Renewal

We know there’s a global shift under way towards sustainability, driven by both nations and corporations. Over 110 countries have already pledged to achieve carbon neutrality by 2050, while environmental, social and governance factors take centre stage in the decision-making of many investors. While electric cars and clean energy sources often dominate discussions on environmental preservation, recycling plays a pivotal role in the processing and repurposing of daily waste.

For many years, rubbish could simply be shipped away, but China’s ban on the importing of non-industrial plastics in 2018 forced many to reassess. The recycling industry is now on the rise again, though, with the global market surging to US$63.3b in 2023 and projected to reach US$88b by 2030. Notably, this benefits major players like Waste Management ($WM), Republic Services ($RSG), Waste Connections ($WCN) and GFL Environmental ($GFL), which all reported an average annual revenue growth above 6% in the past five years.

Key drivers of this growth include new legislation and consumer demand for recycled products. California, for instance, has mandated that all plastic bottles sold in the state be recyclable and contain at least 15% of recyclable materials – with a target of 50% to be reached by 2030. Similarly, the European Union (EU) is set to ban single-use plastics, requiring PET bottles to contain at least 25% recycled material by 2025. The EU is planning to double this figure by 2030.

Plastic is particularly problematic to recycle compared to glass and metals, as the quality declines quickly through the process. It’s estimated that only 5% to 6% of the 40 million tons of plastic waste generated in the U.S. in 2021 was recycled.

Companies are making efforts to integrate recycled materials into everyday items. Google ($GOOGL) has committed to incorporating recyclable materials into its 'Made by Google' products, while Adidas ($ADDY), in partnership with Parley, now produces shoes and clothing from ocean-collected plastics. The company aims to achieve climate neutrality by 2050, ensuring no negative environmental impact from its operations. 

The potential uses of waste are wide ranging and there can be cost incentives. Particles of gold are being extracted from circuit boards inside laptops and old mobile phones as the amount of electronic waste grows. Sweden burns almost half of its household rubbish in waste-to-energy plants and earns money from taking that of other nations. However, not everyone has managed to get there yet, with Lego abandoning efforts to use recycled plastic in its bricks.   

In the context of government support and a growing global population that recognises the importance of environmental preservation, early adopters of sustainable practices are likely to benefit in the long run – and for investors, they might just stand out from the pile of rubbish.