Last month’s blistering new report by the International Panel on Climate Change (IPCC) was a sobering wake-up call for every human being. Climate change isn’t just real, the challenges are manifest and accelerating faster than most of us could have imagined. I recently wrote about how the issue that I focus on – investing in solutions that combat our global plastic waste crisis – is thoroughly intertwined with the climate crisis. And, just like the climate crisis, the tragedy of the plastic waste crisis is being felt in every corner of the globe.
A 2017 report from Ocean Conservancy suggested that the majority of plastic entering the ocean comes from Asia and so the world focused its attention on this region. But in fact, the Latin America and Caribbean (LAC) region accounts for a significant amount of plastic debris due to a lack of circular recycling systems, capital, and technical assistance in the sector. In many ways, the plastic waste challenges in LAC mirror some of the challenges in South and Southeast Asia (SSEA): a combination of rapid economic development and consumption without the necessary recycling and waste management infrastructure.
Both the magnitude of the problem as well as the types of enterprises that are ready for investment to scale and deploy solutions are good news for investors. I also believe that LAC presents an exciting and growing opportunity to invest in cutting edge, early-stage innovations that can advance the circular economy while creating the necessary capacity development in the region to boost the entire waste ecosystem.
But let’s just pause here for a second.
Why Should We Care?
While I currently live in Singapore, l will always be an east coast kid from the U.S. So, in some ways I can understand why some U.S. investors may think that the plastic crisis in the SSEA region is something happening “way out there” because in many ways it is really far removed from daily life in the U.S. and our daily conversation. But LAC? This is our backyard.
So, in short, it’s an environmental crisis and a health crisis and it’s happening practically on our shores. It’s also a wasted economic development opportunity that could create value and jobs across the region.
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By way of background, recycling rates in LAC countries lag far behind the rest of the world, with an average of 4.5% annually versus 13.5% in the rest of the world. As a result, Latin America produces 12% of the total global waste, ranking the second developing region after East Asia and Pacific. In fact, 17,000 tons / day of plastic are still disposed of in open dumpsites in Latin America.
What’s more, millions of livelihoods depend on the informal recycling sector in Latin America and the Caribbean. Commonly referred to as waste pickers, this informal sector are the front lines of recycling systems and flow, mainly in collection, but also in separation at source, transfer and transportation, treatment and disposal. In fact, waste pickers contribute approximately 25 – 50% of all municipal waste collection in the region. So, there’s an enormous opportunity for investment to create a safer environment for these critical participants in the recycling value chain while catalyzing the next generation of enterprises that can close the loop by driving a circular economy.
Identifying the Investment Opportunities
As investors we need to focus our efforts on injecting capital in systemic solutions to plastic waste which includes companies that (i) apply disruptive technologies to scale new materials and new business models to fill the design gap; (ii) deploy new technologies and capacity to expand collection and sorting to fill the quantity and quality gaps; (iii) advance recycling technologies to fill the affordability gap; and finally (iv) apply big data, deep tech and AI to drive efficiency and disrupt supply chains to fill the data gap.
In my next post I will share some of my thoughts on what kinds of solutions investors should have an eye on in LAC. But to my mind, the winning formula for investment looks remarkably like the formula in SSEA:
Step 1: Map the landscape of interventions, markets, and opportunities;
Step 2: Develop the ecosystem to support and accelerate entrepreneurs and businesses; and
Step 3: Invest in plastic circular economy entrepreneurs with multiple holistic solutions to the issue that generate environmental and financial returns.
Investing in these types of solutions will unlock all sorts of important impacts on the environment; ocean plastic pollution and vulnerable populations; help create a safe and more stable environment for waste pickers; curtail the use of open dumpsites that are creating additional health hazards; and power the next generation of emerging companies and waste recycling and circular economy companies that have until now been overlooked by the investment sector.
As the IPCC report said, the time for action is now. Investors will play an essential role in the solution, and I believe investment in the development of a circular economy for plastic waste in LAC must be on their radar if we want to solve the climate crisis and turn the scourge of plastic waste into an opportunity.