Advertisement

Three stocks poised to profit from the plastic problem

Plastic pollution has risen to the top of the public agenda forcing businesses to adjust. Professional investor Mark Whitehead picks three stocks that should thrive in the new post-plastic environment.

A professional investor tells us where he'd put his money. This week: Mark Whitehead of the Securities Trust of Scotland highlights three favourites.

Global consumer goods companies are prioritising phasing out plastic packaging. The World Economic Forum estimates that 95% of the value of plastic packaging, or $80bn-$120bn annually, is lost to the global economy because it is only used once. A large amount of this plastic waste finds its way into our oceans. Around eight million tonnes of the stuff enters the marine environment each year.

Advertisement - Article continues below

With these kinds of statistics making the headlines, plastic pollution has risen to the top of the public agenda. This has forced businesses to adjust their approach to packaging away from a "linear" single-use model towards more sustainable methods.

Consumer activism

Consumer-goods companies have grasped that the tide of consumer activism on plastic waste has been phenomenal and shows no signs of abating. In a sector where brand strength is a key determinant of long-term success, the risk of consumers boycotting certain products because of a lack of packaging sustainability is a real concern not to mention the increasing regulatory pressure we are seeing from many governments. The European Union's ban on a raft of single-use plastics is due to come into force in two years' time.

Advertisement
Advertisement - Article continues below

Undoubtedly, there are costs associated with moving towards a more sustainable packaging model, including capital expenditure on plant operations, the switching of supply chains, and potentially higher input prices. However, aside from the regulatory and reputational risk of not adapting, there is also an opportunity for companies that innovate in areas such as bioplastics or improved recyclability to capture significant market share.

ESG: key to long-term growth

From an environmental, social and governance (ESG) analysis perspective, these kinds of issues are a vital consideration for us in understanding a company's ability to deliver long-term growth. For many of the consumer goods companies we engage with, moving swiftly to a packaging solution that is more in line with the circular economy minimising waste through recycling and reuse is increasingly seen as not only desirable, but imperative for their long-term operations.

Advertisement - Article continues below

For instance, UK drinks manufacturer Britvic (LSE: BVIC) last year made substantial investments in recyclable packaging products at its UK plants. According to the company, the result so far has been a saving of 600 tonnes of primary plastic, but the expenditure is also part of a wider commitment to tackle plastic waste as founding signatories to the UK Plastics Pact.

The deal has been adopted by 42 companies who aim to make 100% of their plastic packaging reusable, recyclable or compostable by 2025.

Danone (Paris: BN), another company we actively engage with through our ownership, is supporting initiatives that strengthen circular infrastructure, in particular for countries without formal collection networks. In addition, Danone is launching 100% recycled polyethylene terephthalate (PET) bottles in its major water markets by 2021.

Likewise, PepsiCo (NYSE: PEP) is targeting zero waste to landfill across all its direct operations through efficient and responsible waste management by 2025. This includes designing 100% of packaging to be recyclable, compostable, or biodegradable.

Advertisement
Advertisement

Recommended

Share tips of the week
Share tips

Share tips of the week

MoneyWeek’s comprehensive guide to the best of this week’s share tips from the rest of the UK's financial pages.
17 Jan 2020
Share tips: eight stocks that should deliver robust returns
Share tips

Share tips: eight stocks that should deliver robust returns

Ryan Ermey of US publication Kiplinger’s Personal Finance chooses his favourite stocks for the next decade, which should be able to grow for years.
28 Dec 2019
Share tips of the week
Share tips

Share tips of the week

MoneyWeek’s comprehensive guide to the best of this week’s share tips from the rest of the UK's financial pages.
20 Dec 2019
Share tips of the week
Share tips

Share tips of the week

MoneyWeek’s comprehensive guide to the best of this week’s share tips from the rest of the UK's financial pages.
13 Dec 2019

Most Popular

Don’t despair on dividends – these companies could be set to bring them back
Income investing

Don’t despair on dividends – these companies could be set to bring them back

The value of dividends paid out by UK stocks has plummeted this year as companies “rebase” their payment policies. But things could soon start to look…
6 Aug 2020
Platinum: the precious metal that looks set to play catch-up with silver and gold
Silver and other precious metals

Platinum: the precious metal that looks set to play catch-up with silver and gold

Gold and silver continue to soar, but there's still time to get in. And there's another precious metal that looks set to go on a bull run too, says Jo…
7 Aug 2020
The MoneyWeek Podcast: how to age well and profit from the “longevity dividend”
Investment strategy

The MoneyWeek Podcast: how to age well and profit from the “longevity dividend”

Merryn talks to economist and author Andrew J Scott and discusses how we can profit from the "longevity dividend" as we live longer; why we need to re…
6 Aug 2020