End of financing of single-use plastics, start of the enabled circular economy
Flexible, lightweight and low-cost, plastics are the building block of the modern economy, with their use growing 20-fold in the past 50 years. But plastic’s ascendance comes with high costs and heavy burdens: the World Economic Forum predicts that by 2050, at current growth rates, there will be more waste plastic in the oceans (by tonnage) than fish, writes Corporate Knights.
The energy sector is facing significant demand reduction for fossil fuel products as the world transitions to cleaner sources of electricity and fuel in response to the climate crisis. To hedge against shrinking demand from the power and transportation sectors, oil and gas companies are allocating significant resources to boost petrochemical operations. Investors must now ask whether relying on high demand growth assumptions for plastics and other petroleum-based products will indeed pay off or whether the industry’s growing Environmental, Social, and Governance (ESG) issues will continue to plague this attempted shift, suggests Shareholder advocacy group As You Sow.
Their report, “Plastics: The Last Straw for Big Oil?”, addressing the financial and environmental, social, and governance (ESG) risks of overinvestment in petrochemical infrastructure.
Proposed investments in expanded petrochemical infrastructure require enhanced scrutiny by investors as the potential for competitive, ESG, and stranded asset risk grows.
“In the face of crises like climate change and global plastic pollution, shareholders must scrutinize whether investments in the production of plastics and other petrochemicals will live up to inflated expectations. Investors are likely to find that companies’ reliance on plastics to recoup lost demand for fossil-based energy is problematic.”
Lila Holzman, report coauthor and senior energy program manager at As You Sow.
This timely report reveals how the proliferation of petrochemical infrastructure contributes to distinct risks that threaten shareholder value. The report examines the growing risks facing the energy sector’s bet on petrochemicals (especially plastics) — including stranded assets, climate change impacts, plastic pollution of land and oceans, greenwashing of “circular” solutions, community health impacts, and a loss of social license to operate, as well as the oversupply of plastic production capacity.
“Plastic waste flowing into oceans is a global environmental crisis. Major users of single-use plastic realize their use of plastic must decline substantially; some large consumer goods companies like Unilever and Procter & Gamble have already agreed to reduce use of virgin plastic by hundreds of thousands of tons. This report highlights how pressure to reduce the use of virgin plastics may deflate overly optimistic demand growth assumptions for the sector.”
Conrad MacKerron, senior vice president of As You Sow. “
“Given the multitude of ESG issues associated with plastics highlighted in this report, investors must be vigilant in seeking information about the viability of further investment in plastic production,” said Holzman. “As You Sow’s report provides an overview of key concerns for investors to consider moving forward.”
Prior resolutions focusing specifically on public health impacts from physical climate risks to petrochemical operations in the Gulf Coast garnered a majority vote at Phillips 66 and strong votes at Chevron and Exxon. Chevron Phillips Chemical Company (a joint venture of Phillips 66 and Chevron) responded to the resolutions by publishing enhanced information about physical climate risk management, but still lacks meaningful discussion of community health impacts seen during severe weather.
“New solutions are required from energy companies that seek to be well-positioned in a net-zero, circular economy. Increasing fossil-plastic production is not one of them,” said Joshua Romo, report coauthor and energy and plastics fellow at As You Sow. “Companies that fail to innovate and continue to invest in new plastic production face a landscape of growing risks and opposition.”