Plastic pollution is a key environmental issue on investors’ ESG agenda. As a practical contribution to address concerns, the Investor Forum brought together nine institutional investors to co-sponsor a new British Standards Institution (BSI) technical standard that aims to eliminate plastic pellet leakage into the environment.
The new standard, PAS 510: 2021, launched in July 2021, means that, for the first time, companies can take a fully auditable and verifiable risk-based approach to eliminating pellet loss and demonstrate compliance with best practice. The Publicly Available Specification (PAS) will be freely available and internationally applicable.
The PAS 510:2021 design process was informed by input from a range of stakeholders, from co-sponsorship to co-design, lending unique credibility to the new specification.
The investors co-sponsoring the PAS have committed to engage with portfolio companies to encourage them to adopt the practices codified in PAS 510, and partner only with suppliers who have made similar commitments. As stakeholders in businesses that are directly or indirectly responsible for microplastic pollution, these investors hope the new standard will help to change company behaviour, prevent avoidable direct sources of microplastic pollution from entering the marine environment and deliver positive real-world impact.
Marine pellet pollution
‘Plastic pellets’ is a term used to collectively refer to pellets, flakes and powders that form the building blocks of plastic manufacturing. Until recently, spills and losses were often deemed inconsequential, but 230,000 tonnes of pellets are now estimated to enter the world’s oceans annually, making it one of the most significant sources of primary microplastic pollution. Once in the environment, the pellets are eaten by fish and seabirds, and are known to cause harm.
Unlike other forms of plastic pollution, the plastics industry and its value chain have direct control over the prevention of pellet loss.
In 2018, boutique asset manager McInroy & Wood identified the lack of pellet management standards as a key challenge when trying to raise the issue with companies. It asked for the Investor Forum’s assistance in coordinating an engagement with the standard setting agencies, and 18 investors signed a letter calling for new standards to codify best practice.
The BSI agreed a standard was required, and suggested a PAS be sponsored to enable a fast-track delivery.
Nine institutional investors agreed to co-sponsor the standard and provide financial backing to advance the development. They were joined by the Scottish government’s Marine Scotland agency, which brought the political and regulatory perspective, and the British Plastics Federation, representing the plastics industry, forming a sponsor group that had true multi-stakeholder support.
The investor group funded a team from conservation charity Fauna & Flora International (FFI) to act as the steering group expert on their behalf. FFI is one of the core NGO partners of the Commonwealth Clean Oceans Alliance formed to address Sustainable Development Goal 14 – “Life below water”, and has long campaigned for a supply chain approach to eliminate potential for pellet loss.
The Steering Group that oversaw the drafting of the PAS wording comprised plastic pellet producers (INEOS), logistics operators, and retailers (Co-op and Waitrose), as well as industry trade associations, government agencies and NGOs. The review panel included representatives from academia, formal standards committees, independent experts and consumer groups.
Tim Wood, CEO of McInroy & Wood, said: “The power of active investment management in collaboration with NGOs, industry and other bodies is demonstrable in addressing important issues such as marine plastic pollution. We are very grateful for the support given to our initiative by FFI, the Investor Forum and its members.
“This is the first time that investors have combined with other stakeholders in the UK to create a new standard and we are proud to be part of that” said Martin Parsons from the Environment Agency Pension Fund.
Stewardship in action
Valborg Lie, stewardship manager at the local government pooled pension scheme LGPS Central, explained why it got involved: “As one of LGPS Central’s core stewardship themes, we engage across our value chain to support progress for companies in a ‘plastics transition’ – to reduce, re-use and replace fossil-fuel based plastics.
“Sponsoring PAS 510, which specifically aims to stop billions of plastic pellets from entering the natural environment, gave us an opportunity to influence corporate practices on this specific theme across industries. We view this as a powerful engagement tool because it raises awareness, establishes best practice and provides a benchmark against which corporate practice can be measured.”
Reflecting on why it sponsored the initiative, Tom Blathwayt, head of sustainability at wealth manager Brewin Dolphin, said: “It is part of our role as responsible investors to enable companies to better manage their environmental impact. This standard will help us assess environmental risk management when evaluating companies.”
Omar Cordes, CEO of Ownership Capital agreed: “Sponsoring the development of this important new BSI standard is aligned with our vision for an economy that has sustainability at its heart. We look forward to encouraging uptake of the standard in our engagement with companies” said Edward Mason, director of engagement at Generation Investment Management.
Matt Christensen, global head of sustainable and impact investing at AllianzGI, said: “We need to ensure better standards are adopted to prevent further damage to the environment, which is why we are delighted to sponsor the PAS.”
Company engagement
Investor scrutiny can play an instrumental role in putting pellet management on the agenda for buyers and end users of plastic. Investors now have a tool to hold companies to account for their impact, and can engage with portfolio companies to encourage adoption and compliance with PAS 510.
Within the investment chain, asset owners can help promote the PAS as an engagement tool. Martin Parsons said the Environment Agency Pension Fund has already written to its asset managers to make them aware of the new standard, and has encouraged them to engage with companies on this issue.
Pellets is just one part of the global problem with plastic pollution, and investors are keen to play a role in addressing the bigger picture too.
“We see plastic pollution as an important external cost in the global economy, and we anticipate continued engagement with companies, funds and policy makers in this area,” said Guy Foster, Brewin Dolphin’s chief strategist.
Reflecting on what has been achieved, and what is still to come, Hugo Ure of Troy Asset Management said: “Troy is delighted to have been able to play a part in this important collaborative effort to stem the flow of micro-plastics into the natural environment. We look forward building on this success and will continuing to work with our investee companies to address the environmental impact of the plastics they use.”
