It might not sound quite like a fairytale romance, but the match between millions of available investment dollars and under-funded ocean plastic waste management and recycling projects could provide solutions to one of the world’s most vexing environmental problems.
Investors are becoming increasingly aware of the enormous environmental and social problems created by the accumulated 150 million tons of plastic waste in the world’s oceans, a volume that grows by some 8 million tons every year. The proliferation of photos of dead sea animals and birds, their bellies stuffed with plastic bits, and tourist beaches populated by more plastic bags than people illustrates the issue.
With their growing awareness of the ocean plastic pollution problem, investors are also seeing the potential for returns for contributing to the massive efforts needed to deal with the issue.
In January, some 30 major global companies created the Alliance to End Plastic Waste (AEPW), committing more than USD 1 billion in investment over the coming five years to tackle this issue in one of the most comprehensive and well-funded efforts to date. AEPW members include private sector companies that make, use, sell, process, collect and recycle plastic products.
Global components of its strategy include partnering with cities on integrated waste management programs and collaborating with the UN and other agencies to host workshops on good governance.
But it has an initial focus is on South and Southeast Asian countries, where the ocean plastic waste problem is especially acute, accounting for about half of the plastic that flows into oceans annually. This focus is seen through AEPW’s investment of USD 10 million in a new initiative of impact investment management firm Circulate Capital and innovation agency SecondMuse that supports waste management technologies and start-up entrepreneurs. The initiative, called the Incubator Network, is designed to help coordinate work of several existing efforts towards achieving similar plastic waste reduction goals.
The Incubator Network is a targeted initiative within Circulate Capital’s broader goals to move plastic waste out of the environment and into the recycling value chain and improve the plastic industry’s circularity, beginning in five countries – India, Indonesia, the Philippines, Thailand and Vietnam – some of which have been replacing China as the world’s dumping ground for solid recyclable waste. Circulate Capital is partnered with the Ocean Conservancy and, separate from the AEPW’s infusion, expects to receive USD 90 million from initial investors including PepsiCo, Procter & Gamble, Dow, Danone, Unilever and the Coca-Cola Company.
The concentration of plastic waste in South and Southeast Asia is largely due to an extreme shortage of investment in waste management infrastructure, coupled with a lack of taxes that pay for waste collection and processing, as do garbage taxes in North America or Europe. Instead, waste collection is often handled by an informal sector composed of people who scavenge for sellable waste.
“We know where to start,” says Rob Kaplan, founder and chief executive officer of Circulate Capital. “We know the solutions that need to be put in place. We know that those solutions create economic value and environmental value and social value in these communities.”
According to the Ocean Conservancy, solving the ocean plastics problem would be helped considerably by three measures: reducing plastic in the waste stream, improving solid waste management, and increasing capture and re-use of plastics.
More than 100 businesses, large and small, in plastic waste management have already responded to Circulate Capital’s initial request for investment proposals, says Kaplan. Their pitches include new technologies for organizing plastic waste collection and sorting; innovations in chemical recycling at the waste-processing stage; and new ideas for re-incorporating plastic waste materials into manufacturing products such as packaging, furniture and other durables. The fund is now performing due diligence on several proposals and has said that funding could begin in the first quarter of 2019.
Increasing access to capital to develop waste management and recycling infrastructure could significantly encourage solutions, adds Kaplan. “If you’re working on the ground in South and Southeast Asia, or wherever plastic pollution is happening, and you try to talk about solutions, the biggest question that always comes up is ‘who is going to pay for it?’ ”
Circulate Capital also hopes its investments will help local entrepreneurs build solid track records, collectively generating an encouraging atmosphere for other investors to buy in along the plastic waste management chain. This can, in turn, boost local economic growth and job creation.
The Incubator Network currently includes WeWork Labs in India, working on early-stage startups; management consulting firm McKinsey & Company’s non-profit McKinsey.org; and the Ocean Plastic Prevention Accelerator (OPPA), which highlights startups tackling packaging and recycling in Indonesia.
“We’re seeing a pathway toward preventing plastic pollution – or at least ocean plastic pollution – in the next five to 10 years,” says Kaplan.