In January this year, the World Bank priced a seven-year $100 million bond to mobilise private capital and support the financing of projects with positive climate impacts and combat waste. Whilst this is a win in the fight against mass plastic pollution, the total investment needed to reach a point whereby only three percent of plastic leaks from a supply chain by 2040 is $5.2 Trillion. Clearly, the World Bank’s seven-year strategy is a model of investment that must be replicated at scale if we are to see real impact for plastic waste management globally.
This exciting announcement came with the backdrop of the proposed UN Global Plastic Treaty currently under negotiation; the next round in Ottawa only a month away. The Treaty has the potential to be the most significant piece of environmental legislation since the Paris Accords of 2015 and could result in a significant upswing of investment into plastic management strategies.
However, such investment into circularity is not a new phenonium, and as awareness of the dire consequences of plastic pollution has risen, so have instruments designed to bolster waste management systems globally. But despite the solutions being never clearer, the problem is getting worse.
Although businesses are increasingly willing to shift away from the “take-make-dispose” business model, current models in the plastic market are far from achieving circularity in practice. Out of the 460 megatons (Mt) of plastic produced each year, 110 Mt are mismanaged, and 28 Mt leak into the natural environment annually. Without global coordinated efforts, these numbers could escalate by 60 percent up to 85 percent in 2040.
Ultimately, investment figures only tell a fraction of the story; we cannot just put money down on the table and walk away. To achieve true circularity, businesses and global policymakers must move towards outcome-based financial mechanisms.
Outcomes-based financing (OBF) is an approach that ties payments to the achievement of specific measurable outcomes, rather than traditional input-based models. It is a common glue that can incentivise efficiency, effectiveness, and enhances the actual impact of interventions by shifting the focus from the quantity of services delivered to the tangible results obtained.
Significantly, the World Bank bond follows this model being contingent on the success of the project that is financed, designating arrangements which landowners and local communities are rewarded for the environmental services they provide. But currently companies are not incentivised to take part in outcome-based investment because there is no way of incorporating such investments into their environmental footprint.
Overlooking the outcome has had a knock-on effect on financing the early stage of new plastic mitigation solutions. Local, small-scale and “upstream” solutions often struggle to access institutional funding, as traditional financing sources rely on track records, return on investment, and demonstration of scalability. So, we may have the technology ready to provide plastic alternative packaging, but without adequate corporate funding it will be unable to scale.
This is especially damaging to the Global South, where investment to improve postconsumer infrastructure is critically needed due to high leakage rates. In Indonesia, barriers to investment in the country’s waste management system often occur due to the perceived risks most likely outweigh potential returns.
To move from income to outcome-based systems, financial institutions, the private and public sector must become ‘enablers’ of workable plastic management solutions. We have seen this with global commitments to carbon reduction, companies aware that they must align their emissions with the Paris Agreement. To date, there is not the equivalent targets for plastic pollution.
Becoming an enabler is a two step-process. First, we must take stock of a company’s waste, and assess its plastic footprint baseline. This measures the volumes of plastic that will leak in the environment because of the company’s operation. The second step moves from assessment to action, where global bodies and companies mitigate their plastic impact through actions within and outside of their value chain.
As plastic pollution continues to rise at an ever more alarming rate, the international community must catalyse a systematic change of priorities. Whether plastic-free packaging, truly circular models of waste management and readopting systems of reuse, we have the solutions, but our hands are tied by archaic models of finance often destined to fail.
Our return on investment must be measured by the continued longevity of both our planet and its people. Above shareholders and short termism, we must place the planet and its people as the key stakeholders at the heart of our fight against plastic.
