There has been a spate of recent media coverage drawing attention to the environmental damage caused by plastics and the waste they generate. It points out the alarming global reach of plastic detritus, its chemical toxicity and appallingly harmful effects on wildlife and sea creatures.
Quintin Rayer explores how IFAs can help preserve our planet by selecting ethical funds and encouraging companies to stop using plastics.
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Q G Rayer (2018), Saving our seas, Citywire New Model Adviser®, issue 576, p19, 22 January 2018.
Popular BBC One television series Blue Planet II joins a spate of recent media coverage drawing attention to the environmental damage caused by plastic waste. The show and others like it point out the alarming global reach of plastic detritus, its chemical toxicity and appallingly harmful effects on wildlife and sea creatures. Indeed, so serious is the problem that the UK government has pledged to eradicate avoidable plastic waste as part of a 25-year plan.
While individuals can make personal decisions to reduce their plastics use, consumers are constrained by the choices available. This is where ethical investing steps in. It can encourage change by supporting companies that are environmentally minded while avoiding those that contribute to the issues.
Advisers and wealth management firms with expertise in ethical investing can support individual investors by helping to raise awareness of the issue with fund providers and identifying the ethical funds with the strongest credentials in this area.
The trouble with plastics is they are extremely useful. They are cheap, strong, lightweight, waterproof, chemically inert and durable, making them ideal for many purposes including storage and food wrapping.
As a result, even when aware of the issues, consumers struggle to excise them from their lives.
Recycling can help to some degree, but not all plastics can be recycled. Similarly, government initiatives, such as bag charging schemes, have made significant reductions in usage, resulting in an 83% drop in 2016-17 since 2014-15 and £66 million donated to good causes.
So ethical investing has a role to play in helping to cut off the problem at the root by encouraging firms to stop using or creating plastics and to seek alternatives throughout the supply chain. It can also support better recycling and disposal.
Key areas to examine when selecting companies to back or avoid are:
- Reduction in use of plastics by the use of more sustainable materials, including for packaging.
- Reuse of plastics, perhaps by the introduction of deposit schemes, such as historically were used with glass bottles, for example. But also to see used plastic as a resource.
- Recycling, whether enhanced plastics treatments, preferential use of more readily recyclable plastics, or use of plastics in ways that can be separated for recycling. Emphasis on products that can genuinely be recycled in the locations where they are used, rather than being only ‘technically recyclable’.
- Disposal, to ensure plastic waste is dealt with responsibly so that it does not enter oceans and other ecosystems causing harm.
Ethical portfolio managers can also engage with firms to encourage improvement. And investors can raise issues around plastics with their advisers. This allows them to leverage their savings, often including pension pots, in addition to actions in their daily lives.
Charity and pension fund trustees can also pursue a similar strategy. For charities with an environmental focus, this allows them to work towards their objectives even with funds invested, as well as achieving targets by disbursement.
In this respect, advice firms have a valuable role to play. Ethical investing can be a challenging area, and it can be hard for investors to select fund providers with the strongest skills and commitment in this area. By making use of the services of advice firms with specific expertise in ethical investing, underlying clients can have greater confidence that their money is being put to the best possible use.