Sustainable private equity: investing in plastic circularity and its opportunities | Lombard Odier

A growing number of clients are aware of the need to contribute to funding the transition to a sustainable economic environment and the opportunities associated with it. Due to the strong interest expressed by next generation investors, thematic strategies such as the circular low-carbon model for plastics are popular across all our markets. We asked Victoire Carous and Christopher Tritten, co-managers of the Plastic Circularity portfolio of Lombard Odier Asset Management (LOIM), for their perspective on the benefits of these sustainable private equity strategies, and how they can meet clients’ goals.

How can we tackle the problem of plastic waste?

The solution to reducing plastic waste (of which only 10% is currently recycled) involves the transition to a circular model, which creates a closed-loop system minimising damage to nature and biodiversity during the production and disposal of plastic. Emissions from the plastics value chain (production and end of life) currently represent 4% of all emissions1, a level comparable to the aviation sector. On the current trajectory, in 20 years these emissions could represent 20% of the allowed annual carbon budget under a scenario of global warming of 1.5 degrees Celsius2.

To make the plastics value chain circular and lower-carbon, we first need to change the way we produce materials, by reducing the use of petroleum-derived commodities in favour of recycled or bio-based inputs. Then, we need to invest in ‘reuse, repair and refill’ solutions to change the way consumers and businesses use plastic and extend its lifespan. Finally, circularity cannot be achieved without significantly improving and expanding the way we collect, sort and recycle plastic waste.

The transformation of plastic waste into resources represents a tremendous opportunity, particularly as consumer trends, business best practice and regulatory frameworks evolve to better address the challenges of plastic pollution.

Read also: 10 ways to rethink plastic through technology

Emissions from the plastics value chain (production and end of life) currently represent 4% of all emissions, a level comparable to the aviation sector

Why does private equity facilitate access to investment opportunities?

By turning to private companies, investors gain access to parts of the economic environment that are not covered by stock markets, because these companies represent the bulk of the economy. For example, in the United States, there are about 11,000 private companies in which you can invest with a top line of more than USD 100 million3, compared with only 2,700 companies listed on the stock exchange. The publicly traded equity market covers only 0.01% of companies in the United States, while 99.99% of companies are private. Private companies can take on different forms, from highly innovative start-ups that develop new solutions to family businesses that are leaders in their niche market and have well-established technologies.

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Taxonomy

• Private Equity
• Private Equity
• plastic pollution
• Circular Economy
• Plastic waste