Alexandra Tracy, Green Finance Advisor of Friends of the Earth (HK)

Single use plastic packaging globally is expected to be a US$26 billion industry this year, with high growth driven propelled by the spending power of the burgeoning middle class across Asia, in particular.  A study by consulting firm Future Market Insights predicted that the market for throw away plastic will expand by 6.1 percent in 2023, and will reach US$47 billion by 2033.

As more people move into towns and cities, and their disposable incomes rise, Asian businesses are rapidly utilising disposable plastics across many industries, most notably in the ecommerce, food and beverages and healthcare sectors.  The enormous popularity of online food deliveries in major market such as India and China is a key driver of growth, while the widespread distribution of single use plastic sachets to sell cheap products in small quantities in less developed regions has led to increased waste and pollution across the continent.

Scant progress on recycling

Another depressing report from the Minderoo Foundation, a non profit, recently found that between 2019 and 2021, global production of single use plastics was fifteen times larger than recycled plastic production.  During that period, 6 million tonnes of single use plastics was produced, a number that is expected to rise exponentially as fossil fuel companies around the world increase their focus away from oil production to petrochemicals.  Meanwhile, only 9 percent of all plastic produced globally is recycled, causing an estimated 10 million tonnes of plastic waste to end up in the ocean every year.

The underlying problem is that in most countries it is cheaper to produce virgin plastic than to sort, clean and recycle used plastic.  According to Minderoo, companies are only investing in scaling up recycling capabilities in developed countries where there is regulation in place that encourages demand for recycled plastics.  Attracting investment into recycling infrastructure in developing countries, where plastic pollution is becoming acute, is much more challenging.

Private capital starting to flow to emerging markets

According to the Circulate Initiative’s Plastics Circularity Investment Tracker, US$4.1 billion was invested in plastics circularity solutions (defined as technologies, business models or other methods to tackle the plastic pollution challenge by eliminating, reducing or reusing plastic, or by keeping plastic materials in circulation without allowing them to leak into the environment) during the period between January 2018 and September 2022.

It is encouraging that downstream solutions, especially recycling and recovery services, where capital is acutely needed, received US$3.6 billion of that amount.  The Circulate Initiative highlights, however, that much more diverse investment across the plastics value chain is still needed to build a circular economy for plastics.  Upstream solutions such as materials and redesign, refill and reuse and digital mapping will also be essential for the transition, creating opportunities for investing in disruption and innovation.

More capital coming into Asia

The vast majority of the investments identified by the Plastics Circularity Investment Tracker, at US$3.5 billion, or 87 percent of the total, came into Asia.  Of this, US$1.6 billion in private capital was invested in South East Asia, followed by East Asia and South Asia with US$1.1 billion and US$678 million, respectively.

Accelerating investment levels in Asia, in particular, reflects the scale of the challenge that plastics are creating in this part of the world.  According to the World Bank, Asia contributes more than 80 percent of the plastic waste leaking into the ocean, and emerging countries in the region are still importing considerable amounts of waste from developed countries.

More positively, several countries in Asia, including Japan and Korea, have implemented new regulations to tackle the plastics waste issue, such as Extended Producer Responsibility (EPR) requirements for packaging.  Singapore and Vietnam are currently going through this process, while the Philippines is planning to require large corporations to recover 80 percent of plastic packaging by 2028.  Over time, these moves will help to mobilise additional capital into these countries.

Companies doing better

Some companies in Asia are already making a name for themselves as leading in efforts to do better on plastic waste.  Minderoo’s recent report identified two companies, Far Eastern New Century in Taiwan and Thailand headquartered Indorama Ventures, that are currently producing recycled polymers at scale.  Indorama has been particularly active in expanding its polyethylene terephthalate (PET) bottle to bottle recycling facilities, supported by financing from the International Finance Corporation and the Asian Development Bank among others.

In the venture funding space, Circulate Capital in Singapore, backed by a number of large multinational retail brands, has for several years been putting capital into start ups in South and South East Asia that are creating alternative solutions to plastic waste.  For example, investee company Lucro Plastecycle, in Bombay, converts low value flexible plastic such as shrink wrap into plastic granules that are sold to manufacturers in India.  Another portfolio company, Jakarta headquartered Tridi Oasis, turns PET bottles into plastic flakes which are used to make packaging and textiles in Indonesia.