Clean profits: Tackling the waste crisis

By Stefanie Mollin, Global Equities Portfolio Manager at GIB Asset Management

Monday 30th September 2024

Yesterday marked the UN International Day of Awareness of Food Loss and Waste (IDAFLW), highlighting the urgent need for effective waste management solutions. As the world grapples with these pressing challenges, there is a growing opportunity for investors to drive impactful change while achieving substantial returns. At GIB AM, our Sustainable World Strategy is designed to capture this investible opportunity by focusing on companies that offer innovative solutions to issues like waste reduction, food loss, and circular economies. By investing in these solution providers, we aim to deliver long-term value for both our clients and society while contributing to global sustainability targets.

The scale of the challenge: A global waste crisis

At GIB AM, waste and recycling are themes within our Sustainable World Strategy and are topics that I discussed last week with ESG Investor (Why Investing in Waste Matters – ESG Investor).

The scale of the opportunity is clear, over 2 billion tonnes of municipal solid waste (MSW) are generated globally each year, and this is projected to rise by 80% by 2050, reaching 3.8 billion tonnes [1].

While this might seem daunting, it also represents a huge potential for transformation. By addressing waste management more effectively, we can reduce methane emissions, a major contributor to climate change, while also unlocking significant economic value [2].

Poor waste management costs the global economy an estimated US$361 billion annually, including the hidden costs of pollution and public health impacts [3]. Improving waste systems could free up vital resources, allowing for more investment in areas like healthcare, education, and infrastructure. This presents both an environmental imperative and a financial opportunity, where companies with innovative solutions can create substantial value for shareholders while contributing to a more sustainable future.

Food Waste: A critical component of the waste puzzle

Food waste is a significant contributor to the global waste crisis. According to the Food and Agriculture Organisation (FAO), one-third of all food produced globally is either lost or wasted. This not only wastes valuable resources but also worsens the methane emissions problem when food is left to decompose in landfills.

Beyond environmental damage, food waste presents a critical economic and social issue. As waste seeps into our ecosystems, it pollutes our soil and water, impacting agricultural systems and human health. Addressing this issue is not just about better waste management; it’s about creating a more sustainable, efficient food system.

Our approach: Finding solution providers

Our Sustainable World Strategy focuses on identifying solution providers that tackle pressing environmental challenges, mainly through innovations in waste reduction and circular economy models. Recently, we added Waste Management (WM US) to our portfolio, reflecting our confidence in the long-term growth potential driven by waste treatment and recycling. Waste Management is well-positioned to benefit from thematic tailwinds, with a strong runway for above-peer margin expansion, EPS growth, and return on invested capital (ROIC). Moreover, we anticipate further earnings uplift from their recent and ongoing investments in recycling and renewable natural gas, alongside upside potential from synergies related to the upcoming Stericycle acquisition and strategic asset divestitures. These factors, combined with an attractive valuation, make Waste Management a compelling addition to our portfolio.

These investments offer significant growth opportunities, driven by the expansion of the waste management sector as governments tighten regulations and businesses increasingly adopt sustainable practices. As investors, we see immense potential in this space to generate strong financial returns while driving positive environmental outcomes.

A call to action on UN Food Waste Day

The UN International Day of Awareness of Food Loss and Waste reminds us of the scale of the opportunity ahead and the work needed to achieve it. It’s also a call to action for all of us—whether as individuals, businesses, or investors—to take responsibility for reducing waste and promoting sustainable practices.

As a Portfolio Manager at GIB AM, I’m proud to be part of a team dedicated to creating value for clients through investing in companies impacting our themes and driving real change. At the heart of our investment strategy is the belief that sustainable investing is the key to long-term value creation. The challenges related to food loss, waste, and waste management are not going away. In fact, they are only becoming more urgent, which is why we focus on identifying innovators who are leading the way in addressing these pressing issues.

The challenges are immense, but so are the potential rewards. We believe that with the right investments, we can create a world for our clients where their wealth is driven by themes such as minimising waste, protecting resources and protecting the planet for their retirement and future generations.

[1] World Bank Report – What a Waste 2.0: A Global Snapshot of Solid Waste Management to 2050.

[2] UN Environment Programme (UNEP) – Global Methane Assessment 2021.

[3] World Bank Report – What a Waste 2.0.

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