INSIGHT by the Planet Tracker
〉Although the vast majority (83%) of documents do not mention plastic related risks at all, disclosures are rising.
〉Most plastic risk disclosures focus on circularity, accounting for 73% of all risk disclosures. References to feedstock and pollution were minimal, while mention of toxins, microplastics and refillables were even rarer.
〉A select group of companies are more forthcoming about plastic risks, with Unilever [ULVR] as a stand-out followed by Borealis [BRLS], Berry Global [BERY] and Uflex [UFLX].
Planet Tracker has released a new report “Exposing Plastic Risk”, an in-depth analysis of 8,245 documents, transcripts and filings from all areas of the plastic industry value chain (from upstream companies such as Saudi Aramco and Exxon Mobil to downstream FMCG corporates such as Mondelez and P&G) which reveals alarming tendencies in the plastic value chain’s risk management practices.
The report found that the vast majority (83%) of documents from plastic industry executives from across the plastics value chain did not mention any of the risks that the plastic industry faces, showing scarcity of pressing risk related issues, such as plastic pollution and low levels of recycling and circularity, which risk burying the sector in liability and mounting costs.
While the report found that the amount of relevant plastic risk disclosures had increased five-fold in the past five years, with a marked increase in “high quality” disclosures, the disclosures in transcripts have dropped since 2020, which suggests management rarely discussed plastic related risks, and/ or participants expressed little interest in probing this line of questioning when given the opportunity. As plastic pollution and its environmental impact are globally recognised, this oversight could have severe financial and reputational consequences.
A majority of all plastic risk disclosures focused on circularity (73%), while issues around feedstock and pollution appeared rarely, being featured in only 6% of disclosures in the FMCG sector, despite reports that pollution from the sector causes USD 350 billion per year in external costs from GhG emissions, ocean pollution and collection. References to microplastics, toxins, refillable, bioplastic and biodegradable rarely appeared.
The report reminds the financial markets that plastic companies could face significant reputational and regulatory risks from not addressing their environmental and social impact quickly, particularly if the proposed Global Plastics Treaty is enacted soon. A previous Planet Tracker analysis mentioned that major plastic companies could be exposed to anywhere between USD 20 billion and USD 100 billion in liabilitiesi and litigation costs by the next decade under conservative estimates if they do not act soon to reduce their environmental impact.
“In light of these findings, the responsibility falls on management teams and boards to acknowledge and address the risks associated with the plastic industry. Companies that fail to do so may face claims of being misleading to investors.
“The plastics industry today faces one of the longest lists of risks of any sector, which should be on the mind of every executive and every financier. The risk disclosures of these companies should include exposure to CO2 emissions, harmful toxic discharges, visible and invisible plastic pollution (for land, sea and air) and rising harm to people and nature through chemical additives exposure.
“Plastic companies across the value chain are displaying a dangerous complacency to very real, and very material, risks. We call for the capital markets to consider these factors in their investments, and push for more concrete change, challenging assumptions and raising these issues with management frequently”.
-Thalia Bofiliou, Senior Investment Analyst (Plastic) at Planet Tracker
Planet Tracker suggests that if companies fail to meaningfully act to improve their environmental impact, these liabilities could also extend to individual investors and lenders, placing them at risk of legal action.
Despite this, a previous Planet Tracker report, “Plastic Risk” identified that the majority of investors were not pricing these significant risks into their portfolios, reflected by a decline in the risk premiums they were demanding. A lack of understanding of these risks has the potential to threaten the portfolios of many investors.
Planet Tracker calls on investors, lenders, and insurers to fully understand these factors and ensure the myriad of plastic-related risks are adequately priced into their investments, financial instruments and premia. It also calls on plastic companies, and those companies that are dependent on them, to assess and disclose the risks facing plastics more accurately.
Explore the full report and interactive dashboard
| about
Planet Tracker is a non-profit financial think tank producing analytics and reports to align capital markets with planetary boundaries. Our mission is to create significant and irreversible transformation of global financial activities by 2030. By informing, enabling and mobilising the transformative power of capital markets we aim to deliver a financial system that is fully aligned with a net-zero, nature-positive economy. Planet Tracker proactively engages with financial institutions to drive change in their investment strategies. We ensure they know exactly what risk is built into their investments and identify opportunities from funding the systems transformations we advocate.
i Minderoo (2022) The Price of Plastic Pollution: Social Costs and Corporate Liabilities. Note that the expected corporate liabilities for plastic litigation triggered in the period 2022-30 (“expected liabilities”) is preliminary but exceeds USD20 billion in the United States alone, which will be the centre of claims activity.
| All opinions expressed are those of the author and/or quoted sources. investESG.eu is an independent and neutral platform dedicated to generating debate around ESG investing topics.
