Stockholm (NordSIP) – European banks should urgently address the risks inherent in the plastics industry value chain, according to new analysis by financial non-profit think tank Planet Tracker. Under business-as-usual scenarios plastics could contribute almost a fifth of global greenhouse gas (GHG) emissions by 2040. The industry is also at the heart of an ongoing global waste crisis as well as the emerging realisation of the threat posed by novel chemical substances. However, Planet Tracker’s investigation concludes that exposure to these risks is being ignored by European banks.
Planet Tracker’s investigation is based on the analysis of more than 4,000 documents produced by 30 European banks. Natural Language Processing (NLP) was used to search the documents for references to a range of terms relating to the plastics industry and its value chain. The researchers found that only 7% of the documents and transcripts contained any references to plastic. There is a growing awareness in the investment industry of the problems posed by plastics, as well as the realisation that the proposed UN-sponsored global plastics treaty and other legislation will have a significant impact on the sector. In 2024 the European Union began the process of approving and implementing new Packaging and Packaging Waste Regulation (PPWR) that aims to tackle the problem of single-use plastics.
Banks’ baby steps on plastics are not enough
Despite the low incidence of plastics-related terminology, Planet Tracker acknowledges that there has been some progress on the subject among European banks, as Senior Investment Analysts Richard Wielechowski explains: “It’s encouraging that European banks are speaking about plastic more, in particular in the context of risk. But with over three tonnes of plastic waste produced each year for every person born and production set to triple by 2060, consumer and regulatory focus on plastic will only increase – and with it risk to portfolios.” These include significant physical, transitional, regulatory, legal, and reputational risks, and Wielechowski is concerned that banks’ blind spot on the issue leaves them exposed to potential stranded assets or defaults. He believes action must be taken: “Investors must go beyond lip service to mitigate growing material risks as they consider financing companies in the plastic value chain and seize the opportunities of a transition to greener materials and systems and a circular economy.”
Further analysis of the references to plastics found via the NLP investigation sheds further light on the banks’ approach. Most instances related to downstream solutions to the plastic waste crisis, such as chemical recycling and other unproven technical innovations. It appears that the European banks evaluated by Planet Tracker continue to support and finance continued mass production of single-use plastics. Most of the 30 banks were found to be lacking any explicit policy on mitigating plastic use and encouraging the manufacture of alternatives.
Planet Tracker would like to see the European banking sector properly understand, evaluate and acknowledge its exposure to the full range of portfolio risks inherent in the plastic sector. This should be translated into robust policies to be applied to lending decisions, ideally with a view to encouraging the reduction of the production and use of single-use plastics and the support of reuse programmes and the substitution of more sustainable materials.
