PI Partnership – M&G Investment


Addressing our linear economic model How is M&G applying double materiality to drive transformational change to one of the biggest challenges we face – excess emissions and waste from our current linear economic model?


The principles and processes of impact investing need to be embraced by


mainstream finance.


both lenses will naturally have a more holistic view of the risks and opportuni- ties and might prefer businesses actively creating a positive impact, or a ‘hand- print’, through their core business activi- ties. So, for climate focused investors, what type of business would this lead you towards? You might be a business that is embrac- ing the circular economy to reduce waste and cut the use of virgin materials. You could be a clean tech company developing the use of low carbon and non-polluting green hydrogen, or a power utility orient- ing towards renewable wind and solar generation away from fossil-based power generation. In other words, you’re really embracing a solutions approach, on top of reducing the negative operational foot- print that you might have.


There are various options across public and private markets to support a more cir- cular economy where companies are mit- igating excessive waste into the environ- ment. Major consumer and retail businesses are committing to reduce their use of plastic packaging – i.e., their footprint – driven by pressure from citi- zens and regulators. But certain companies are going further and employing innovation to intentionally tackle and solve the issue. In public mar- kets, M&G’s equity impact team invests in sustainable packaging producer, DS Smith, and global circular logistics busi- ness, Brambles, as well as Darling Ingre- dients, which transforms waste products into feed and fuel. All of these are design- ing waste out of the system. On the pri- vate assets side, investors also have the opportunity solutions.


to invest in earlier-stage


M&G’s catalyst team has invested in a cir- cularity pioneer called UBQ Materials, which takes items from the household waste stream that would normally end up in landfill and were previously hard or im- possible to recycle – everything from mixed plastics through to organic materi- als can go into this process. UBQ has developed a unique and highly efficient process that can transform all of


that waste into a high-quality recyclable thermoplastic that has uses in industries as varied as retail, transportation and construction.


What would happen to that high-quality plastic material once it’s run its course? The argument is it’s completely recycla- ble. The process turns waste into a feed- stock – a new, high-quality material that can be used in electric vehicles or durable construction materials. It’s the antithesis of single use. We need plastic for all sorts of things – it’s a lightweight, durable and versatile material but the problem is that manufacturing it tends to be highly car- bon intensive, it uses oil feedstock and we do not have the infrastructure to recycle it at the end of its product life, so it tends to get landfilled or incinerated. However, the UBQ product captures carbon and waste at the front end, has a long life and is then recyclable at the back end of its use. It is designed explicitly to solve a problem, or in fact a range of problems.


Investors increasingly recognise their responsibility as actors in society to help tackle sustainability gaps, and where appropriate, provide solutions to them. Embracing the concept of double materi- ality can take sustainable investing to a critical new level which is intentionally designed to tackle real world challenges as well as managing portfolio risks. As regulators increasingly focus on soci- etal outcomes and investors recognise the potential negative impacts of their invest- ments, double materiality has the scope to become a prominent prong of sustainable investment.


For Investment Professionals only. The value of investments will fluctuate, which will cause prices to fall as well as rise and investors may not get back the original amount they invested. Past performance is not a guide to future performance. The views expressed in this document should not be taken as a recommendation, advice or forecast. The article has been written for informational and educational purposes only and should not be considered as investment advice or as a recommendation of any security, strategy or investment product. Issued by M&G Investment Management Limited, registered in England and Wales under number 936683 with its registered office at 10 Fenchurch Avenue, London EC3M 5AG. M&G Investment Management Limited is authorised and regulated by the Financial Conduct Authority.


Issue 112 | April 2022 | portfolio institutional | 35


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