Ban on waste export presents risks, opportunities

The government's announced ban on the export of recyclable waste and commitment to fund the construction and expansion of recycling facilities brings strategic risks and opportunities for companies and investors

In Tuesday's budget speech, Treasurer Josh Frydenberg announced that commencing 1 January 2021, there will be a progressive ban on the export of waste, starting with unprocessed glass, and including mixed plastic, whole used tyres, single resin/polymer plastics, and finishing with paper and cardboard in July 2024.

To support this regulation, the government announced plans to spend $250 million over four years to modernise recycling infrastructure, divert more than 600,000 tonnes of recyclable waste from ending up in landfill and create 10,000 jobs, Frydenberg said.

$190 million will go towards a new Recycling Modernisation Fund with the aim of generating $600 million of investment in Australia's recycling capacity, and $59.6 million will go towards for National Waste Policy Action Plan commitments, including implementing the waste export ban, improving our waste data and halving food waste by 2030.

Listed companies in the waste management and recycling space welcomed the announcement. Waste management company BINGO Industries said two initiative will directly impact their business - the Recycling Modernisation Fund and the $1.5 billion allocated to the Modern Manufacturing Strategy that identifies recycling and clean energy as one of six focus areas.

"BINGO's plans to invest further in advanced recycling infrastructure align perfectly with these initiatives," a spokesperson told FS Sustainability. "In addition, BINGO is likely to benefit from the increased investment in infrastructure as well as the measures aimed at supporting first home buyers.

"BINGO supports the Government's efforts to improve recycling in this country and believes these initiatives will go a long way to supporting Australia's transition to a circular economy."

Cleanaway also highlighted the implications for their company.

"This injection gives the waste management industry confidence when investing in infrastructure and innovation," said Vik Bansal, Cleanaway CEO and managing director. "With this fund, governments at all levels, together with industry can invest in building a domestic circular economy."

Bansal also urged stakeholders in the waste management ecosystem to take more ownership of resource recovery at every step of the value chain.

"A genuine closed loop solution for materials is needed for a domestic recycling economy to thrive," he said. "We hope that the fund will encourage waste generators to take more responsibility for the materials they design and use locally sourced raw materials to further drive the domestic economy."

Cleanaway, together with Pact Group and Asahi Beverages have proposed a new facility in Albury/Wodonga that will process up to 28,000 tonnes or the equivalent of approximately 900 million plastic bottles into flake and food grade pellets which will be used as a raw material for making food and beverage packaging.

Cleanaway will provide available feedstock through its collection and sorting network. Pact will provide technical and packaging expertise and Asahi Beverages and Pact will buy the majority of the recycled pellets from the facility to use in their packaging products.

There will be implications for investors to dissect - many fund managers in the ESG sector have identified plastic waste in particular as a risk for companies to manage, and one that had particular implications during the COVID-19 pandemic.

AMP Capital has a regular series of engagements around plastic and waste. Similarly, Ausbil Investment Management has identified plastic waste as an area of risk, with Mans Carlsson-Sweeny telling FS Sustainability in April that if a business model relies on underpriced pollution or weak regulation of waste, it has implications for long term financial sustainability.

Maria Elena Drew, director of research, responsible investing, T. Rowe Price, also identified plastic as a "severe sustainability challenge," and predicted in April last year that regulation related to the management of plastic waste would likely be on the increase.

Read more: CleanawayRecycling Modernisation FundBINGO IndustriesNational Waste Policy Action PlanJosh FrydenbergAusbil Investment ManagementT. Rowe Price
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