The new plastics economy: Tackling ocean pollution

August 23, 2019 — In this Q&A, the Eaton Vance floating-rate loan team offers its perspective on today’s loan market.

By: Craig P. Russ; Andrew Sveen, CFA; Ralph Hinckley, CFA; Christopher Remington

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By Yijia ChenESG Quantitative Research Analyst, Calvert Research and Management

Washington - World Water Day, set for March 22, is set aside by the United Nations as a day of observance used to advocate for the sustainable management of freshwater resources. Water pollution is such a serious global problem that access to clean water and sanitation is Goal No. 6 of the 17 United Nations Sustainable Development Goals (SDGs), and addressing environmental degradation is one of the overarching themes.

But access to potable water isn't the only area of concern -- our oceans are also under attack from the approximately 9 million tons of plastic discarded in seas annually. As more plastic waste covers the ocean and is exposed to sunlight, more gases are released, exacerbating the greenhouse effect and thereby the rate of climate change.

To tackle the plastics problem in oceans and beyond, looking for an alternative new material to replace conventional plastic seems to be the obvious first choice, as it would not require any change in consumer behavior/demand for single-use items. The most popular substitute is biodegradable plastic that decomposes naturally by microorganisms in the environment, and is made from all-natural plant materials, such as corn oil, orange peels, starch and plants.

Limits of biodegradables

However, biodegradable plastics may not be the best answer to the ocean-plastics problem, because the complete biodegradation of plastics requires conditions that are rarely met in marine environments. These plastics require industrial composters and prolonged temperatures above 50 degrees Celsius (123 degrees Fahrenheit) to disintegrate. Moreover, labeling plastics as biodegradable may increase the public's inclination to litter.1

Recycling solutions

In our view, parallel to new-material innovation, creating an effective after-use, recycling system for plastics should be the first priority in addressing the ocean problem. This area has huge business potential for innovative companies. Based on U.S. EPA data, the U.S. recycled 9.1% of its plastics generated in 2015.2 In contrast, the U.S. discards more than 30 million tons of plastic every year.

Of the 9.1% that was recycled, most was exported as after-use plastic waste to countries such as Malaysia, Thailand, and Vietnam, following China's ban on foreign plastic-waste imports in June 2018.3 These countries do not have the full capacity to deal with the large amount of plastics waste being shipped to them, and are thinking of setting similar bans. Instead of looking for other countries with less-stringent legislation, in our view, building a domestic single-use plastic-recycling system would be more beneficial in the long term.

According to a World Economic Forum's estimate, only 5% of the material value of plastics packaging is captured after a single use, corresponding to $4 billion -$6 billion out of a total $80 billion - $120 billion potential value.4 Reuse, recycling and composting should all be considered to extract the remaining 95% of material value from plastics. Reusable business-to-business packaging could decrease plastic packaging, as well as produce considerable savings on company product costs. This type of reusable business-packaging system could also improve recycling and encourage secondary markets for various recycled plastic products. For the plastic waste that cannot be reused or recycled, composting through industrial infrastructures would reduce the amount of plastic waste going into landfills or oceans, as well as lower the possibility of water contamination.

A responsible approach

Calvert's ESG investment research process considers the environmental impacts of a company's business operations as well as the impact of its products and services. Controversies related to negative environmental impacts (such as toxic pollution and oil spills) are assessed in the context of ocean pollution. In addition, Calvert has developed a customized strategy that specifically considers sector impacts on ocean health and seeks to reduce the risk that a portfolio may contribute to ocean degradation.

Bottom line: Curbing the growing problem of plastics clogging our oceans requires innovative business solutions, like the creation of new, biodegradable materials and effective after-use recycling systems. This represents a major opportunity for companies working to address ocean-related - and environmental - issues.

The views expressed in these posts are those of the authors and are current only through the date stated. These views are subject to change at any time based upon market or other conditions, and Eaton Vance disclaims any responsibility to update such views. These views may not be relied upon as investment advice and, because investment decisions for Eaton Vance are based on many factors, may not be relied upon as an indication of trading intent on behalf of any Eaton Vance strategy. The discussion herein is general in nature and is provided for informational purposes only. There is no guarantee as to its accuracy or completeness.