Investing in zero-waste

We live in an economy today that is wildly unsustainable in terms of the way we consume, produce, and organise our lives.

Presently, we live in a linear, take-make-waste economy, reliant on vast extraction of natural resources. This is putting huge pressure on natural capital, and not only failing to harness the regenerative power of nature but also failing to protect nature’s precious biodiversity. This means we miss out on many opportunities, including the residual value that the re-use of finished products might deliver, and the value of components and materials contained in discarded waste. At Lombard Odier, we believe analysing the challenge of zero waste, as part of the transition required to a CLIC™ (Circular, Lean, Inclusive and Clean) economy, can help us identify investable opportunities across multiple industries.

While many industries vitally depend on nature, they also have a propensity to destroy it. We must invest in a leaner form of industry to do more with less and also recognise the untapped potential of the circular bio-economy. Our cities and industries today are wasteful. Every year, we produce over 2 billion tonnes of municipal waste alone, the equivalent of more than 7,500 Empire State Buildings. In some countries, we generate as much as 4.5 kilograms of waste per person every single day¹. Around 33% of the waste we produce is openly dumped, outside of landfills, contributing to pollution, health risks and biodiversity losses². Moreover, greenhouse gas emissions generated during decomposition and disposal account for as much as 5% of global emissions³. Yet, aside from being an environmental hazard, these waste flows also represent a missed economic and investment opportunity.

 

Materials and waste – Our economic model requires a vast amount of raw materials

 

Source: LOIM estimates and calculations based on OICA, the World Bank and the Global Resources Outlook

 

Under current projections, 160 billion tonnes of material will be extracted from the planet by 2040. Only 9% of this material is currently recycled, composted or treated for re-use, with the remaining 91% contributing to the gradual depletion of our natural resources⁴. Global waste is therefore set to increase to 3.4 billion tonnes by 2050, meaning it is growing at double the rate of population growth⁵. The increase in waste is driven by demographic changes, as well as rising incomes and changing patterns of consumption. The regions accounting for most of the expected increase in waste, such as South Asia and parts of Africa, are also among the regions with the least developed waste management systems, adding additional urgency to waste reduction efforts.  

 

Our habits related to produced assets are wildly unsustainable

We will soon extract the weight of Mount Everest every year, while recycling only 9% of the material we extract

 

Source: LOIM estimates and projections based on Global Resources Outlook 2019, Circulatory Gap Report 2019, European Commission

 

Much of this waste retains substantial economic potential. One entire garbage truck of clothes is burned or added to a landfill every second, even though most of these clothes have been little worn before being discarded⁶. Similarly, some 54 million tonnes of electronic and electrical waste is generated every year, only 17% of which is recycled⁷. The value of raw materials in this unprocessed waste flow is in excess of USD 63 billion and growing yearly⁸.

 

Materials and waste – a lost opportunity

Recycling offers an environmental and economic opportunity that challenges conventional models of production

 

Source: LOIM estimates, Global e-Sustainability Initiative, Dell, The Verge

 

While improvements in waste management are often thought of as a net cost, taking full account of the negative externalities of pollution, including carbon pricing, radically shifts the economics of waste management.

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