A growing global awareness of the negative effects that single-use plastics have on the environment has more investors seeking companies that are reducing or reusing these materials.
A recent Responsible Investment Association survey found that 82 per cent of Canadian investors think it’s important for the companies whose stocks they own to reduce plastic waste while 70 per cent believe companies that reduce plastic waste from their products and packaging will be better long-term investments.
The survey, sponsored by AGF Investments Inc. and Desjardins Group, also found that 79 per cent of investors want their advisors to give them responsible investment options in this area.
We asked four experts to provide their top picks for companies making a concerted effort to reduce plastic:
Scott Knight, senior portfolio manager, international and U.S. equities, Addenda Capital Inc. in Toronto
Mr. Knight says his team tries to evaluate how management at different companies is thinking about sustainability issues, such as plastic packaging, and how forward-looking they are when it comes to reducing waste. From there, they evaluate the financial impacts of making those changes and if they’re doable.
“It’s not just what they’re saying, but what they’re doing. ... The challenges and how they’re facing them,” he says.
His first pick is beverage and snack maker PepsiCo Inc. (PEP-Q), which has a goal to use 25 per cent recycled content by 2025 and reduce virgin plastic by 35 per cent. The company is also working on several initiatives, many in partnerships, to reduce plastic pollution.
“We like their approach,” Mr. Knight says. “You’re investing in social licence to some extent. … If the public turns against plastic bottles and everything you sell is in plastic bottle, you’re in trouble.”
His second pick is France-based alcoholic beverage company Pernod Ricard SA (PDRDY-OTC), which has committed to eliminating single-use plastics for its marketing and promotional products.
“It doesn’t sound like much,” he says, but there’s a lot of it when you consider it’s one of the largest producers of spirits with some of the best-known global brands.
Mr. Knight says the company plans to use 100-per-cent recyclable, compostable, reusable or bio-based materials by 2025.
While there’s not a lot of additional information available on how Pernod Ricard plans to get there, Mr. Knight is encouraged by the company’s history of protecting the environment, including its lower water use through its grape-growing process.
“[Pernod Ricard’s] wider commitment to sustainability is good,” he says, noting that executives’ compensation is tied to the company’s overall sustainability performance.
Andrew Simpson, director, investment management, Vancity Investment Management Ltd. in Vancouver
As the use of plastic is “a pressing global issue,” Mr. Simpson says he and his team look to invest in companies that can both reduce and reuse plastics.
One of his top picks and a stock they own in the funds they manage is Germany-based athletic and footwear company Adidas AG (ADDYY-OTC), which is making millions of pairs of shoes each year using recycled plastic ocean waste. The company says it expects to make 11 million shoes using recycled ocean plastic waste in 2019, up from five million last year and one million when the program started in 2017.
“From an economic perspective, [Adidas] sees value ... in untapped demand for its products,” Mr. Simpson says. “In other words, consumers who may not have bought Adidas but like the recycled product concept.”
Another company currently on his firm’s watch list is Japan-based chemicals company Kaneka Corp., which trades on the Tokyo Stock Exchange. Mr. Simpson says Kaneka is a world leader in developing marine biodegradable plastics.
“These aren’t a huge part of the supply chain for plastic products,” he says, but demand is growing. “It’s an area in which companies like this are taking a leadership role.”
Jonathan Foley, responsible investment analyst, Desjardins Global Asset Management in Montreal
Mr. Foley’s focus is on large-cap stocks, and he says Desjardins Global Asset Management engages with companies in an effort to influence them to make changes to improve their environmental, social and governance footprint.
“We put a lot of emphasis on dialogue” with companies, he says.
One of his picks is Loblaw Cos. Ltd. (L-T), which he believes is a leading retailer in Canada around reducing its own plastic footprint.
“It’s part of [the company’s] core values. They really want to reduce plastics and food waste,” which Mr. Foley says is good for the environment and the company’s bottom line.
He cites the example of Loblaw’s recent partnership with waste-management company TerraCycle and its Loop initiative, in which customers can have their groceries delivered in reusable and returnable plastic bins.
Although companies like Loblaw “aren’t perfect,” Mr. Foley says his team likes to “see companies moving forward and moving the goalposts year after year.”
He also likes IPL Plastics Inc. (IPLP-T). Although it may seem counterintuitive to invest in a plastics company, Mr. Foley says the company makes bulk containers and industrial bins with high-quality resin that can be reused and recycled. The company also uses its own reusable plastic shipping containers and palettes to ship its products, then recycles them when they wear out.
“They’re looking [to work toward] a circular economy,” he says, adding that the company also has a research and development team devoted to working on new, innovative products. It’s also working with various stakeholders on how to improve the recycling system.
Martin Grosskopf, vice-president and portfolio manager, AGF Investments Inc. in Toronto
Mr. Grosskopf says there’s increasing awareness about plastic pollution among investors and many want to “speak through their investments” on the issue. He says AGF Investments looks for companies that are providing some kind of solution to the sustainability issue.
“We don’t just gravitate to companies that improve their footprint. That’s important ... but we want to see a business model around it,” he says. “We also like companies that deal with the huge waste stream that still continues even after the three ‘Rs’ [reduce, reuse and recycle].”
One of Mr. Grosskopf’s picks is Trex Co. Inc. (TREX-N), a Winchester, Va.-based manufacturer that recycles plastic bags and turns them into composite decking products. Trex says on its website that its products are made from a blend of 95 per cent recycled wood and plastic film.
“The business model itself is strong. It’s not just that they have a green product ... but they’re part of the circular economy and are gaining share,” he says.
Another of his picks is Kingspan Group (KGSPY-OTC), a company based in Ireland that recycles plastic bottles into wallboard insulation. The company is also working with the Ecoalf Foundation to recover plastic bottles from the ocean. “Both sides are important,” Mr. Grosskopf says.
He says that Kingspan has committed to recycling 500 million plastic bottles each year by 2023 for use in its insulation and one billion bottles a year by 2025.