Waste in Rome June 2023
Schroders – Waste: a $1.3 trillion opportunity
Investing in the circular economy it allows investors to expose themselves to companies that offer not only attractive levels of growth and returns, but also long-lasting positive outcomes for people and the planet. The circular economy represents a change in the economic system. It means abandoning the “take, use, throw away” practice in favor of a circular system which requires that products and materials are kept in use and that production follows a sustainable path aimed at reducing the raw materials consumed.
The main objective of the circular economy is to decouple economic growth from the consumption of virgin resources. The reason is simple: the world is running out of resources. We already use 1.7 times the resources that the planet naturally regenerates every year and this figure is destined to grow, given the increase in the world population. We are living beyond our means. Waste is nothing more than an absence of imagination. In the modern world, there is very little worthless “waste”; rather, it is a question of having the right infrastructure, regulations and will to obtain this value.
Municipal solid waste: +70% by 2050
By 2050, with a global population of around 10 billion people, The world is expected to produce 3.4 billion tons of municipal solid waste per year, an increase of 70%. compared to today. However, this data does not give us a complete picture. On the one hand there is the North American region, with approximately 530 kg per capita per year, on the other, sub-Saharan Africa, with 168 kg per capita. The problem is therefore this: if all citizens of the world produced waste at the same rate as the average North American citizen, global waste production would approximately reach 4.1 billion tons per year (or 210 million trucks of garbage per day). Waste production per capita is strongly correlated with income levels. It is problematic if we cannot separate economic growth from resource consumption. Low-income countries have the ambition to make progress, and are those that also tend to experience the highest growth in their populations.
Why is waste a problem?
The main problem is the way in which waste is disposed of, because it can generate negative impacts on climate change, pollution and biodiversity. Furthermore, by not recycling our waste properly, we create a demand for more virgin resources at a time when excessive consumption is already being recorded. The overwhelming one The majority of waste globally is disposed of openly (approximately 33%) or taken to landfill (approximately 37%), while only 19% is recycled or composted. Around 11% of waste is disposed of through incineration, a process known as waste-to-energy. Furthermore, landfills alone account for approximately 8-10% of greenhouse gases linked to human activity, due to the release of methane gas during the decomposition of waste. All this without considering other negative external factors, such as water pollution, land degradation and the impact on wildlife and biodiversity at a local level.
There is also the problem of waste of resources, considering that much of what ends up in landfill has value. The best way to reduce the negative impacts of landfills would be avoid using them. However, this is not always possible. Alternatively, it would be necessary to ensure that methane emissions are not released freely into the environment. In the United States, there is an increasing focus on this approach, capturing these landfill gases and converting them into renewable natural gas.
Waste management sector – a $1.3 trillion investment opportunity
As investors in the circular economy, both on listed and private markets, we recognize the enormity of the challenge facing the global economy to change our linear waste management practices to become more circular. However, we are extremely excited about the significant investment opportunities arising from this challenge. In 2022, the global waste management sector was valued at $1.3 trillion and a significant growth of the same is expected in the next decade. The expansion of recovery and recycling is generating growth opportunities for a wide range of companies across the industry spectrum. For example, Republic Services Group, a leading US-listed waste management company, has the potential to expand its recycling capabilities, especially for plastics. Indeed, the demand for recycled plastic from large companies that manufacture essential goods can guarantee high profits, while improving recycling rates.
It is also one of many waste management companies investing in renewable natural gas opportunities. The legislative framework, both by virtue of the Renewable Fuel Standard and the Inflation Reduction Act (tax credits), makes these investments very profitable, with investment returns expected to exceed 30%. Companies like Norsk Gjenvinning (NG), a private Norwegian company, already boast growth and profitability in store if they achieve better recycling rates. In 2022, NG processed more than 2.3 million tons of waste, of which approximately 58% was recovered for basic raw materials, while 96% was recycled by recovering materials or energy. This made it possible to avoid over 1.3 million tonnes of CO2 emissions. These are just some of the companies that reveal the interesting opportunities that investors in this sector can seize, driven by structural need to make the planet a more circular and sustainable place.
READ ALSO: Stellantis opens the first Circular Economy Hub in Mirafiori
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