthetic biology, artificial intelligence, and material science to reveal exciting climate-tech investment opportunities that also facilitate the creation of a circular economy in plastics. It’s not a niche strategy — they exist across a wide diversity of sectors and value chains, as mentioned above such as new materials, food and ag, consumer goods, and packaging.
Investments tend to fall into four buckets of innovations:
- Innovative Materials – These types of innovations aim to lessen the carbon footprint at the beginning of the cycle by rethinking the materials a product is made from. For example, new bio-based solutions for conventional plastic packaging or products that have lower carbon footprints and better end-of-use performance. Phase Change Solutions, for instance, has developed a material that improves temperature control in supply chains, which reduces waste, and, because of its bio-based polymer approach, it also has better climate and circular performance compared to conventional materials.
- Innovative Delivery Models – These types of innovations also aim to lessen the carbon footprint at the beginning of the cycle by reimagining how a product can be consumed or delivered. For example, think of a next generation bottle of laundry detergent, such as the one designed by Algramo, where you can get a refill from a vending machine, and it comes in a design that can be reused and then reused at the next vending machine. Starbucks
SBUX recently announced a program that allows customers to order their beverage in a reusable cup for a $1 deposit. When they return the cups at a participating store's contactless kiosk, or at-home through a Seattle-area service called Ridwell, they'll get the $1 back and 10 rewards points through the chain’s loyalty program. The cups are then professionally cleaned and sterilized. - Advanced recycling tech that enables complete plastic-to-plastic recycling at the molecular level – This is all about recycling technologies at the end of use of plastics. These solutions help us recapture the material by breaking it back down to its original form. For instance, Circ can recycle your mixed textiles (e.g. cotton-poly blend t-shirts) back down into cotton and the building blocks of polyester for new clothes. Apparel is one of the most carbon-intensive products, and by driving a circular model, we can cut that climate impact significantly.
- Digitization technologies that involve the application of big data and artificial intelligence to drive efficiency and expand circular supply chains – These involve the application of emerging technologies such as an AI image recognition and recycling sorting technology company; a biodegradable solution for conventional plastic packaging; or digitizing logistics to improve efficiency and circularity at a global scale. The more efficient these value chains, the less waste and the lower carbon intensity.
Circular economies have always been about the creation of holistic solutions to some of our biggest environmental challenges like plastic pollution. And the only way to fully address the enormous scope of this particular problem is through an understanding of the linkages between plastic pollution and our climate.
In short, applying climate-tech innovations to the plastics crisis may be the key to finally stemming the tide, and presents climate-focused investors with the potential for meaningful financial and impact outcomes.
