24 February 2020 – 08:00 CET
Chief Investment Ofce GWM
Investment Research
Future
of waste
Finding opportunities in waste reduction
This report has been prepared by UBS Switzerland AG and UBS Financial Services Inc. (UBS FS).
Analyst certication and required disclosures begin on page 53.
2
February 2020 – Future of waste
Content
The future of waste
Cover picture
Michael Galliker
Publishing date
24 February 2020, 08:00 CET
Editor in Chief
Simon Smiles
Maximilian Kunkel
Project management
Pranvera Reci
Authors
Mark Haefele
Simon Smiles
Solita Marcelli
Matthew Carter
Maximilian Kunkel
Michelle Laliberte
Andrew Lee
David Leowitz
Jeannine Lennon
Barry McAlinden
Antonia Sariyska
Melissa Spinoso
Alexander Stiehler
Thomas Wacker
With thanks for the contribution of:
Omar Moustafa, UBS Evidence Lab
Design
CIO Content Design
Michael Galliker
Werner Kuonen
Margrit Oppliger
Elena Vendraminetto
Editors
Mark Boehme
Erin Jaimovich
Language
English
Contact
[email protected]
What are the best ways to
reduce waste?
26 Reducing solid waste
31 Reducing energy waste
Chapter 1
6
Chapter 2
19
Chapter 3
25
What are the impacts of waste?
20 Impacts of solid waste
24 Impacts of energy waste
What are the major types of
waste?
7 Solid waste
13 Energy waste
February 2020 – Future of waste 3
Where are the investment
opportunities in waste?
39 Mainstream companies whose
operations generate a material
amount ofwaste and that have
proven to manage waste and
pollution proactively
42 Companies whose primary lineof
business is dedicated waste man-
agement or companies that issue
debt specically totackle waste
49 Mainstream companies with poten-
tialfor corporate engagement to
improve c ompany waste manage-
ment and commercial performance
Regional, country, and sector
insights on waste
51 Data insights from UBS Evidence
Lab and UBS Chief Investment
Ofce Global Wealth Management
Chapter 4
38
Chapter 5
50
4
February 2020 – Future of waste
Key findings
We currently waste around 30% of all food globally at a
cost of USD 1tr a year. Meanwhile, 10% of the global popu-
lation goes hungry. Plastic packaging volumes are expected to
more than quadruple by 2050, yet 95% of the value of such
plastic is lost aer one use, at a cost of up to USD 120bn each
year. And, without change, plastics in the sea could outweigh
sh by 2050.
This report oers concrete waste reduction solutions that can
increase businesses’ nancial returns. We highlight main-
stream and innovative companies that have cut fuel costs
by billions of dollars, slashed landll waste by up to 90%, or
reduced food spoilage to less than 1%. In our view, investors
can capture long-term returns by investing in waste reduction
opportunities. Doing so aligns both with lawmakers’ drive for
stricter regulation, and with growing consumer demand for
companies that make a positive impact.
In this report we list the dedicated management companies in
the waste sector, one part of an overall waste market whose
estimated size of USD 2tr is twice that of Australia’s stock mar-
ket (MSCI Australia Index). We ag the equities and bonds
of companies that generate material levels of waste but
reduce it more proactively than peers. And we identify the
equities and bonds of companies that have made strides—or
have the potential to—in tackling waste (including cases
where shareholder or bondholder engagement could boost
corporate and investment performance).
The following chapters analyze the main sources of waste
(p.6–18) and the impacts of that waste (p. 19–24). We pres-
ent potential best practices to address waste that can prove
protable for businesses and investors (p. 25–37). And, in the
nal chapter, we use data from UBS Evidence Lab to highlight
regional, country and sector insights on waste.
Waste reduction and its link to the UN’s
Sustainable Development Goals
Fig. 21
Sour
ce: UBS
direct impact indirect impact
Waste
reduction
Reducing waste boosts companies’ prots while lowering costs to
the consumer. And what’s more, it can also improve broader societal
outcomes.
February 2020 – Future of waste 5
External views
Interview highlights*
*This interview contains views which originate from outside Chief
Investment Ofce Global Wealth Management (CIO GWM). It is there-
fore possible that statements herein do not fully reect the views of
CIO GWM
"Waste management is going to play an increasingly
important role in delivering commercial returns as well as
tackling the climate crisis. The sector is growing signi-
cantly—we expect it to double between 2017 and 2025.
And although the majority of people think waste starts in
the home, residential accounts for only 10% of it. Bigger
areas of waste generation and opportunity are in the
construction and industrial sectors."*
Urs Wietlisbach
Partner, Co-Founder, and Member of the Board of Directors,
Partners Group
“Energy waste is a major challenge both at the country
and company level. I’d draw particular attention to energy
waste in buildings. In the US, commercial buildings use
20% of national energy consumption. They waste 30%
of this energy, accounting for around 12% of US green-
house gas emissions."*
Professor Donald Sadoway
John F. Elliott Professor of Materials Chemistry
Massachusetts Institute of Technology; Co-Founder, Ambri; UBS
Global Visionary Alumnus
Global solid waste composition
Fig. 2
Source: World Bank, 2019
*
Food and green
44%
Glass
Metal
Other
Paper and cardboard
Plastic
Rubber and leather
Wood
*
Kaza, Silpa, Lisa Yao, Perinaz Bhada-Tata, and Frank Van Woerden. 2018. What a Waste 2.0:
A
Global Snapshot of Solid Waste Management to 2050. Urban Development Series.
Wa
shington, DC: World Bank. doi: 10.1596/978-1-4648-1329-0. License: Creative Commons
Attribution CC BY 3.0 IGO
2%
2%
12%
17%
14%
4%
5%
Just 4% of green bonds actively address
waste—an opportunity for growth?
Fig. 29
Sour
ce: Climate Bonds Initiative, UBS
Energy
35%
Waste
Land use
T
ransport
Buildings
Water
Other
2%
Adaption2%
11%
26%
17%
3%
4%
6
February 2020 – Future of waste
Chapter 1 – What are themajor types ofwaste?
What are
themajor types
ofwaste?
Chapter 1
February 2020 – Future of waste 7
Chapter 1 – What are themajor types ofwaste?
ce: Kaza, Silpa, Lisa Yao, Perinaz Bhada-Tata, and Frank Van Woerden. 2018. What a Waste 2.0: A Global Snapshot of Solid Waste Management to 2050. Urban Development Series.
shington, DC: World Bank. doi: 10.1596/978-1-4648-1329-0. License: Creative Commons Attribution CC BY 3.0 IGO.
Middle East and
North Africa
Sub-Saharan
Africa
North America
Latin America
and the Caribbean
East Asia and
Pacific
South Asia
Europe and
Central Asia
14%
11%
6%
23%
6%
20%
9%
The majority of the world’s solid waste consists of food and
green materials (44%), followed by paper and cardboard
(17%), and plastic (12%) (Fig. 2).
1
All waste is not created equally—or rather, dierent countries
and regions produce solid waste in dierent quantities and pro-
portions. In absolute terms, the US and China are the world’s
largest solid waste producers, followed by Brazil and Japan.
1
For more details about global waste, included special wastes such as industrial, agri-
cultural, medical, and e-waste, please see Kaza, Silpa, Lisa Yao, Perinaz Bhada-Tata,
andFrank Van Woerden. 2018. What a Waste 2.0: A Global Snapshot of Solid
Waste Management to 2050. Urban Development Series. Washington, DC: World
Bank. doi: 10.1596/978-1-4648-1329-0. License: Creative Commons Attribution
CC BY 3.0 IGO.
How waste is dened varies. In our analysis, we focus on two main
categories: solid waste (also known as municipal solid waste,
orMSW) and energy waste.
1
Throughout this report we’ll explore
eachcategory in turn, rst looking at the majorcontributors to these
types ofwaste.
Solid waste
At a regional level, East Asia and the Pacic account for nearly a
quarter of all solid waste, while Europe and Central Asia account
for 20% of the total and North America 14% (Fig. 1).
Solid waste generation also changes as national income
changes. High-income countries generate 34%, or 683million
metric tons, of the world’s waste even though they’re home to
just 16% of the world’s population. Low-income countries are
home to 9% of the world’s population and generate about
5% of global waste, or 93 million metric tons.
2
2
Kaza, Silpa, Lisa Yao, Perinaz Bhada-Tata, and Frank Van Woerden. 2018. What a
Waste 2.0: A Global Snapshot of Solid Waste Management to 2050. Urban Devel-
opment Series. Washington, DC: World Bank. doi: 10.1596/978-1-4648-1329-0.
License: Creative Commons Attribution CCBY 3.0 IGO.
8
February 2020 – Future of waste
Chapter 1 – What are themajor types ofwaste?
Solid waste composition diers by national income levels.
Theshare of food and green waste is lower in high-income
countries than in others, and richer nations produce consider-
ably higher percentages of waste from manufactured or n-
ished materials such as paper, plastic, and glass (Fig. 3).
Exploring each and every category of solid waste is beyond the
scope of this report. Instead, we want to focus on the types
ofwaste that have the biggest impact on people, the planet,
and prots. Below we explore in more detail the three largest
contributors to solid waste: food waste, paper and cardboard
waste, and plastic waste.
Global solid waste composition
Fig. 2
Source: World Bank, 2019
*
Food and green
44%
Glass
Metal
Other
Paper and cardboard
Plastic
Rubber and leather
Wood
*
Kaza, Silpa, Lisa Yao, Perinaz Bhada-Tata, and Frank Van Woerden. 2018. What a Waste 2.0:
A
Global Snapshot of Solid Waste Management to 2050. Urban Development Series.
Wa
shington, DC: World Bank. doi: 10.1596/978-1-4648-1329-0. License: Creative Commons
Attribution CC BY 3.0 IGO
2%
2%
12%
17%
14%
4%
5%
High
income
Food and green
56%
53%
54%
32%
Metal
3%
4%
5%
Glass
2%
2%
2%
6%
Other
27%
17%
15%
11%
Paper and cardboard
7%
12.5%
12%
25%
Plastic
6.4%
11%
11%
13%
Rubber and leather
4%
Wood
4%
Upper-
middle
income
Lower-
middle
income
Low
income
Sour
ce: World Bank, 2019
Food and green
Finished goods
Richer countries waste more finished goods,
poorer ones waste more food
Solid waste composition by income level
Fig. 3
February 2020 – Future of waste 9
Chapter 1 – What are themajor types ofwaste?
Food waste
Food loss and waste (FLW) is a global issue, with the main driv-
ers being supply chain inefciencies in developing economies,
and consumers buying more food than they end up consum-
ing in richer nations.
Food waste threatens food security, food safety, the economy,
and environmental sustainability. Although there are no deni-
tive data on the global scope of food waste, one study indi-
cates that we squander around 30% of all food globally (UN
FAO 2015).
3
Barclays estimates this wasted food costs the
world economy around USD1tr each year, potentially rising to
USD1.5tr by 2030.
4
Meanwhile, more than 10% of the global
population currently goes hungry. Global food waste translates
into the equivalent of six refuse trucks of edible food being
wasted every second.
5
Food waste comes at a cost. According to the Ellen McArthur
Foundation, production and processing inefciencies contrib-
ute 1.1 billion metric tons of waste per year, and 0.5 billion
metric tons of food waste in cities through awed transport
and sales channels. This amounts to an annual economic loss
of around USD 1.6tr each year.
6
For particular foodstus like
meat, waste or losses account for a h of production, the
equivalent to 75 million cattle every year.
7
The reasons for food waste dier by region (Fig. 4). In emerg-
ing economies, there is typically a lot of waste in the supply
chain due to infrastructure inefciencies. In high-income coun-
tries, waste is generally concentrated in consumer-facing sec-
tors although it can also occur in earlier stages such as when
agricultural subsidies lead to overproduction of farm crops.
8
3
Kaza, Silpa, Lisa Yao, Perinaz Bhada-Tata, and Frank Van Woerden. 2018. What a
Waste 2.0: A Global Snapshot of Solid Waste Management to 2050. Urban Devel-
opment Series. Washington, DC: World Bank. doi: 10.1596/978-1-4648-1329-0.
License: Creative Commons Attribution CCBY 3.0 IGO.
4
Barclays Equity Research—Sustainable & Thematic Investing—Food Waste:
Ripe for Change (4 March 2019).
5
Ellen MacArthur Foundation, Cities and Circular Economy for Food (2019).
6
Ellen MacArthur Foundation, Cities and Circular Economy for Food (2019).
7
Ellen MacArthur Foundation, Cities and Circular Economy for Food (2019).
8
Kaza, Silpa, Lisa Yao, Perinaz Bhada-Tata, and Frank Van Woerden. 2018. What a
Waste 2.0: A Global Snapshot of Solid Waste Management to 2050. Urban Devel-
opment Series. Washington, DC: World Bank. doi: 10.1596/978-1-4648-1329-0.
License: Creative Commons Attribution CCBY 3.0 IGO.
Inthe US, for example, 43% of food waste happens in
consumer-facing businesses and 40% at home, according
toReFED’s A Roadmap to Reduce U.S. Food Waste By 20%.
The reasons for meat waste match those for general food
waste. In more developed economies the majority of losses
can be traced back to consumers, whereas production and
distribution challenges explain waste in less economically
developed regions (Fig. 5).
Paper and cardboard
waste
The second largest contributor, paper andcardboard account
for 17% of all global solid waste. The main drivers of paper
waste are ne paper and tissue, with processed foods domi-
nating as the end use for US corrugated board consumption
(Fig. 6).
Processed foods dominate as the end use for US corrugated
board consumption, asshown in Fig.6.
In spite of technological developments (such as the rise of
e-documents and online distribution), paper and cardboard are
still widely used resources in the world economy. And some of
the fastest growing economic sectors (such as e-commerce)
may bedriving increased use of cardboard for packaging.
In aggregate, global paper and cardboard waste (expressed as
the ratio ofconsumption to production) has dropped modestly
over the last 10 years (Fig. 7).
However, there is considerable opportunity to increase ef-
ciency and reduce waste across the sector. Waste levels have
scarcely improved for ne paper used for printing and writing
over the last decade—and have worsened in both tissue and
newsprint. Waste management has improved in cardboard,
albeit modestly (Fig. 8).
10
February 2020 – Future of waste
Chapter 1 – What are themajor types ofwaste?
Where is food wasted along the supply chain?
*
Fig. 4
North America,
Oceania
Industrialized Asia
Europe
North Africa,
West/Central Asia
Latin America
South/Southeast Asia
Sub-Saharan Africa
42%
25%
22%
19%
15%
17%
23%
Production
Handling and storage
Processing
Distribution and market
Consumption
Share of
food available
that is lost
or wasted
* Sour
ce: Graph derived from WRI Reducing Food Loss and Waste: An Overlooked Strategy
for Cr
eating a Sustainable Food System—October, 16 2014.
URL:www
.wri.org/blog/2014/10/reducing-food-loss-and-waste-overlooked-strategy-creating-
sustainable-food-system
Processed foods are the biggest use case of
cardboard in the US
Consumption of corrugated board, 2017, by end-use application, in
%
Fig. 6
Sour
ce: Smithers, 2018: The Future of Corrugated Packaging to 2023.
https://www
.smithers.com/resources/2019/jan/trends-changing-the-corrugated-packaging-
market, accessed as of 7 February 2020
Vehicle parts
Textiles
Wood and timber products
Tobacco
Chemicals
Glassware and ceramics
Personal and household care
Electrical goods
Paper products
Beverages
Fresh food and produce
Others
Processed foods
28.1
10.7
10.5
7.4
7.2
7.1
6.0
5.1
4.3
3.7
3.6
3.1
3.1
Sour
ce: Fastmarkets RISI, BofA Global Research, UBS, as of January 2020
36
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020E
37
38
39
40
41
42
43
44
Paper and cardboard waste is falling
Ratio of consumption to production in
%
Fig. 7
There is still considerable opportunity to reduce
paper waste
Figures in the line charts indicate domestic consumption* in megatons
Fig. 8
Sour
ce: Fastmarkets RISI, BofA Global Research, UBS, as of January 2020
Consumption
Waste 2010
Waste expected 2020
2020E2010
48%
39%52%
61%
2020E2010
28%
64%72%
36%
2020E2010
13%
93%87%
7%
CardboardNewsprintTissue
Printing and
writing
2020E2010
2020E2010 2020E2010 2020E20102020E2010
11.6
12.4
89%
12%11%
88%
16.2
15.1
12.5
23.2
166
121
* Domestic consumption is defined as production plus imports – exports
Where is meat wasted along the supply chain?
In
%
Fig. 5
Sour
ce: URL http://www.fao.org/3/a-i2697e
01
02
0
Latin America
South and Southeast Asia
North Africa, West and
Central Asia
Sub-saharan Africa
Industrialized Asia
North America and
Oceania
Europe
Animal production
Slaughter
Processing
Distribution
Consumption
February 2020 – Future of waste 11
Chapter 1 – What are themajor types ofwaste?
Plastic waste
Plastics (including plastic packaging) account for 12% of the
world’s solid waste. The main drivers of plastic waste are
excessive plastic packaging and low levels of recycling.
Despite their environmental impact, plastics remain an impor-
tant part of the global economy. Plastic production grew from
15million metric tons in 1964 to 311 million metric tons in
2014.Volumes are expected to double again over the next two
decades, as plastic usage widens.
9
The share of plastic packaging in global packaging volumes
has increased from 17% to 25%, and the global plastic pack-
aging market is growing at around a 5% annual rate. In 2013,
the industry sold 78 million tons of plastic packaging, worth
USD260bn. Plastic packaging volumes are forecast to double
within 15 years and more than quadruple by 2050, to 318 mil-
lion metric tons annually—exceeding the size of today’s total
plastics industry.
However, the current use of plastic has important negative
sideeects. Today, 95% of plastic packaging’s material value,
orUSD 80–120bn annually, is lost aer just one use (Fig.9).
Just 14% of plastic packaging is collected for recycling. And
when additional value loss in sorting and reprocessing is fac-
tored in, only 5% of material value is retained for a subse-
quent use. Plastics that do get recycled are mostly recycled into
lower-value applications that are not again recyclable aer use.
9
Ellen MacArthur Foundation, The new plastics economy: Rethinking the future of
plastics & Catalysing action, (2017), http://www.ellenmacarthurfoundation.org/
publications.
The recycling rate for plastics in general is even lower than for
plastic packaging, and both are far below the global recycling
rates for paper (58%) and iron and steel (70%–90%). PET
(used for drinks bottles) is the most widely recycled type of
plastic, but overall rates are low, with just 7% recycled from
one bottle to another, and near half not collected for recycling
in the rst place. In addition, plastic packaging is almost exclu-
sively single-use, especially in business-to-consumer applica-
tions.
10
There is a disconnect between where major plastic producers
and consumers are located, and where plastic ocean leakage
isfound (Fig. 10). Although nearly all the top20 plastic pro-
ducers are located in the US and Europe, just 2% of the
ocean’s plastics come from these two regions. Asia is home
to10% of the world’s 20 biggest fast-moving consumer
goods (FMCG) companies (and none of the world’s biggest
producers), yet the region accounts for 82% of plastic ocean
leakage.
10
Ellen MacArthur Foundation, The new plastics economy: Rethinking the future of
plastics & Catalysing action, (2017), http://www.ellenmacarthurfoundation.org/
publications.
12
February 2020 – Future of waste
Chapter 1 – What are themajor types ofwaste?
95% of plastic packaging’s value is lost aer
just one use
95% loss
USD 80–120 billion
Fig. 9
Sour
ce: Ellen MacArthur Foundation, The new plastics economy: Rethinking the future of
plastics & Catalysing action,
(2017), http://www.ellenmacarthurfoundation.org/publications
Value yield, in %
Collected for recycling, in %0%
0%
100%
100%
82%
of ocean
plastic leakage
is in Asia
United States
& Europe Asia Rest of world
85%
95%
40%
10%
45%
5%
5%
15%
16%
2%
FMCG Top 20 HQ
Plastic top 20 HQ
Rest of
world
United States
& Europe
Headquartes of the global
top 20 plastic and resin
manufacturers (measured
by 2015 global capacity)
Plastic production
Production of plastic material
volumes (ex. thermoplastics
and polyurethanes)
Headquartes of the global
top 20 FMCG (fast-moving
consumer goods)
companies (measured by
2014 global net sales)
Ocean leakage
Source of plastics leaked into the oceans (proportion of the total global
leakage measured in million tons of plastic marine debris leaked per year)
10%–
80% of ocean plastic leakage is in Asia
Fig. 10
Sour
ce: Ellen MacArthur Foundation, The new plastics economy: Rethinking the
future of plastics &atalysing action, (2017)
,
http://www
.ellenmacarthurfoundation.org/publications
February 2020 – Future of waste 13
Chapter 1 – What are themajor types ofwaste?
China, the US, and the EU produce more than half the world’s CO
2
e
m
i
s
s
i
o
n
s
Share of annual global CO
2
emissions, 2017
Fig. 11
EU9%
US14%
India 7%
Japan 5%
Russia 4%
Canada 2%
Brazil 1%
Rest of World 28%
Australia 1%
Source: Citi Global Insights, cited in Citi Global Perspectives and Solutions (September 2019) Energy Darwinism III—The Electrifiying Path to Net Zero Carbon
China29%
Energy waste
Measuring solid waste is relatively straightforward. Measuring
energy waste and its implications is not. The main byproducts
of energy waste are emissions and pollution. While green-
house gas emissions tend to have global consequences (so
looking at aggregate data makes logical sense), pollution
impacts tend to be more localized. So it’s difcult to collate
meaningful high-level data on actual waste gures for the
energy sector.
Regional data is available on annual CO
2
emissions. Analysis by
Citi shows that China, the US, and the European Union
accounted for 52% of world emissions in 2017 (Fig.11).
Although a dierent base year, 2016 data from the Interna-
tional Energy Agency (IEA) shows emissions per head are high-
est in Australia, the US, and Canada (Fig. 12). Yet, some of the
Middle Eastern countries may well generate even higher per-
capita emissions thanks to their hydrocarbon- and commodity-
geared economies and population sizes.
11
We adopt a more pragmatic approach, instead looking at cur-
rent emissions by global sectors. The three largest contributors
to energy emissions are industry (including energy generation
11
Citi Global Perspectives and Solutions (September 2019)
Energy Darwinism III—The Electrifying Path to Net Zero Carbon
from extraction to generation), which accounts for nearly 40%
of emissions; buildings at around 18%; and transport at close
to 15% (Fig. 13).
While measuring energy waste is more challenging, the imper-
ative of tackling signicant and material energy waste cases
remains strong. Reducing waste in each of the three areas pre-
viously outlined (industrial processes, buildings, and transport)
will have important implications for reducing emissions and
pollution while raising efciency. We explore each in more
detail below.
14
February 2020 – Future of waste
Chapter 1 – What are themajor types ofwaste?
Australians, Americans, and Canadians produce
the most CO
2
per head
Annual global CO
2
emissions per capita in 2016, in tCO
2
/capita
Fig. 12
Source: IEA, cited in Citi Global Perspectives and Solutions (September 2019)
Energy Darwinism III—The Electrifying Path to Net Zero Carbon
India
Brazil
UK
China
German
y
Japan
Russia
Canada
US
Australia
16.0
15.0
14.9
10.0
9.0
8.9
6.6
5.7
2.0
1.6
80%
wasted energy
up to
Source: ABB, as of May 2015
Primary
energy
Electrical
energy
Trans-
mission
& distri-
bution
Industrial
plant
Motors &
drivers
Buildings
Up to 80% of energy is wasted from primary energy to end us
e
Capital goods companies can help reduce waste along the value chain
Fig. 14
Transport
Net
energy
Conversion
efficiency
Line loss
Production
process
Motor
efficiency
Fig. 13
Energy emissions (CO
2
equivalent)
February 2020 – Future of waste 15
Chapter 1 – What are themajor types ofwaste?
Industrial processes
Industrial processes are the largest contributor to energy
waste, accounting for nearly 40% of energy emissions (includ-
ing indirect). The main drivers are inefcient energy or fuel
mixes and poor conversion rates from inputs to outputs.
Why does industry account for such a large share of energy
emissions? Energy mix is a major factor—the industrial sector
remains dominated by fossil fuels (70%), mainly coal (account-
ing for around one-third of the total demand).
12
ABB estimates
that up to 80% of energy is lost between extracting a
resource (like coal) and the nal use case (like electricity). In
between, multiple industrial applications transport energy and
drive production of nal end products (Fig. 14).
Energy ef
ciency measures could help to reduce waste, lower
emissions, and cut pollution. For every unit of electricity saved,
three units are saved at the power plant, as most thermal
power plants only have conversion rates of 35%. Modern
combined-cycle gas turbines have even better conversion
rates of 60%.
The IEA estimates that, with today’s technology, one-third of
energy could be saved (following a best-in-class approach).
The expected payback period would only be three years in
OECD countries and ve years in non-OECD countries. The
largest industry sectors in terms of energy consumption are
steel production, chemical companies, non-metals (cement,
glass, ceramics), and the paper industry. Reducing waste in
these sectors would not only have positive impacts on carbon
emissions, but also reduce solid waste and pollution.
13
12
IEA (Tracking report—May 2019), https://www.iea.org/reports/tracking-indus-
try-2019. All rights reserved.
13
UBS Longer Term Investments—Energy Efciency
Stricter regulation has slashed Swiss buildings’
energy consumption for heating since 1975
Consumption in liters of oil equivalent per
m
2
and year
Fig. 15
Sour
ce: EnDK (Konferenz Kantonaler Energiedirektoren, April 2008),
Schweizerische Energie-Stiung SES (URL: https://www
.energiestiung.ch/energieeffizienz-
gebaeudestandar
ds.html, accessed 17 February 2020).
Note: Minergie is a Swiss-r
egistered quality label for new and refurbished
low-energy-consumption buildings.
0510 15 20 25
Model rules (2014)
Minergie-P (2009)
Minergie (2009)
Model rules (2008)
Minergie (1998)
Model rules (2000)
Model ordinance (1992)
Ty
pical construction (1975)
Buildings and construction
Buildings and construction are the second biggest contributor
to energy emissions. Here the main drivers of energy waste
areenergy-inefcient buildings and excessive use of building
materials.
Buildings oer considerable potential for reducing energy
consumption. The buildings segment currently accounts for
around 36% of global nal energy use and 39% of direct and
indirect CO
2
emissions.
14
Based on IEA forecasts, new technol-
ogies and techniques for constructing and retrotting build-
ings could improve energy efciency (and reduce energy
waste) by close to 40% by 2040.
15
Opportunities to improve energy efciency within buildings
abound. Water heating, lighting, and space heating consume
alot of energy, though efciency rates vary across countries
(Fig.13). Energy-efciency measures in these areas can reduce
14
International Energy Agency and the United Nations Environment Programme
(2018): 2018 Global Status Report: towards a zero‐emission, efcient and resilient
buildings and construction sector. All rights reserved.
15
IEA (2018) Market Reports Series (Energy Efciency 2018: Analysis and outlook to
2040). All rights reserved.
16
February 2020 – Future of waste
Chapter 1 – What are themajor types ofwaste?
waste, carbon emissions, and pollution. Examples include build-
ing insulation; a switch to LED lighting (particularly relevant
when considering that lighting accounts for 15%–20% of all
global electricity consumption); and building automation for cli-
mate control, lighting, and electricity outside of ofce hours.
16
Reducing energy waste also makes commercial sense, as oper-
ating costs dominate the lifetime costs of a building. The
National Institute of Building Sciences (NIBS) has pointed out
that the operating costs of a building account for 60%–85%
of the total life-cycle costs (fuel, maintenance, and repair, etc.),
compared with just 5%–10% spent on design and construc-
tion, and 5%–35% spent on land acquisition, conceptual
planning, renewal or revitalization, and disposal. Energy ef-
ciency is therefore a simple way to cut maintenance costs.
17
Regulation has a role to play in driving better energy efciency
in new or retrotted buildings. Data from Switzerland shows
how progressively tighter standards have pushed down build-
ings’ energy consumption for heating per square meter by
around 75% since 1975 (Fig. 15).
Transport
The transport sector is the third largest contributor to energy
emissions. The main drivers of waste are growing transport
demand, high energy intensity for road travel, and limited
adoption of zero- or low-emission modes of transport.
The sector consumes signicant energy and generates large
amounts of waste. For example, road travel is estimated to
account for 73% of total transportation fuel use (Fig. 16).
At the same time, road travel is signicantly more energy
intensive than other modes of transport (Fig. 17). Large pas-
senger cars are more than six times as intensive as trains, and
regular passenger vehicles have comparable intensity to
16
UBS Longer Term Investments—Clean Air and Carbon Reduction
17
NIBS, National Institute of Building Sciences (December 2010): Federal Green
Construction Guide for Speciers, Section 01 81 10 (01120)—Facility Service
Life Requirements
planes. Medium and heavy freight trucks are the most carbon-
intensive ways to move cargo, many more times wasteful than
either rail or shipping.
18
Road vehicles have dierent energy efciencies across regions,
and vehicle makers may be subject to dierent levels of regula-
tory and consumer pressure to reduce overall energy waste.
The overall expectation is that vehicle energy intensity will fall
universally by 2030 (Fig. 18).
19
But will this be enough to reduce transport energy emissions?
European Union data shows that between 2000 and 2017, the
reduction in CO
2
emissions from newer vehicles was oset by
transport demand growth (Fig.19). And the promise of zero-
or low-emission cars and trucks has yet to translate into
demand—despite theEU’s global leadership on the topic,
around 96% of cars and 99% of trucks still run on petrol or
diesel (Fig. 20)
20
Other forms of transport have made progress in reducing
waste. According to a study by the International Council of
Clean Transportation (icct), the compound annual reduction in
fuel burn of new aircras was 1.3% between 1968 and 2014,
or a total reduction of about 45%.
21
In the marine industry,
rising focus on reducing waste through stricter regulation (such
as the International Maritime Organization’s 2020 rules on
adopting compliant lower-sulfur fuels with a cap on sulfur oxide
pollutants) can help to reduce emissions and pollutants alike.
22
Aside from energy efciency, there are also opportunities to
reduce waste by using products more intensely. For example,
the average European car is parked 92% of the time and
when the car is used, only 1.5 of its 5 seats are occupied.
Toimprove utilization, business models and assets should be
designed to be t for purpose. For example, many of the cars
in shared car eets may not need to hold four passengers.
Smaller cars, for one- to two-passenger trips in the city, may
be sufcient to deliver their service.
23
18
UBS Longer Term Investments—Energy Efciency
19
UBS Longer Term Investments—Clean Air and Carbon Reduction
20
European Environment Agency (EEA), January 2020, National emissions reported to
the UNFCCC and to the EU Greenhouse Gas Monitoring Mechanism (URL: https://
www.eea.europa.eu/data-and-maps/data/national-emissions-reported-to-the-
unfccc-and-to-the-eu-greenhouse-gas-monitoring-mechanism-15); European Envi-
ronment Agency (EEA), December 2019, Monitoring of CO
2
emissions from passen-
ger cars – Regulation (EC) No 443/2009 (URL: https://www.eea.europa.eu/
data-and-maps/data/co2-cars-emission-16), both accessed 13 February 2020.
21
icct (Anastasia Kharina, Daniel Rutherford, August 2015): Fuel efciency trends for
new commercial jet aircra: 1960 to 2014
22
For more details please see UBS Global Research (October 2019) Global Marine
Sector—UBS Evidence Lab inside: counting down to IMO 2020—will it really have
an impact?
23
Ellen MacArthur Foundation, Completing thePicture: How the Circular Economy
Tackles Climate Change (2019) www.ellenmacarthurfoundation.org/publications
February 2020 – Future of waste 17
Chapter 1 – What are themajor types ofwaste?
Cars and trucks are some of the least energy
efficient modes of transport
Average energy intensity of different transport modes worldwide
Fig. 17
Sour
ce: IEA (The Future of Rail Opportunities for energy and the environment, 2019).
All rights r
eserved.
Note: toe = tonne of oil equivalent
Passengers
toemillion passengers/km
0204060
Large cars
Cars
Aviation
Business and minibuses
2- and 3- wheelers
Rail
Freight
toemillion tonne/km
020 40
Medium trucks
Heavy trucks
Rail
Shipping
Road transportation dominates total transport
fuel use
Transportation fuel by end market 2015
Fig. 16
Source: OECD/IEA 2017, (Railway Handbook 2017, elaborating by Susdef based on IEA 2017)
72.6% Road
Aviation 10.9%
Navigation 10.2%
Rail 4.2%
Other transport0.4%
Pipeline transport 1.7%
US
Stricter regulation will drive cleaner cars
and trucks
Energy efficiency in transport by 2030
Fig. 18
Passenger vehicles
l/100 km
Heavy trucks
l/100 km
2013
2030
EU
China
India
6.8
3.9
46
32
5.3
3.4
30
21
7.3
4.4
38
27
6.1
4.1
40
28
6.9
4.6
44
31
6.6
4.0
38
27
Southeast Asia
South Africa
Source: OECD / IEA*, UBS
* Based on Energy and Climate Change—WEO Special Report ©OECD/IEA 2015,
IEA Publishing; modified by UBS AG. License: iea.org/t&c
18
February 2020 – Future of waste
Chapter 1 – What are themajor types ofwaste?
While new EU cars are cleaner, demand growth is offsetting emission improvements
Average CO
2
emissions of new cars in G CO
2
/km, 2000–2017
Fig. 19
Sour
ce: European Environment Agency (EEA), January 2020, National emissions reported
to the UNFCCC and to the EU Gr
eenhouse Gas Monitoring Mechanism
(URL: https://www
.eea.europa.eu/data-and-maps/data/national-emissions-reported-to-the-
unfccc-and-to-the-eu-gr
eenhouse-gas-monitoring-mechanism-15), accessed 13 February 2020.
110
120
130
140
150
160
170
180
2001 2003 2005 2007 2009 2011 2013 2015 2017 2001 2003 2005 2007 2009 2011 2013 2015 2017
–31,2%
CO
2
–5.0
–2.5
0
2.5
5.0
825
850
875
900
925
GDP growth (le scale)
CO
2
emissions from EU road transport (in million metric tons, right scale)
CO
2
from road transport EU and GDP growth, 2000–2017
Zero- and low-emission cars have yet to become
mainstream in the EU
Fig. 20
Sour
ce: European Environment Agency (EEA), December 2019, Monitoring of CO₂ emissions
from passenger cars—Regulation (EC) No 443/2009
(URL: https://www.eea.europa.eu/
data-and-maps/data/co2-cars-emission-16), accessed 13 February 2020.
Petrol
Diesel
54.0
41.9
Diesel98.3
Hybrid electric
Battery electric
Plug-in hybrid
LPG + natural gas
Other + unknown
Cars
0.7
0.2
0.1
2.8
0.3
Petrol
Hybrid electric
Battery electric
Plug-in hybrid
LPG + natural gas
Other + unknown
Trucks
1.0
0.02
0.01
0.01
0.4
0.2
February 2020 – Future of waste 19
Chapter 2 – What are the impacts of waste?
What are
the impacts
of waste?
Chapter 2
Source: Gettyimages
20
February 2020 – Future of waste
Chapter 2 – What are the impacts of waste?
Impacts of
solid waste
Solid waste has a number of direct and indirect impacts both
on the environment (through emissions or pollution) and on
society at large (such as health eects).
In 2016 solid waste management generated around 1.6 billion
metric tons of carbon dioxide-equivalent (CO
2
-equivalent)
greenhouse gas emissions, roughly 5% of global emissions.
Without improvements in the sector, solid waste-related emis-
sions are anticipated to increase to 2.6 billion metric tons of
CO
2
equivalent by 2050.
24
Waste management, especially in urban areas, has an economic
cost. It can be the single highest budget item for many local
administrations in low-income countries, where it comprises
nearly 20% of municipal budgets, on average. Solid waste
management typically accounts for more than 10% of munici-
pal budgets in middle-income countries, and about 4% in
high-income ones.
25
The costs of collection are, however, far lower than the costs
of not tackling solid waste. A study focused on Southeast Asia
estimated the economic cost of uncollected household waste
that is burned, dumped, or discharged to waterways to be
USD375 per metric tonne (McKinsey 2016). For the same
region, the World Bank estimated the integrated waste man-
agement costs for basic systems meeting good international
24
World Bank: Wh Kaza, Silpa, Lisa Yao, Perinaz Bhada-Tata, and Frank Van Woerden.
2018. What a Waste 2.0: A Global Snapshot of Solid Waste Management to 2050.
Urban Development Series. Washington, DC: World Bank. doi: 10.1596/978-1-
4648-1329-0. License: Creative Commons Attribution CC BY 3.0 IGO.
25
Kaza, Silpa, Lisa Yao, Perinaz Bhada-Tata, and Frank Van Woerden. 2018. What a
Waste 2.0: A Global Snapshot of Solid Waste Management to 2050. Urban Develop-
ment Series. Washington, DC: World Bank. doi: 10.1596/978-1-4648-1329-0.
License: Creative Commons Attribution CC BY 3.0 IGO.
Impacts of overall waste
Solid and energy waste both have direct and indirect impacts on a num-
ber of the UN Sustainable Development Goals (Fig.21). These impacts are
typically environmental (through emissions or pollution) or social (such as
health eects) in nature. This report explores the diverse impacts of waste
across regions and sectors.
Waste reduction and its link to the UN’s
Sustainable Development Goals
Fig. 21
Sour
ce: UBS
direct impact indirect impact
Waste
reduction
February 2020 – Future of waste 21
Chapter 2 – What are the impacts of waste?
hygienic standards to be USD 50–100 per metric tonne.
26
Inadequate waste collection can also have negative health
consequences. In urban low-income neighborhoods, up to
two-thirds of solid waste is not collected (Baker 2012). In areas
with poor service coverage, the incidence of diarrhea is twice as
high and acute respiratory infections are six times higher than
in areas with frequent waste collection (UN-Habitat 2010).
27
Solid waste in each of the three largest contributing sectors—
food, paper and cardboard, and plastics—results in varying
impacts.
Impacts of
food waste
Food waste has an obvious environmental impact, contributing
up to 8% of global greenhouse emissions.
28
But food produc-
tion and waste also costs society as much as USD5.7tr each
year. By contrast, minimizing food waste can lead to substan-
tial food security and environmental gains.
29
Food loss and waste (FLW) aects food supply chains by lower-
ing producer incomes, raising costs for consumers, and reduc-
ing food access.
30
Current food systems rely heavily on natural
resources along the supply chain. For every calorie consumed
in the US, the equivalent energy of 13 calories of oil is burned
to produce it.
31
According to one estimate, the resource
impact of food wastage in the US accounts for a quarter of all
freshwater usage and 4% of total US oil consumption. The
same food waste leads to 33 million tons of landll waste and
USD750mn in waste disposal fees every year.
32
26
Kaza, Silpa, Lisa Yao, Perinaz Bhada-Tata, and Frank Van Woerden. 2018. What a
Waste 2.0: A Global Snapshot of Solid Waste Management to 2050. Urban Devel-
opment Series. Washington, DC: World Bank. doi: 10.1596/978-1-4648-1329-0.
License: Creative Commons Attribution CC BY 3.0 IGO.
27
Kaza, Silpa, Lisa Yao, Perinaz Bhada-Tata, and Frank Van Woerden. 2018. What a
Waste 2.0: A Global Snapshot of Solid Waste Management to 2050. Urban Devel-
opment Series. Washington, DC: World Bank. doi: 10.1596/978-1-4648-1329-0.
License: Creative Commons Attribution CC BY 3.0 IGO.
28
Barclays Equity Research—Sustainable & Thematic Investing – Food Waste:
Ripe for Change (4 March 2019)
29
Kaza, Silpa, Lisa Yao, Perinaz Bhada-Tata, and Frank Van Woerden. 2018. What a
Waste 2.0: A Global Snapshot of Solid Waste Management to 2050. Urban Devel-
opment Series. Washington, DC: World Bank. doi: 10.1596/978-1-4648-1329-0.
License: Creative Commons Attribution CC BY 3.0 IGO.
30
Kaza, Silpa, Lisa Yao, Perinaz Bhada-Tata, and Frank Van Woerden. 2018. What a
Waste 2.0: A Global Snapshot of Solid Waste Management to 2050. Urban Devel-
opment Series. Washington, DC: World Bank. doi: 10.1596/978-1-4648-1329-0.
License: Creative Commons Attribution CC BY 3.0 IGO.
31
Ellen MacArthur Foundation, Cities and Circular Economy for Food (2019).
32
Food Waste Reduction Alliance (Spring 2014: Volume 1) Best Practices & Emerging
Solutions Toolkit.
Current farming methods also contribute to pollution. The
agrifood industry is estimated to account for a quarter of all
human-produced emissions, making it the world’s second larg-
est emitter of greenhouse gases.
33
Pesticides and articial fer-
tilizers used in traditional farming can worsen air pollution,
contaminate soils, and leach chemicals into water supplies.
Poor management of animal fertilizers, food waste, and the
byproducts of the food supply chain also contribute to water
pollution, especially in less economically developed countries.
34
As for ecological damage or wasted natural resources, 39 mil-
lion hectares of soil are degraded each year globally, 70% of
global freshwater demand is used for agriculture, and 73% of
deforestation between 2000 and 2010 is attributable to
unsustainable agricultural use. Modern agrifood systems have
driven a greater than 60% decline in biodiversity over the last
four decades, as the world relies on just three crops for more
than 50% of its plant-derived protein. Today’s food systems
are also more dependent on chemical inputs, while more at
risk from diseases and agricultural pests.
35
Food production and managing its byproducts also have nega-
tive health consequences, estimated at USD1.6tr each year. By
2050, around ve million people a year—double the number
of the world’s obese population today—could die due to
unsustainable food production.
36
These health costs include:
– Farm worker exposure to pesticides (USD900bn—chronic
exposure to low levels of pesticides has been linked to
numerous health problems, two of which (reduced IQ and
higher rates of attention decit hyperactivity disorder) cost
the EU an estimated USD150bn annually.
37
– Antimicrobial resistance (USD 300bn).
38
– Air pollution from agriculture (USD 200bn and accountable
for 20% of particulate air pollution)
39
– Water contamination and foodborne diseases
(USD 200bn)
40
33
Ellen MacArthur Foundation, Cities and Circular Economy for Food (2019).
34
Ellen MacArthur Foundation, Cities and Circular Economy for Food (2019).
35
Ellen MacArthur Foundation, Cities and Circular Economy for Food (2019).
36
Ellen MacArthur Foundation, Cities and Circular Economy for Food (2019).
37
Ellen MacArthur Foundation, Cities and Circular Economy for Food (2019).
38
Ellen MacArthur Foundation, Cities and Circular Economy for Food (2019).
39
Ellen MacArthur Foundation, Cities and Circular Economy for Food (2019).
40
Ellen MacArthur Foundation, Cities and Circular Economy for Food (2019).
22
February 2020 – Future of waste
Chapter 2 – What are the impacts of waste?
Impacts of
paper and cardboard waste
Paper and cardboard waste leads to increasing consumption
and production of pulp, a commodity that in many parts of
the world is linked to negative environmental impacts includ-
ing water consumption (as deforestation can both aect water
courses and contaminate water supplies), pesticide contamina-
tion, loss of biodiversity, genetic engineering, peat degrada-
tion, and related greenhouse gas emissions. Logging and pulp-
wood plantations may have negative social consequences
(such as land-grabbing and displacement of indigenous
communities).
41
And replacing old trees with younger ones can
lead to lower carbon capture and negative climate eects,
given the delays between harvesting old forests and planting
new ones and the fact that older trees typically absorb far
more carbon than younger ones.
42
41
Environmental Paper Network (April 16 2019) Event Highlights: Paper Saving—Packaging in Focus. URL: https://environmentalpaper.org/2019/04/event-highlights-paper-saving-packag-
ing-in-focus/, accessed 3 February 2020.
42
The Telegraph (23 January 2020) Planting tress cannot oset burning wood, warn experts aer government advisers recommend it as renewable fuel. URL: https://www.tele-
graph.co.uk/news/2020/01/23/planting-trees-cannot-oset-burning-wood-warn-experts-government/, accessed 3 February 2020.
43
US Environmental Protection Agency, 2014: Advancing Sustainable Materials Management. URL: http://www.epa.gov/sites/production/les/2016-11/documents/2014_smmfact-
sheet_508.pdf
By contrast, using recycled materials to make cardboard con-
sumes less energy and produces fewer emissions. In the US in
2014, 89 million tons (80.7 million metric tons) of materials
including cardboard and plastics were recycled or composted,
with a reduction in emissions equivalent to that of 38 million
passenger cars according to the EPA.
43
Impacts of
plastic waste
Plastic packaging generates large social costs, with the
UnitedNations Environment Programme estimating them at
USD40bn, more than the industry’s total prots. These gures
are set to rise if volumes continue to grow. At least eight mil-
lion metric tons of plastic leak into the ocean each year – the
equivalent of dumping a refuse truck’s worth of plastic into
February 2020 – Future of waste 23
Chapter 2 – What are the impacts of waste?
the ocean every minute. Without action, this leakage is set to
double by 2030 and quadruple by 2050.
44
Estimates suggest that 32% of plastic packaging leaks into the
natural environment, generating economic costs by contami-
nating oceans (Fig.22). Best estimates conclude that there are
over 150 million metric tons of plastics in the ocean today.
45
Without change, the ocean is expected to contain a metric
tonne of plastic for every three metric tons of sh by 2025.
And by 2050, plastics could outweigh sh in the seas (Fig.23).
Not only is packaging the largest application of plastic, making
up 26% of volumes, its small size and low residual value also
makes it especially prone to leakage. One indicative data point
is that plastic packaging comprises more than 62% of all items
collected in international coastal cleanup operations.
46
Making plastic also has a material carbon footprint given the
use of fossil fuels in production. Over 90% of plastics pro-
duced come from virgin fossil feedstocks, while the gure is
even higher for plastic packaging. This represents about 6%
ofglobal oil consumption (with use split equally between
material feedstock and fuel for production), the same as the
global aviation sector. If present plastic production growth of
3.5%–3.8% per year continues (compared to expected oil
demand growth of 0.5% annually), the plastics industry will
account for 20% of total oil consumption and 15% of the
global annual carbon budget (if the planet is to remain below
a 2°C increase in global warming) by 2050, underscoring the
importance of tackling plastic production’s greenhouse gas
impact and treatment aer use.
Plastics can also generate negative social costs. They oen
contain a complex mix of chemicals, some of which can have
negative eects on human health and the environment.
Although the scientic community has not reached a consen-
sus on the drivers and links between plastics and health, more
research and industry change look likely.
47
44
Ellen MacArthur Foundation, The new plastics economy: Rethinking the future of
plastics & Catalysing action, (2017), http://www.ellenmacarthurfoundation.org/pub-
lications.
45
Ellen MacArthur Foundation, The new plastics economy: Rethinking the future of
plastics & Catalysing action, (2017), http://www.ellenmacarthurfoundation.org/pub-
lications.
46
Ellen MacArthur Foundation, The new plastics economy: Rethinking the future of
plastics & Catalysing action, (2017), http://www.ellenmacarthurfoundation.org/pub-
lications.
47
Ellen MacArthur Foundation, The new plastics economy: Rethinking the future of
plastics & Catalysing action, (2017), http://www.ellenmacarthurfoundation.org/pub-
lications.
Plastics could outweigh fish in the ocean by 2050
Forecast of plastics volume growth, externalities and oil consumption in a
business-as-usual scenario
Plastics production
Ratio of
plastics to fish
in the ocean
A
(by weight)
Plastics
A
share of
global oil
consumption
B
Plastics
A
share of
carbon budget
C
2050
1,124 mt311 mt
>1:11:5
2014
Fig. 23
A
Fish stocks are assumed to be constant (conservative assumption)
B
Total oil consumption expected to grow slower (0.5% a year) than plastic production
(3.8% until 2030, then 3.5% until 2050)
C
Carbon from plastics includes energy used in production and carbon released through
incineration or energy r
ecovery aer use. The latter is based on 14% incinerated or energy
re
covery in 2014 and 20% in 2050. Carbo budget based on 2 degrees scenario.
Sour
ce: Ellen MacArthur Foundation, The new plastics economy: Rethinking the future
of plastics & Catalysing action
, (2017),
http://www
.ellenmacarthurfoundation.org/publications
20%6%
15%1%
24
February 2020 – Future of waste
Chapter 2 – What are the impacts of waste?
Impacts of
energy waste
As previously highlighted in chapter 1, the primary impacts of
energy waste are environmental, in the form of carbon emis-
sions and pollution (such as particulates from burning heavy
fossil fuels). Again, energy waste has a number of direct and
indirect impacts on a number of the UN Sustainable Develop-
ment Goals (SDGs), the majority of which are environmental.
There are more specic impacts of energy waste in the three
sectors that most contribute to it: industry, buildings and con-
struction, and transport.
Major trends such as increased urbanization and rising
incomes in developing countries are expected to increase the
greenhouse gas emissions generated by construction and its
attendant waste. Demand for industrial materials such as steel,
cement, aluminum, and plastic is projected to increase by a
factor of two to four, according to the Ellen MacArthur Foun-
dation. Emissions from the production of steel, cement, alumi-
num, and plastics could reach 649 billion metric tons CO
2
by
2100—even if energy comes from zero-carbon sources and
its efciency signicantly increases (Fig. 24).
48
By contrast, improving on construction and demolition waste
recycling for reuse in buildings could have cost and environ-
mental benets. Recycled materials (especially cement) could
save up to 0.3bn metric tons of CO
2
emissions each year by
2050. And the processing of recycled aggregates produces up
to 70% fewer CO
2
emissions than producing them from
scratch.
49
48
Ellen MacArthur Foundation, The new plastics economy: Rethinking the future of
plastics & Catalysing action, (2017), http://www.ellenmacarthurfoundation.org/pub-
lications.
49
Ellen MacArthur Foundation, The new plastics economy: Rethinking the future of
plastics & Catalysing action, (2017), http://www.ellenmacarthurfoundation.org/pub-
lications.
Steel, cement, aluminum, and plastic production
greatly contribute to CO
2
emissions
Fig. 24
Sour
ce: Tong D. et al. Committed emissions from existing energy infrastructure jeopardize
1.5°C climate target, Natur
e 572, 373–377 (2019).
Material Economics,
The Circular Economy—A Powerful Force for Climate Mitigation (2019)
1.5°C carbon budget
for energy and
industrial
emissions by 2010
CO
2
emissions from
materials production
by 2010
500
918
649
… with best available
energy efficiency
… with best available
energy efficiency
and zero carbon energy
With respect to transport, overall road travel dominates in
terms of emissions and pollution signicance. Itaccounts for
75% of all transport sector emissions. Without changes in the
sources of vehicle fuel, emissions are set to rise by 2050, given
one estimate that the global number of cars will more than
double by then.
50
50
Ellen MacArthur Foundation, Completing the Picture: How the Circular Economy
Tackles Climate Change (2019) www.ellenmacarthurfoundation.org/publications
What are the
best ways to
reduce waste?
Chapter 3
This report has identied the major sources
of solid and energy waste and their social
and environmental impacts.
Source: Gettyimages
26
February 2020 – Future of waste
Chapter 3 – What are the best ways to reduce waste?
Waste treatment has historically followed a waste hierarchy
rst mentioned in the 1970s, the so-called four R’s: recover,
recycle, reuse, and reduce (Fig. 25). The hierarchy encourages
minimizing greenhouse gas (GHG) emissions. The most sus-
tainable form of “treatment” is outright waste reduction,
though other methods, including recycling, also mitigate envi-
ronmental damage.
52
Innovators
Architects in less developed economies are increasingly using
waste to build. In South Africa (where 41% of households
lackbasic waste collection and only 10% of waste is recycled),
architect Kevin Kimwelle has built recycling depots, rainwater
tanks, solar panels, and a school using recycled materials and
waste. Materials are collected from local businesses by people
working in the informal recycling sector, providing a source
ofemployment. A local childcare center he built was made
entirely from recycled materials—including a glass wall made
from 2,500 wine bottles sourced from local restaurants. One
future project intends to use two-liter bottles lled with plastic
waste as building blocks for a children’s play and learning
c enter.
53
52
UBS Longer Term Investments—Waste Management and Recycling
53
The Guardian (22 October 2019) ’There is ingenuity in Africa’: the architect who
builds with trash. URL: https://www.theguardian.com/cities/2019/oct/22/ingenuity-
south-africa-architect-kevin-kimwelle-builds-with-trash, accessed 23 January 2020.
Reducing
solid waste
Waste management companies
Waste management companies operate across a three-part
value chain: upstream, midstream, and downstream. The
upstream business involves transport and collection—competi-
tion is ercest and margins lowest. The midstream part
includes waste treatment, sorting, and recycling, with poten-
tially attractive margins depending on the region. However,
certain parts (such as industrial waste) can be volatile given
high gearing to the economic cycle. Last, downstream busi-
nesses include landlls and incineration facilities.
51
51
UBS Longer Term Investments—Waste Management and Recycling
The waste hierarchy offers pointers on how to
reduce it
Fig. 25
Waste
disposal
Controlled dump
Landfill
Recycle
Reuse
Incineration
(with energy recovery)
Recover
(digestion, composition)
Waste
diversion
Most preferred
option
Least preferred
option
Reduce
Source: Bhada-Tata, Perinaz; Hoornweg, Daniel A.. 2012. What a waste? : a global review of
solid waste management (English). Urban development series knowledge papers; no. 15.
Washington, DC : World Bank Group.
http://documents.worldbank.org/curated/en/302341468126264791/What-a-waste-a-global-
review-of-solid-waste-management
This section explores some of the ways that mainstream and innovator
companies are tackling solid and energy waste, witha look at the top
three waste contributing sectors for each category. It also examines how
dedicated waste management companies are dealing with waste, as
they can provide potential examples for others.
February 2020 – Future of waste 27
Chapter 3 – What are the best ways to reduce waste?
Turning to specic company examples, China Everbright Inter-
national oers one example of how food waste can be turned
into other commercial uses. Using steam generated from a
waste-to-energy facility, the company’s plant in Sanya runs a
food waste treatment project which is currently processing
double its daily target of 100 tons of food waste. Food waste
residue is processed and incinerated in the waste-to-energy
operation, while methane gathered from the food waste facil-
ity powers combustion at the waste-to-energy site. The gross
margin for the food waste business is estimated at 30%–
40%.
56
A second example is the Danish company Too Good To Go.
Run by Mette Lykke, it has created the world’s largest food
waste app with 18 million users and covering more than
37,000 restaurants, bakeries, hotels, and supermarkets. The
company uses technology to connect users across 2,000 cities
56
Citi (17 December 2019) China Everbright International—High Level Operation in
Waste-to-Energy & Food Waste Treatment
External example from the
UBS Industry Leader Network*
One entrepreneur who runs hospitality businesses in Egypt
(and who is a member of the UBS Industry Leader Network of
private business-owning clients) is tackling food waste by shi-
ing the costs of it from kitchens to consumers. Guests at hotels
are now encouraged not to waste food through their pockets,
as they are charged a penalty for collecting food from the buf-
fet and leaving it on their plates.
*The UBS Industry Leader Network is a global group of UBS
clients and prospects who are private business owners and
executives. Their views may dier from those of UBS.
Food waste
reduction examples
Food and green waste account for 44% of the world’s solid
waste. While food waste and its impacts present major envi-
ronmental, economic, and social challenges, reducing food
waste also oers numerous potential opportunities for main-
stream and innovator companies.
Mainstream companies
Conventional companies are increasingly exploring innovative
ways to help reduce waste, oen by harnessing the power of
new technologies. For example, 900 Finnish supermarkets
within the S-market chain hold a daily “happy hour” to reduce
food waste by selling close-to-sell-by-date items at steep dis-
counts. The group is aiming to reduce its overall food waste by
15% by 2020.
Governments can also play a role in reducing food waste. San
Francisco introduced legislation in 2009 mandating that food
waste be composted. France has led the world in using regula-
tion to curb food waste, introducing a 2016 law that forbids
supermarkets from wasting unsold food and requires them to
donate it to charities or food banks. And a number of Swedish
cities turn food waste into biogas used to propel vehicles and
heat homes or businesses.
54
Innovators
Farmers are increasingly experimenting with holistic managed
grazing techniques that improve soil health without using arti-
cial fertilizers, while also providing farmers with a greater
number of income streams. One farm in North Dakota, for
example, mixes grazing and no-tilling crops to raise immediate
revenues and to act as cover crops. The ranch also raises pigs,
hens, and broilers, whose waste provides several types of natu-
ral nutrient-cyclers. Despite being environmentally degraded,
the farm’s organic soil content (a store of carbon and bene-
cial bacteria) has risen to 14% (from 1% before). The soil’s
capacity to store water (and therefore reduce water waste) is
more than three times bigger than it was in the degradation
phase.
55
54
Kaza, Silpa, Lisa Yao, Perinaz Bhada-Tata, and Frank Van Woerden. 2018. What a
Waste 2.0: A Global Snapshot of Solid Waste Management to 2050. Urban Devel-
opment Series. Washington, DC: World Bank. doi: 10.1596/978-1-4648-1329-0.
License: Creative Commons Attribution
CC BY 3.0 IGO.
55
Ellen MacArthur Foundation, Cities and Circular Economy for Food (2019).
This interview contains views which originate
from outside Chief Investment Ofce Global
Wealth Management (CIO GWM). It is there-
fore possible that the interview does not fully
reect the views of CIO GWM.
Interview
Marc Zornes
Marc Zornes
Founder of Winnow
and UBS Global Visionary
Marc, how can businesses and
households most effectively reduce
food waste in a commercial and
environmentally friendly way?
First, we need to use technology and
data to identify food waste, uncover
inefciencies, and monetize waste
reduction. Here at Winnow we use our
proprietary technology, Winnow Vision,
to take photos of the food that’s thrown
away in commercial kitchens, capture
that data, and use computers trained via
articial intelligence techniques to ana-
lyze food waste data.
We then propose ways that kitchens
can change their processes to minimize
waste, maximize prots, and reduce
negative environmental impact. We esti-
mate reducing food waste by half can
typically save between 3% and 8% of
food costs. Today we’re working in
1,300 kitchens across 40 dierent
countries, saving our clients around
USD33mn in food costs and saving the
planet from 42,000 tons of CO
2
emis-
sions according to our data. And our
ambition is to help our clients save USD
1bn by 2025.
Second, I think we need to help con-
sumers better understand how to man-
age food freshness without wasting
produce. We can start by removing the
confusion around sell-by dates, best-
before dates, and use-by dates. Very
few date codes relate to consumer
health considerations, but rather quality
control. Standardization of date codes
would help reduce unnecessary food
waste, and smart labeling would be
even better. This is an exciting growth
area—one company recently raised
USD110mn of funding for its product,
date coding using a tasteless, edible
material for food labels that has dou-
bled product shelf life.
And third, we need continued innova-
tion. It can range from more progressive
regulation to applying circular economy
techniques that turn food waste into
other uses. Just one example is using
black soldier ies to consume leover
food and for the y larvae to become
sustainable feedstock replacements for
small sh for the growing aquaculture
industry.
Minimizing food waste and ecological
damage will help us feed the world’s
population more sustainably. Making
targeted payments that help the poorest
buy high-quality food could be a better
and more sustainable option than
today’s widespread food production
subsidies.
And focusing just on producing cheap
food isn’t the answer—it’s about mak-
ing healthy food aordable and reduc-
ing waste, while pricing food properly to
reect its societal costs.
February 2020 – Future of waste 29
Chapter 3 – What are the best ways to reduce waste?
and 12 countries with a bag of surplus food that would other-
wise have been wasted. Users pay a small fee but are guaran-
teed produce worth three times the amount they pay for it.
Since inception in 2016, the app is estimated to have saved
more than 29 million meals each year, and avoided the equiva-
lent of 73 million kilograms of CO
2
emissions.
57
,
58
A third example is Winnow. The company works by measuring
food waste data from commercial kitchens and using analytics
to understand how food is planned, prepared, and served. It
captures data from cameras pointed at the bin in a commercial
kitchen, then uses articial intelligence technologies and algo-
rithms to identify what’s being thrown away, put a value on
that waste, calculate why it was wasted, and suggest how to
optimize production practices such that less food is leover at
the end of service (for more details please see the interview on
the previous page).
Crop One Holdings, the world’s largest vertical farming opera-
tion, is yet another example of an innovator company. Vertical
farming redistributes agricultural infrastructure so that it sits
closer to the consumer, cutting waste along several parts of
the food value chain. Due to production techniques that mini-
mize exposure to bacteria, the company’s salad product
lasts60 days in the fridge according to the company’s CEO
SoniaLo, as opposed to others with far shorter shelf lives (and
a greater likelihood of wastage).
59
Ms.Lo also noted that their
salads typically have 1/600th of the bacteria of eld-grown
washed product, thanks to no contact with human hands and
adelivery time from “eld” to consumer of 24 hours.
60
Com-
pared to general food waste gures globally of 30%
61
—and
37% for the US based on USDA data—Crop One Holdings’s
techniques have reduced spoilage rates on their products to
less than 1%.
62
Post-consumer food waste in developed coun-
tries accounts for approximately 25% of the carbon emissions
of those countries, based on USDA data.
63
57
Data sourced from Mette Lykke, CEO of Too Good to Go,as of February 2020.
58
Data sourced from Too Good to Go website. URL: https://toogoodtogo.org/en,
accessed 6 February 2020.
59
Source: Crop One Holdings, as of January 2020. This is based on side-by-side tests
conducted at Crop One Holding’s farm in Boston, where their product was bought
alongside another salad at the same store, same shelf, and same date, and then
kept in the same condition for 60 days.
60
Source: Crop One Holdings. Based on independent test lab verication by the
company
61
Source: Crop One Holdings, UN FAO 2015.
62
Source: Crop One Holdings, based on feedback from its customers.
63
Source: Crop One Holdings, USDA.
Paper waste
reduction examples
Paper and cardboard account for 17% of the world’s solid
waste. We noted in Chapter1 that there remained consider-
able scope to reduce wastage, especially in the ne paper seg-
ment. A number of companies are embracing new technolo-
gies (such as a shi to e-documents) to limit paper and
cardboard waste. At the same time, newer more cardboard-
intensive industries (such as e-commerce) are nding innova-
tive ways to design less wasteful products, delivering measur-
able commercial and environmental benets.
Mainstream companies
In an example that hits close to home, UBS has made signi-
cant strides in reducing paper waste. We have reduced paper
consumption by more than 60% over the last ten years. This
eort is thanks to a combination of shiing to e-documents
instead of printed ones for clients, and using a secure printing
system (whereby employees can only collect printouts by swip-
ing their security card on a device). This second initiative has
not only meaningfully reduced paper waste, but also enhanced
security and condentiality.
A second mainstream example comes from Amazon, whose
position in the e-commerce market means it’s a big consumer
of paper and especially cardboard. The company uses a num-
ber of strategies to optimize its paper and cardboard produc-
tion and to reduce waste and costs. It also applies machine
learning to monitor feedback that comes in from customers
via call centers and social media on damage during transit, bal-
ancing customer satisfaction against design specication and
material reduction priorities.
Amazon has also collaborated with companies in the glue and
tape industries to create new designs that can be scaled up.
These include fully recyclable plastic-free padded envelopes to
replace ones made from bubble wrap and paper. Amazon
claims that, combined, these methods have reduced packag-
ing material by 19% in volume versus a 2016 baseline.
64
64
CNN Business (July 16 2019) Amazon’s incredible, vanishing cardboard box. URL:
https://edition.cnn.com/2019/07/16/business/amazon-cardboard-box-prime-day/
index.html, accessed 24 January 2020.
30
February 2020 – Future of waste
Chapter 3 – What are the best ways to reduce waste?
Plastic waste
reduction
In Chapter 1we noted that plastic (and plastic packaging)
account for 12% of the world’s solid waste. In Chapter2 we
highlighted that the societal costs of plastic may exceed the
industry’s total prot pool. So corporate examples of how to
reduce plastic waste or or how to nd new circular-economy
uses for it could generate commercial and positive societal
returns alike.
Mainstream companies
One example of reducing plastic waste comes from Pennon
Group Limited’s Viridor arm. In response to rising restrictions
on exporting plastic waste to Asia (where historically it was
incinerated or dumped), it is building a new dedicated plastic
recycling facility in Avonmouth, UK.
The facility aims to process around 80,000 metric tons of input
plastic and generates around 60,000 metric tons of plastic
output to be reused in other applications. The facility will save
around 12,000 metric tons of CO
2
through co-location with
an energy recycling facility and around 1 metric tonne of CO
2
compared to “virgin” polymer production. The project has an
estimated internal rate of return of 15% and a four-year pay-
back period, while supporting the UK government’s targets
for 30% recycled plastic content by 2030 and for 70% of all
plastic packaging to be recycled by 2025.
65
Innovators
One innovative example of how to reduce plastic waste comes
from Mondi. The company specializes in cra paper and paper
bags but is exploring new solutions to reduce both paper and
plastic waste. Several of their new exible plastic solutions
reduce the amount of plastic required by 70%.
65
Pennon Group Ltd (2019) Viridor Plastics Reprocessing Developments. URL: https://
www.pennon-group.co.uk/system/les/uploads/nancialdocs/viridor-plastics-repro-
cessing-developments-12-september-2019_0.pdf, accessed 15 January 2020.
The company is also looking to produce two new exible plas-
tic packaging products: a recyclable plastic for exible packag-
ing made using a proportion of post-consumer waste, and a
form ll and seal (FFS) pouch for food applications. By reduc-
ing the use of multilayer laminates in food packaging, it hopes
to increase recyclability rates and bring circular economy prin-
ciples such as reusing waste into the mainstream. The group’s
EcoSolutions division also advises customers on how to design
and produce more sustainable packaging, using paper in place
of plastic where possible.
66
66
Mondi, 2017.URL: https://www.mondigroup.com/en/newsroom/eco-packaging-
breakthrough-biodegradable-paper-liner-for-s-machines-reduces-plastic-by-70-per-
cent/, accessed 7 Feb 2020.
February 2020 – Future of waste 31
Chapter 3 – What are the best ways to reduce waste?
Reducing
energy waste
In Chapter 1 we highlighted the data limitations to compre-
hensive measurement of energy waste. Instead, we’ve looked
at energy waste’s negative impacts through emissions and pol-
lutions. In Chapters 1 and 2 we focused on the three largest
contributors to energy eemissions—industry, building and con-
struction, and transport. Below we oer examples of how
mainstream companies and innovators are trying to reduce
waste across each of these three areas.
Industrial energy
waste reduction
Mainstream companies
One way mainstream companies can reduce energy waste is
by increasing their adoption of cloud computing. IT infrastruc-
ture-related investments are typically about 20% of total
business capital expenditure. Studies by companies such as
Amazon and IBM highlight that enterprises can reduce their
carbon emissions by more than 50% if they migrate their data
storage operations to the cloud from in-house data cen-
ters—25% of whose costs typically come from electricity and
20% from renting physical premises which may waste heat
and lighting energy (Fig. 26).
One concrete example of industrial energy waste reduction
comes from DuPont. The company was able to reduce its over-
all energy usage by 18% and save USD6bn in costs between
1990 and 2010, while growing production by 40%. Its specic
actions were either in the line of ordinary business or required
little spending, and the return on its energy-saving investments
is estimated at 65%. Examples of measures it took include
repairing and improving steam traps to reduce leakage;
rectifying metering problems around its purchased energy;
upgrading boilers and equipment design to raise efciency;
building efcient heat and power cogeneration plants; and
fostering a waste-focused culture across the company.
In 2008 DuPont launched its “Bold Energy Plan” whose aim
was to drive all its plant to accelerate energy efciency
improvements with a view to reducing energy use by 5% each
year, while targeting 65% lower greenhouse gas emissions in
2020 (compared to 1990 base levels).
67
Since inception, the
initiative has led to the completion of more than 2,200 proj-
ects, savings of more than USD350mn year-over-year, and
reduced CO
2
emissions equivalent to taking 300,000 cars o
the road for a year. In one energy-from-waste example,
DuPont switched its Grindsted site in Denmark from coal-red
fuel sources to wood chip, reducing its CO
2
emissions by
45,000 tons directly and by 64,000 tons of CO
2
equivalent per
year overall (thanks to delivering surplus heat production back
into the local community).
68
Innovators
Another example of innovation comes from Mironivsky Hlibo-
product (MHP), the largest chicken meat producer in Ukraine.
The company has had a long-standing engagement with envi-
ronmental, social, and governance issues, most notably setting
a goal to achieve energy independence by using environmen-
tally sustainable energy. MHP built its rst biogas plant in
2014, using fermentation technologies to convert organic
chicken waste into bio gas. With an initial capacity of 5MW/h
(the equivalent to what’s needed to supply power to 15,000
apartments and thermal heating to 1,500 apartments), MHP’s
plant had produced 19 million m
3
of biogas generating
38.4million KW / year by 2017. In total 38% of the compa-
ny’s energy consumption was self-generated, reducing costs
and increasing energy independence.
Today the company produces more than 70% of the total
biogas in the Ukraine and controls 45% of the Ukrainian mar-
ket in electricity generated from biogas. Building on its biogas
capabilities, MHP has announced a USD 27mn project to build
67
Goldman Sachs Global Investment Research (GIR), as of February 2019.
68
Sustainability Roadmap—DuPont (July 2019). URL: https://www.dupont.com/con-
tent/dam/dupont/amer/us/en/corporate/about-us/Sustainability/DuPont%20Sustain-
ability%20Roadmap_nal.pdf, accessed 8 January 2020.
A quarter of an in-house data center’s costs come
from electricity—moving to the cloud could cut this
Cost breakdown of a traditional/internal data center
Fig. 26
Sour
ce: Company reports, UBS
Depreciation
20%
Engineering/personnel
15%
Operational cost
20%
20%
Space/rent
Electricity
25%
32
February 2020 – Future of waste
Chapter 3 – What are the best ways to reduce waste?
a second plant with total capacity of 20 MW, with production
scheduled to start in 2020.
69
Overall renewable energy is
expected to make up 8% of Ukraine’s energy mix by 2020,
with 5% from biofuels and waste.
70
However, MHP’s example
may help to accelerate renewable energy generation in a
country still heavily reliant on more polluting coal (and nuclear)
power.
A third example is CLEAResult,
71
a third-party energy efciency
program administrator and solution provider for the utilities
sector in North America. The company works with a variety of
utility rms to optimize their energy generation programs.
Working with one of the world’s largest private impact funds,
the company aims to reduce carbon emissions from electricity
and heating while also advocating for energy-saving measures
with businesses, utilities, and their residential consumers. The
impact fund that has invested in CLEAResult has underwritten
it to reduce CO
2
emissions by 22million metric tons.
69
MHP, 2019
70
KPMG (July 2019) Renewables in Ukraine. URL: https://home.kpmg/ua/en/home/
insights/2019/07/renewables-in-ukraine.html, accessed 3 February 2020.
71
The Rise Fund CLEAResult. URL: https://therisefund.com/portfolio/clearesult accessed
14 February 2020.
Smart grids could help to reduce energy waste and deliver potential economic benefits
Conventional electricity grid
Energy flows in only one direction
Smart grid
Energy flows in many directions
Fig. 27/28
Sour
ce: Nomura, UBS
Single-family
home
Single-family
home
Single-family
home
Plug-in
hybrid/electric
car
Large power
station
Large solar
farm
Large wind
turbines
Single-family
home
Single-family
home
Green lter solutions from CNH Industrial serves as our fourth
example. The company started using metal-free oil lters ten
years ago, developing plastic and fully recyclable solutions. An
oil lter’s metal casing is typically 80% of the part’s total
weight, whereas metal-free lters consist of lter paper and
plastic components that are up to 70% recyclable. To date the
company has made 30% of vehicle and engine lters spare
parts metal-free; other applications include pollen lters, blow-
by lters, oil lters, diesel fuel lters, and engine air lters. The
company aims to extend metal-free material use right from the
design phase through to suppliers to reduce materials waste
and extend sustainability throughout the value chain.
72
Construction and buildings
energywaste
There are general opportunities to reduce waste and emissions
from the steel, plastic, aluminum, and cement used in build-
ings at the design and construction stages. By one estimate,
emissions could fall by up to 1.2billion metric tons of CO
2
per
year by 2050. If the world also used circular economy tech-
72
CNH Industrial, 2018: Sustainability report. URL: https://www.3blmedia.com/sites/
www.3blmedia.com/les/other/CNH_Industrial_Sustainability_Report_2018.pdf,
accessed 7 February 2020.
February 2020 – Future of waste 33
Chapter 3 – What are the best ways to reduce waste?
niques like sharing, reusing, and recycling (especially cement
recycling), annual emissions could fall by around 40% (2 billion
metric tons of CO
2
per year) from a 2050 baseline estimate of
the Ellen MacArthur Foundation. One reason for this potential
reduction is that standard construction practices oen use
excessive materials. It would be possible to achieve the same
structural strength using only 50%–60% of the amount of
cement that is currently being used, according to one esti-
mate. Reduced over-specication, improved design, and use of
high-strength materials (like steel) all have the potential to
reduce material usage by 30%.
73
New approaches to the construction and operation of build-
ings can make a dierence in reducing solid waste and pollu-
tion. Construction and demolition waste accounts for around
40% of urban solid waste. Globally 20%–30% of construction
and demolition waste is recycled or reused. And in Europe,
54% of it is sent to landlls. New technologies and processes
(such as prefabrication, osite construction, and 3D printing
have the potential to reduce material and waste generation
while also lowering costs by as much as 60%. For example,
building pieces away from the main site can increase build
quality and control while potentially curbing on-site waste
generation by up to 90% versus standard building tech-
niques.
74
Turning to specic examples of reducing energy waste from
buildings and construction:
Mainstream companies
One example of energy waste reduction in construction and
building comes from Microso. The company has employed a
variety of strategies to keep as much as 90% of its waste out
of landlls and was the rst of the major technology rms to
receive a Zero Waste certication from the US Green Building
Council. Microso also focuses on reducing energy waste by,
for example, using a dedicated power management system to
control 160,000 of its computers (reducing power usage by
27%).
75
73
Ellen MacArthur Foundation, Completing the Picture: How the Circular Economy
Tackles Climate Change (2019) www.ellenmacarthurfoundation.org/publications
74
Ellen MacArthur Foundation, Completing the Picture: How the Circular Economy
Tackles Climate Change (2019) www.ellenmacarthurfoundation.org/publications
75
Rubicon Blog ( 1 November 2017) 10 Zero Waste Companies Leading the Charge.
URL: https://www.rubiconglobal.com/blog/companies-zero-waste/, accessed 3 Feb-
ruary 2020.
External example from the
UBS Industry Leader Network*
One entrepreneur who runs hospitality businesses in Egypt
(and who is a member of the UBS Industry Leader Network of
private business-owning clients) is tackling energy waste by
switching energy sources for the kitchen and boilers and
replacing air conditioning units with energy-efcient models.
The entrepreneur estimates such energy waste reduction and
energy efciency measures have had a tangible impact on
costs, reducing energy bills by 10%–12% per year.
*The UBS Industry Leader Network is a global group of UBS
clients and prospects who are private business owners and
executives. Their views may dier from those of UBS.
Innovators
More broadly innovative companies are introducing technolo-
gies to reduce energy waste in “smart” buildings. They use
building management systems (hardware and soware) to
centralize control of lighting, heating, climate control, and
ventilation systems. Relying on a variety of technologies
(including increased use of sensors, the Internet of Things, and
big data processing), smart systems can help to reduce energy
waste, save costs, and limit greenhouse gas emissions from
wasteful energy use.
76
“Smart” electricity grids can also help cut energy consump-
tion, wastage, and CO
2
emissions by enabling a move from
traditional (and inefcient) transmission and distribution
networks to a decentralized model (Fig. 27/28).
Smaller decentralized grids allow for a two-way ow of energy
production and consumption between power generators and
users via solar panels and energy storage solutions (such as
electric cars or home storage batteries). Grid operators will
also be able to collect and analyze data on electricity demand
and supply in real time to optimize energy production and cut
waste.
76
UBS Longer Term Investments—Energy Efciency
Chapter 3 – What are the best ways to reduce waste?
Interview
Professor Donald Sadoway
Professor Donald Sadoway
John F. Elliott Professor
of Materials Chemistry,
Massachusetts Institute of Technology;
Co-Founder, Ambri;
UBS Global Visionary Alumnus
Donald, how big is the problem of
energy wastage?
Energy waste is a major challenge both
at the country and company level. I’d
draw particular attention to energy
waste in buildings. In the US, commer-
cial buildings use 20% of national
energy consumption. They waste 30%
of this energy, accounting for around
12% of US greenhouse gas emissions.
1
What are the most common reasons
for energy wastage?
The greatest source of energy waste is
inefcient climate control systems. The
primary reason for energy waste is old
and inefcient equipment. The fuels
used to power these systems are oen
carbon intensive too. Lighting and water
use in buildings is oen wasteful—incan-
descent lightbulbs, for example, convert
just 10% of energy inputs into light out-
put, the remainder into heat
²—but the
environmental and nancial conse-
quences pale in comparison to climate
control systems.
In US households, energy waste also
results from inefcient household utili-
ties such as fridges, hot water heating,
and appliances. Other factors include
old US housing stock that adheres to
prior regulations (which did not account
for environmental considerations). Fur-
thermore, residential design oen priori-
tizes natural light, even though large
glazed areas can compromise building
efciency without the installation of
expensive insulation and thickened
windows.
So how can we most effectively
reduce energy waste in a commercial
and environmentally friendly way?
Businesses should consider three simple
steps.
– First, encourage employees to turn o
equipment when not in use.
– Second, raise employee awareness of
energy use and waste. In today’s com-
petitive and globalized business land-
scape, smart energy usage and a col-
lective responsibility to reduce energy
waste can deliver tangible cost sav-
ings, while also aligning with employ-
ees’ increasing desire for their employ-
ers to practice environmentally sound
business practices.
– Third, businesses should pay due care
to their equipment and its environ-
mental footprint.
Actions can include regular equipment
maintenance to maximize efciency and
correct defects; capital replacement in
“quick win” areas (such as replacing all
incandescent lighting for LED bulbs);
and installing energy management sys-
tems to turn o devices, computers, or
other equipment automatically outside
of business hours.
What are the potential commercial
and environmental advantages of
new energy storage solutions?
New energy storage systems will be criti-
cal to the success of future energy grids
that rely on renewable energy sources.
We must acknowledge that many renew-
able energy sources are intermittent
unlike their fossil fuel equivalents. And so
supply will therefore uctuate, and fail to
be in balance with demand. The grid
operates such that supply is in perfect
balance with demand everywhere at all
times. The grid is the world’s largest sup-
ply chain operating with zero inventory.
Without adequate and scalable energy
storage solutions, the current push for
renewable energy grids risks supply fall-
ing short of demand. This would be
unacceptable to consumers or businesses,
likely resulting in back-up power genera-
tion fueled either by natural gas or diesel.
In this instance, the nal outcome is more
expensive electricity which still does not
meet environmental targets. Storage
would do for our electric grid what refrig-
eration did for our food supply.
New technologies can store intermittent
renewable energy more efciently. They
can store supply when it exceeds
demand, typically at night, and release
supply when demand peaks, typically to
double its average in the middle of the
aernoon. In the same way that a car
runs most economically when driving at a
constant speed, new storage capabilities
can iron out the greenhouse gas emis-
sions per unit of energy generated across
low- and high-demand periods. This
results in more efcient use of capital
assets employed in generation, transmis-
sion, and distribution. Think about this:
Generation capacity is sized to meet peak
demand which can be double the average
demand and required less than 2% of the
time.
3
Imagine an airline that 98% of time
idled 50% of its eet of airplanes. You’d
say that’s a bad business model. Well,
that’s how today’s grid is congured.
1
C. Martani, D. Lee, P. Robinson, R. Britter, and C. Ratti
(2012). ENERNET: Studying the dynamic relationship
between building occupancy and energy consump-
tion. Energy and Buildings, DOI: 10.1016/j.
enbuild.2011.12.037, 2012.
2
University of Wisconsin Stevens Point Energy Educa-
tion: Concepts and Practices. URL: https://www.
uwsp.edu/cnr-ap/KEEP/nres633/Pages/Unit2/Section-
D-Energy-Efciency.aspx, accessed 10 February 2020.
3
US Energy Information Agency (2014) Peak-to-aver-
age electricity demand ratio rising in New England
and many other U.S. regions. URL: https://www.eia.
gov/todayinenergy/detail.php?id=15051, accessed 10
February 2020.
This interview contains views which originate
from outside Chief Investment Ofce Global
Wealth Management (CIO GWM). It is therefore
possible that the interview does not fully reect
the views of CIO GWM.
February 2020 – Future of waste 35
Chapter 3 – What are the best ways to reduce waste?
In the future, larger numbers of consumers could become sup-
pliers too, with more widespread selling back to the grid oper-
ator of any surplus home-generated electricity stored in batter-
ies. Grid managers could respond to swings in power
generation from renewable sources by discharging battery-
stored energy at demand peaks and recharging batteries when
demand falls. Such new infrastructure would promote greater
transparency of energy consumption and electricity costs,
enhanced by the increased use of smart meters.
77
Advancements in energy storage, especially to cope with more
intermittent generation from renewable sources, represent
another area ripe for innovation. New forms of storage are
vital to support greener energy generation (and lower waste)
by providing power smoothing, wider application of distrib-
uted networks, emergency power coverage in natural disas-
ters, and greater cost efciency across renewable and non-
renewable sources.
78
Professor Donald Sadoway, Professor of Materials Chemistry at
the Massachusetts Institute of Technology and a UBS Global
Visionary (please see the interview on the previous page for
more of his thoughts on reducing energy waste), introduced a
new innovation for energy storage. He and his team created a
liquid metal battery that can store renewably sourced energies
at grid scale. The liquid metal technology underpinning the
batteries has far less wastage (100% discharge even aer four
years of use) than lithium-ion equivalents and at potentially
70% lower costs by the mid-to-late 2020s. To commercialize
this idea, Prof. Sadoway co-founded the liquid metal battery
company Ambri with USD 50mn of investment—with the rst
supporters being Bill Gates and Total.
79
77
UBS Longer Term Investments—Energy Efciency
78
Citi Global Perspectives and Solutions (September 2019)
Energy Darwinism III—The Electrifying Path to Net Zero Carbon
79
Source: Crunchbase. URL: https://www.crunchbase.com/organization/
ambri#section-investors, accessed 6 February 2020.
Transport
energy waste
Mainstream companies
The cruise operator Carnival Group serves as another example
of a mainstream company working to reduce transport energy
waste.
From 2007–2014, Carnival increased its eet’s overall fuel ef-
ciency by roughly a quarter and saved around USD 2.5bn in
fuel costs (using onebillion fewer gallons of fuel). This cost
and waste reduction resulted from technological advance-
ments in areas like new hull coatings (reducing the growth of
marine organisms and, by extension, drag), air conditioning
(installing newer and more energy efcient systems), lighting
(replacing traditional lighting with LED bulbs), water produc-
tion (enabling freshwater production from sea water), and pro-
pulsion (achieving greater energy efciency of vessel engines).
Education and training also helped raise awareness of energy
use and ways to reduce energy waste among both crew and
passengers.
80
Increased use of video conferencing and telecommuting could
help reduce transport energy waste and emissions, as well as
cut down on the time previously spent commuting. A US fed-
eral study found the average American spends 264 hours
every year commuting to work.
81
The shipping company United Postal Service (UPS) oers a
second example. By avoiding le turns whenever possible on
the US’s right-hand drive roads, UPS was saving an estimated
10 million gallons of fuel per year by 2017, with drivers cover-
ing 6–8 fewer miles per route. UPS has achieved this waste
reduction by applying routing soware to each of the 18 mil-
lion deliveries it makes in the US every day (as of 2017), ana-
lyzing 250 million
80
Goldman Sachs Global Investment Research (GIR), as of February 2019.
81
UBS Longer Term Investments—Energy Efciency
36
February 2020 – Future of waste
Chapter 3 – What are the best ways to reduce waste?
address points a day, and performing 30,000 route optimiza-
tions per minute. This optimization has also saved the com-
pany USD300–400mn a year in fuel, wages, and vehicle run-
ning costs.
82
In terms of future developments, UPS intends to pilot self-driv-
ing vehicles between depots and stores in Arizona; to acquire
10,000 electric delivery vans that are customized to local
needs; and to trial delivering medicines and light packages via
drone to the residential sector in North Carolina.
83
More generally, the ubiquitous use of smartphones, equipped
with Global Positioning System (GPS) technology and other
apps, provides mainstream companies (and consumers) greater
opportunities to optimize routes, signicantly reduce travel
times, and cut fuel consumption. Emerging markets may oer
the greatest potential given lower penetration rates.
Rising e-commerce volumes may boost transport sector energy
efciency (though not necessarily waste through packaging).
E-commerce can replace consumer journeys with deliveries
and take advantage of economies of scale in warehousing and
logistics. Studies by Alibaba and Amazon suggest e-commerce
energy consumption is up to one-third below that of the tradi-
tional brick-and-mortar retail model.
84
A third example can be found at the BMW Group. Between
2006 and 2017, the company reduced waste for disposal by
an average of 80% and process wastewater by 51%. Overall
resource consumption and emissions per vehicle fell by 53%.
Drivers of this waste and emissions reduction included: the
installation of in-plant cogeneration systems, which provide
almost half the heat required and 10% of the plant’s electric-
ity; and switching to LED lighting in all production areas, which
reduced energy consumption by more than one gigawatt hour
per year.
The company also set up an energy-optimized operating sys-
tem across several areas of mechanical production. Like the
auto start-stop feature used in cars, the system automatically
switches to standby if there are no parts awaiting processing.
82
Goldman Sachs Global Investment Research (GIR), as of February 2019.
83
The Verge (29 January 2020) UPS is buying thousands of electric vans and teaming
up with Waymo to accelerate the future of deliver. URL: https://www.theverge.
com/2020/1/29/21112001/ups-waymo-self-driving-arrival-ev-delivery-vans, accessed
3 February 2020.
84
UBS Longer Term Investments—Energy Efciency
At Plant Steyr, one of its production plants, BMW has become
wastewater-free through a combination of various membrane
technologies, such that all production wastewater from the
plant can be optimally processed and fed back into produc-
tion. Water waste is signicantly reduced and no production
wastewater enters the public sewage system.
The aluminum chips generated during the production of cylin-
der heads and crankcases provide a good example of how to
manage resource cycles. Chips are collected according to type
and processed to produce liquid aluminum. This liquid alumi-
num is then further processed at the BMW foundry in
Landshut to form new engine components.
Finally, BMW delivers products and materials in mesh contain-
ers to save packaging material and reduce waste.
85
Innovators
One example of more innovative ways to tackle transport
waste comes from Valeo. The company is a major supplier of
automotive parts in Europe. It ts one in every three vehicles
worldwide with electrical systems for reducing CO
2
emissions.
The company invented the stop-start system, which now
equips millions of vehicles across the world and signicantly
reduces emissions by optimizing engine running. It is also
driving car hybridization, producing around 25 million 12Volt
systems per year.
86
85
BMW, 2018: Sustainability value report. URL: https://www.bmwgroup-werke.com/
steyr/en/responsibility/sustainability-and-efciency.html
86
Valeo, 2018. URL: https://www.valeoservice.co.uk/en-uk/newsroom/valeo-innova-
tions-are-reducing-co2-emissions, accessed 7 February 2020.
February 2020 – Future of waste 37
Chapter 3 – What are the best ways to reduce waste?
Dedicated
waste management
companies
pal solid waste processed at energy-from-waste facilities,
greenhouse gas emissions are reduced by approximately one
tonne. This is due to the avoidance of methane from landlls,
the oset of greenhouse gases from fossil fuel electrical pro-
duction, and the recovery of metals for recycling.
China Everbright International provides an example of waste-
to-energy practices. It uses co-integrated waste-to-energy and
food waste techniques to generate commercial returns and
environmental benets for one of China’s regions with a
fast-growing population.
Its Sanya waste-to-energy operation diverts 1,200–1,300 met-
ric tons of waste each day (out of an expected daily household
waste output of 2,350 metric tons per day in 2019) and uses
three incinerators to transform waste into energy and slag (for
potential use in heavy metal recycling, construction, and soil
remediation). The project generates commercial returns from
waste management fees and selling its electricity, with an esti-
mated internal rate of return of 8%. Greenhouse gas emis-
sions from the project (looking at daily and hourly average lev-
els of gas emissions) are far less than landlling the waste, and
are superior than local Chinese regulations and the EU’s 2010
requirements.
89
Innovators
One innovative company tackling general waste is WasteZero,
a company that works with fast-moving consumer goods
groups to support the rollout of 100% recycled product lines.
It also drives sales among eco-friendly consumers by mounting
waste reduction-led sales campaigns. To date the company has
reduced US waste by 6.7mn metric tons and GHG emissions
by more than 15.6mn metric tons (equivalent to taking 2.5mn
cars o the road). Estimated commercial benets total USD
1.6bn for communities—all with an annual client retention
rate of 96%. The company’s long-term ambitions are to
reduce overall US waste by half and bring a closed-loop or
circular economy into the mainstream.
90
89
Citi (17 December 2019) China Everbright International—High Level Operation in
Waste-to-Energy & Food Waste Treatment
90
Company factsheet, with more information at WasteZero website.
URL: http://wastezero.com/, accessed 7 February 2020.
Waste management and reduction companies can be over-
looked as potential tools to tackling global waste. However,
successful programs can oen yield substantial commercial
and environmental benets.
Mainstream companies
Renewi is one such company working to more eectively man-
age waste within the sector. By applying a waste-to-product
business model that is focused on extracting value from waste,
rather than on its disposal through mass incineration or land-
ll, the company seeks to encourage more capital-efcient
ways of recycling and managing commercial and municipal
waste.
The company wants to create valuable products from materials
that are otherwise discarded. It collects or receives waste, then
sorts it into specic categories and waste streams for treat-
ment. It then looks to create and sell new products from these
segregated streams. Renewi recycles or recovers energy from
nearly 90% of the waste it receives, and, in doing so, esti-
mates it prevents around 2.88 million tonnes of carbon dioxide
emissions each year—equivalent to the total emissions of
almost all the households in Amsterdam.
The company has also struck major so-called “closed loop”
partnerships deals with large manufacturers. One is with elec-
tronics, healthcare, and lighting technology company Philips to
produce a vacuum cleaner made from 36% recycled plastic
from discarded old vacuum cleaners. Another partnership is
with household goods company Miele, to deliver back cast
iron for washing machines, produce bricks from ashes formed
by incinerators, and create packaging from crop waste.
Covanta is an example of another company aiming to more
efciently manage waste. The company’s facilities convert
about 21 million tons of waste into power each year, enough
for more than one million homes. The rm also recycles
approximately 600,000 tons of metal—the equivalent to man-
ufacturing three billion aluminum beverage cans every year.
87
More generally, mainstream companies are also looking at
waste-to-energy applications as a way to tackle waste in com-
mercial and environmentally sound ways.
88
According to the
US’s Environmental Protection Agency for every ton of munici-
87
Covanta website. URL: https://www.covanta.com/, accessed 3 February 2020.
88
UNEP/IETC (2019) Waste to Energy: Considerations for Informed Decision Making
URL https://www.unenvironment.org/ietc/resources/publication/waste-energy-con-
siderations-informed-decision-making, accessed 5 January 2020.
38
February 2020 – Future of waste
Chapter 4 – Where are theinvestment opportunities in waste?
Where are
theinvestment
opportunities
in waste?
Chapter 4
Source: Plainpicture
February 2020 – Future of waste 39
Chapter 4 – Where are theinvestment opportunities in waste?
The overall waste sector is growing quickly. Municipal solid waste is one
part of a market that, in 2018, had an estimated size of around USD1.7tr.
By the end of this year that gure is projected to reach USD 2tr. And
higher value-added treatment plus better waste collection rates should
increase the industry’s size in the coming decades. In addition, energy
waste reduction opportunities should abound.
91
Investment opportunities in waste (across both public
and private markets) are likely to be concentrated in
three categories.
91
The rst category includes mainstream companies who oper-
ate in sectors that generate a material amount of waste, and
that have proven to manage waste and pollution proactively.
Doing so may give these companies cost advantages (reducing
waste and unnecessary expenditures), a more loyal customer
base, or new lines of revenue (such as opening up their own
specialized waste treatment programs to external clients).
91
Data taken from UBS CIO GWM Longer Term Investment theme: Waste
Management and Recycling, published in May 2018. For more informa-
tion please see here or contact your UBS representative. Please note this
market size also includes specialized waste markets beyond the scope of
this report (among others industrial waste, waste water, and e-waste).
This report focuses on municipal solid waste and energy waste, the lat-
ter’s size being hard to quantify due to problems of data availability and
complexity.
Mainstream companies who
operate in sectors where waste
is of signicant importance and
have proven to manage waste
and pollution proactively
To establish whether waste has a signicant impact on a sec-
tor’s nancial performance and to evaluate how companies
within this sector manage it, investors can use a waste and
pollution data set as part of a wider methodology that ana-
lyzes companies on several sustainability criteria. Applying
materiality principles to conventional sector classication high-
lights four key sectors where waste is of signicant impor-
tance: consumer discretionary, energy, materials, and utilities.
Below is one example of such a methodology from the
UBS Chief Investment Ofce Global Wealth Management
(CIO GWM, see breakout box).
Examples in this category include:
– Equities of large mainstream companies (constituents of the
MSCI All Country World Index) that tend to tackle pollution
and waste more proactively than their peers and operate in
sectors where waste is of signicant importance (see table 1).
– Investment grade bonds of issuers that tend to tackle pollu-
tion and waste more proactively than their peers and oper-
ate in sectors where waste is oof signicant importance
(see table 2). Further, certain municipal bonds in the US may
berelevant for investors interested in the waste and pollu-
tion theme.
40
February 2020 – Future of waste
Chapter 4 – Where are theinvestment opportunities in waste?
Table 1
Mainstream companies tackling waste
This is not a list of recommendations, nor is it comprehensive.
Region Sector Company name Ticker Waste and
Pollution Score
Industry Group
Average
Americas
Consumer
Discretionary
Gildan Activewear GIL 7.6 6.8
Nike NKE 8.4 6.8
Energy ConocoPhillips COP 7.4 5.8
Kinder Morgan KMI 5.4 4.9
Phillips 66 PSX 5.6 4.1
Industrials CSX Corp. CSX 5.7 5.5
Honeywell International HON 6.8
5.7
Union Pacic Corp. UNP 6.2
5.5
Materials Eastman Chemical Company EMN 7.6 6.1
International Flavors & Fragrances IFF 8.1 6.1
Linde plc LIN 8.2 6.1
Utilities Dominion Energy D 6.9 5.7
Exelon Corp. EXC 6.2 5.7
NextEra Energy NEE 7.0 5.7
Source: UBS, as of January 2020. These equities are drawn from the UBS Global Research coverage uni verse and are rated Buy or Neutral. For more information
on this methodol ogy, please contact your UBS representative. See page 55 for UBS Global Research rating denitions.
Table 2
Mainstream bond issuers with a high score on pollution and waste
This is not a list of recommendations, nor is it comprehensive.
Region Company name Country Issuer score on pollution and waste
(0 – lagging; 10 – leading)
Americas
Dominion Energy Inc United States 6.9
DuPont de Nemours Inc. United States 7
General Motors Co United States 8.6
NextEra Energy Inc United States 7
Southern Company United States 6.9
Steel Dynamics United States 6.9
Source: UBS, as of January 2020. These bond issuers are drawn from the UBS Chief Investment Ofce Global Wealth Management coverage universe and are part
of the Pre ferred or Core lists. For more information on this methodology, please contact your UBS representative. See page 55 for rating denitions. This list is
based on screening CIO WMA’s credit coverage universe (about 60 companies) combined with issuer scores in pollution and waste (CIO methodology) and other
environmental / sustainable mandates.
February 2020 – Future of waste 41
Chapter 4 – Where are theinvestment opportunities in waste?
There is no universally agreed-upon
approach to evaluating sustainability.
Its assessment depends on dierent
client interests around sustainability—
some investors care about environ-
mental issues, others social ones. And
sustainability data is subject to far
wider variation than nancial metrics.
For example, opinions dier far more
on how to dene a company’s waste
footprint than they do for the price-
to-book ratio.
UBS CIO GWM developed an in-house
proprietary data methodology to
assess company and country perfor-
mance on sustainability. Using more
than 500 environmental, social, and
governance indicators and applying
them to near 11,000 equity and bond
issuers, the data methodology pro-
vides aggregated data on company
and country performance in six sus-
tainability topics. One of these is pol-
lution and waste. According to our
denition, “companies that have
good environmental management
policies and systems, reduce packag-
ing, recycle materials, manage hazard-
ous waste, limit toxic emissions; and
governments that manage their air
and land resources well” would score
well in this area.
The data methodology gives a numer-
ical “score” for a country or company
based on each of these six sustainabil-
ity topics. The methodology also
assigns a “headline score” for a com-
pany’s overall sustainability, using the
Sustainability Accounting Standards
Board (SASB) Materiality Map. Using
this map helps to ensure greater com-
parability across regions and sectors
by accounting for dierent levels of
“materiality.” Put simply, data on car-
bon emissions will likely matter more
for utilities or materials companies
than nancials due to their underlying
activities.
UBS CIO GWM waste and pollution dataset:
How does it work?
42
February 2020 – Future of waste
Chapter 4 – Where are theinvestment opportunities in waste?
Table 3
Dedicated waste management companies
This is not a list of recommendations, nor is it comprehensive.
Region Company name ISIN
identier
M’Cap.
in mn USD
Currency Thematic
sales exposure
Americas
United States Waste Management, Inc. US94106L1098 52496
USD
100%
United States Republic Services, Inc. US7607591002 30829
USD
100%
Canada Waste Connections, Inc. CA94106B1013 26420
CAD
100%
United States Clean Harbors, Inc. US1844961078 4774
USD
65%
United States Advanced Disposal Services, Inc. US00790X1019 2942
USD
100%
United States Casella Waste Systems, Inc. Class A US1474481041 2422
USD
99%
United States Covanta Holding Corporation US22282E1029 2023
USD
76%
United States US Ecology, Inc. US91734M1036 1192
USD
96%
Europe
France Veolia Environnement SA FR0000124141 16467
EUR
39%
Belgium Umicore BE0974320526 11689
EUR
50%
France SUEZ SA FR0010613471 10241
EUR
36%
United Kingdom Pennon Group Plc GB00B18V8630 6067
GBP
52%
Norway TOMRA Systems ASA NO0005668905 4526
NOK
45%
Asia
Hong Kong China Conch Venture Holdings Ltd. KYG2116J1085 8638
HKD
73%
Australia Cleanaway Waste Management Ltd. AU000000CWY3 2702
AUD
100%
China Grandblue Environment Co., Ltd. Class A CNE000001675 2183
CNY
37%
China China Tianying Inc CNE000000FN8 2111
CNY
59%
China Tus Environmental Science & Technology
Development Co., Ltd. Class A
CNE000000BX6 1984
CNY
52%
Australia Sims Ltd. AU000000SGM7 1445
AUD
90%
China Chifeng Jilong Gold Mining Co., Ltd. Class A CNE000001H94 1561
CNY
67%
China Zhongzai Resource & Environment Co., Ltd. Class A CNE000001113 1180
CNY
100%
China Jiangsu Huahong Technology Stock Co., Ltd. Class A CNE1000019V6 515
CNY
69%
China Anhui Shengyun Machinery Co Ltd Class A CNE100000QV7 273
CNY
84%
Source: Factset, UBS, as of 7 February 2020
Important note: This is a company reference list with relevant waste management and recycling stocks globally. To select the stocks in this list we have used the FactSet business classication system
(RBICS) that uses a bottom-up approach to classify companies according to the products and services they provide. To nd the relevant stocks and sales exposure to our investment theme we have
identied ve out of more than 1,500 subsectors in the FactSet RBICS classication that we believe t our theme well. To nd stocks with relevant exposure to our investment theme we have l-
tered the ve subsectors for stocks with at least 35% sales exposure to the respective subsector. We have excluded stocks with a market capitalization of less than USD 250mn and a daily trading
volume of less than USD 5mn (average last six months).
Please note that this list is only for reference and is not a recommendation list.
A second category includes companies whose primary line of
business is dedicated waste management or companies that
issue debt with the specic purpose of tackling waste.
Increased focus on reducing solid and energy waste is most
likely to have a positive impact on these rms’ revenue and
protability through higher volumes. Examples in this category
include:
– Equities of dedicated waste reduction and recycling compa-
nies with sales exposure such that more than 35% of their
revenues come from managing waste (see table 3).
– Green bonds that contribute to reducing company waste
(see table 4).
– Investments in waste management companies and assets in
private markets.
Companies whose primary
lineof business is dedicated
waste management or
companies that issue debt
specically to tackle waste
February 2020 – Future of waste 43
Chapter 4 – Where are theinvestment opportunities in waste?
Just 4% of green bonds actively address
waste—an opportunity for growth?
Fig. 29
Sour
ce: Climate Bonds Initiative, UBS
Energy
35%
Waste
Land use
T
ransport
Buildings
Water
Other
2%
Adaption2%
11%
26%
17%
3%
4%
Green bonds that contribute to reducing company waste
Waste prevention, reduction, and recycling form part of the
eligible project categories laid out in the Green Bond Principles
(GBPs) published by the International Capital Markets Associa-
tion (ICMA) that can be nanced by the proceeds of green
Table 4
Overview of green bonds using proceeds for waste-related projects
Considering all outstanding green bonds with a minimum issue size of USD 100mn, there are currently 213 that mention waste as a use of proceeds, and about half of
these stem from companies (the remainder are public entities). Only three issuers exclusively refer to waste. We include these three and examples of other major
corporate green bond issuers below.
Issuer Green bonds
mentioning waste
(USD)
Use of
Proceeds
Example waste projects
Paprec 4 (1.8bn) 100% Waste Leading French recycling company across paper, plastics, and construction
waste. Used proceeds for a recycling project, consisting of the acquisition of a
specialized company.
California Pollution Control
Finance Auth.
2 (345mn) 100% Waste Construction of a waste rice straw conversion facility, construction of a food
disposal facility including the conversion of biosolids to renewable energy and
fertilizer.
City and County
of Honolulu
1 (185mn) 100% Waste Funding H-Power, a program to reduce the volume of municipal solid waste.
Theplant is reducing the amount of refuse going to landll by 90%.
Apple 1 (1.5bn) ~2% waste Apple’s rst green bond allocated USD 21mn to projects focused on recycling
and recovering materials. E.g. 100% aluminum recycling halved the carbon
footprint of the MacBook Air. A special robot disassembles iPhones to recover
more materials than from traditional shredding. Apple estimates an impact of
47,600 metric tons of waste being diverted from landlls.
Klabin 2 (1bn) ~10% waste Installation of a diluted non-condensable gas treatment system in its pulp
manufacturing plant, reducing atmospheric emissions during 95% of operating
time.
Stora Enso 1 (604mn) Unspecied Reducing waste in pulp and paper production and reusing waste and residuals
(including ash, sawdust, bark).
Source: Climate Bonds Initiative, company reporting.
bonds. In the absence of ofcial regulation, which is currently
being worked out by the EU, green bonds are essentially self-
labeled by the issuer. Most large issuers, but not all, choose to
obtain a third-party verication of their green bond program by
institutions like Cicero, VigeoEiris, Sustainalytics orISS-oekom.
In addition, the GBPs require green bond issuers toreport on
their eective use of proceeds and the climate-related impact
achieved at least annually. A study by the Climate Bonds Initia-
tive, however, found that only 74% of all green bond issuers
were in compliance with the reporting requirement.
The cost of setting up a green bond program and providing
regular reporting comes at additional cost to the issuer, while
the bonds are priced at yields similar to those of non-green
bonds from the same issuer. Despite the absence of an outright
nancial benet, we still see an economic value of green bonds
to companies, such as the access to a long-term-oriented and
fast growing audience of sustainable investors, as well as the
signaling of environmental commitment. Diversication of cred-
itors, particularly buy-and-hold-oriented ones, can add to more
stable bond valuations in adverse times and facilitate an easier
rollover of maturing bonds during periods of market stress. Still,
the additional cost of maintaining a green bond program may
be perceived as a hurdle by companies, especially by those
without a large pool of recurring funding needs.
44
February 2020 – Future of waste
Chapter 4 – Where are theinvestment opportunities in waste?
Waste currently represents only 4% of the reported use of pro-
ceeds of the USD 700bn green bond market, which is more
tilted toward energy efciency and green buildings (Fig.29). In
only a very few cases are proceeds from a green bond exclu-
sively used for waste-related projects (e.g., the recycling com-
pany Paprec). Typically, waste is one of several projects catego-
ries nanced by a specic green bond. This is the case for
some of the largest green bond issuers, like France, Engie, Bel-
gium or Indonesia and many regional public sector agencies.
Why do companies require financing to produce lesswaste?
Most oen the waste projects nanced by green bonds relate
to managing waste, including recycling to conserve materials.
Technology companies like Apple have introduced reuse pro-
grams for hardware. A typical example of waste reduction
projects requiring a large amount of new nancing is the
building of new factories or the retrotting of existing ones to
create products with less waste, marrying an ecological ratio-
nale to an economic one. Therefore, waste reduction nanc-
ing is mostly about companies investing in modern technolo-
gies that create a given output with less energy, less material,
and less wastage. Typically, the greatest potential for this can
be found in developing countries, where hazardous waste is
currently being sent to landlls. While this problem is also
being addressed by development programs in global multilat-
eral development banks (MDBs), it oen also aects subsidiar-
ies of large developed country companies, which have access
to global bond markets.
We see the most potential for issuing dedicated nancing for
waste reduction projects in companies active in packaging, as
well as those producing very sensitive products, like food.
Table 5
Municipal issuers with bonds funding waste projects
Issuer State Green CUSIPs
funding waste
projects (millions)
Summary of proceeds
Massachusetts Water Resources Authority MA $1’645 Proceeds of green bonds were used to fund construction and improvements to
state water treatment facilities in addition towards funding sewer separation
projects to reduce waste and improve water quality.
California Infrastructure & Economic Develop-
ment Bank
CA $1’164 Proceeds of green bonds were used to help local governments and other public
entities nance wastewater infrastructure projects throughout the state of
California.
City of Los Angeles CA Wastewater System
Revenue
CA $958 Proceeds of green bonds were used to fund capital projects to meet national
discharge stands including wastewater collection and reduction of sewage spills
and improve water recycling projects.
New York State Environmental Facilities Corp. NY $758 Proceeds of green bonds were used to nance and renance clean water and
drinking water bonds. Projects funded are designed to improve the quality of the
State's drinking water by reducing pollution in the State's water supply under
federal standards. The issuer generally issues bonds for water management,
solid waste disposal, sewage treatment and pollution control projects.
District of Columbia Water & Sewer Authority DC $751 Proceeds of green bonds were used to fund the District of Columbia's Clean
Rivers Project to reduce waste and improve its water quality. Proceeds also used
for improving DC's combined sewer overow levels.
San Francisco City & County Public Utilities
Commission Wastewater Revenue
CA $423 Proceeds of green bonds were used to fund the Commissions waste collection
system improvements, improve stormwater collection and treatment and fund
improvements to treatment plans among other sustainable purposes.
State of Massachusetts MA $250 Proceeds of green bonds were used towards treatment of stormwater projects,
pollution prevention, energy and conservation projects among other sustainable
projects.
Indiana Finance Authority- Citizens
Wastewater
IN $226 Proceeds of green bonds were used to nance improvements to the wastewater
system.
Los Angeles County Sanitation Districts
Financing Authority
CA $161 Proceeds of green bonds were used to renance prior bonds originally issued to
nance improvements to the sewerage system to improve disinfection and
reduce waste in the service area's groundwater.
City & County of Honolulu HI HI $124 Proceeds of green bonds were used to fund H-Power, a program to reduce the
volume of municipal solid waste. The plant is reducing the amount of refuse
going to landll by 90%.
Total
$6’460
Source: *Universe includes cusips sourced from Bloomberg which are deemed active/outstanding, municipals, with a green bond indicator.
February 2020 – Future of waste 45
Chapter 4 – Where are theinvestment opportunities in waste?
For example, companies may look to raise dedicated nancing
to follow Nestlé’s example of sourcing up to twomillion met-
ric tons of food-grade recycled plastics between now and
2025. Their aim is to make all their packaging recyclable or
reusable by this date, while reducing their use of virgin plas-
tics by up toa third and supporting eorts to clean water-
borne plastic waste.
92
Companies may also want to raise dedi-
cated funding to invest in new production processes or new
partnerships. InBev, for example, has worked with partners
including the Ellen MacArthur Foundation, the Closed Loop
Fund, and the Glass Recycling Coalition to move to 100%
product packaging that is returnable or predominantly made
from recycled content by 2025 (from a 46% level today).
93
The concept of Waste Reduction Bonds
A new concept for “Waste Reduction (WaRe) Bonds” also sug-
gests a way for companies to tackle waste by raising dedicated
nancing for its reduction. One innovation could be waste-
reduction-linked corporate debt. Like green bonds, these would
be standard bonds that appeal both to mainstream traditional
investors and to the growing cohort of sustainable investors.
Utilizing a simplied version of the ICMA Green Bond Princi-
ples, the overall structure of a WaRe bond could be an instru-
ment where the proceeds would be exclusively used to nance
new or existing eligible waste reducing projects, covering three
broad areas: energy, packaging, and food. As with traditional
and green bonds, they would also have a standard recourse-
to-the-issuer and be priced at similar yields.
In contrast to the Green Bond Principles, WaRe bonds would
not necessarily require the issuer to launch a dedicated pro-
gram specifying the use of proceeds, the process for project
evaluation and selection, and the management of proceeds
and reporting. In particular, smaller companies tend to perceive
these requirements—as well as the typical external auditing of
the program—as a signicant nancial and operational burden.
92
Nestlé Press Release (January 2020) Nestlé creates market for food-grade
recycled plastics, launches fund to boost packaging innovation.
URL:http://nestle.com/media/pressreleases/allpressreleases/nestle-market-
food-grade-recycled-plastics-launch-fund-packaging-innovation, accessed
3 February 2020.
93
AB InBev Circular Packaging: Driving Sustainable Packaging. URL:www.
ab-inbev.com/sustainability/2025-sustainability-goals/circular-pakaging.
html, accessed 3 February 2020.
To provide the required transparency and integrity of informa-
tion necessary for sustainable investors to consider the bonds,
companies should, however, disclose the intended use of pro-
ceeds at issuance, and provide both annual reporting on the
eective projects nanced and ideally also their respective
waste reduction outcome.
At some point, such an innovation may lead to commonly
accepted “WaRe Bond Principles.” Forthcoming ofcial regula-
tion, as in the case of the EU’s Green Deal, would likely also
impact the development of such an asset class and its eligibility
for commonly used sustainable investing benchmark indexes.
Ideally, WaRe bonds should be of sufcient size to be liquid in
the secondary market, to deliver competitive pricing for issu-
ers, and to allow investors to actively trade the bonds.
Investments in waste management companies and
assets in private markets
Tackling waste reduction requires innovative solutions and new
processes, business models, and toolsets. Traditional compa-
nies look for new partners and talent to address waste in their
existing businesses, which gives rise to enterprises with a spe-
cic focus on waste solutions. As regulatory and societal pres-
sures grow, so does the demand for reducing pollution and
waste across traditional sectors and industries. Technology-
savvy entrepreneurs recognize the opportunity to develop new
waste-related products and services and bring new business
models to the market. In many cases, these are early- or
growth-stage ventures, looking to nance their accelerated
development. However, opportunities also exist in more estab-
lished infrastructure-related assets. Investors who are willing to
engage with impactful private companies—and can add illiq-
uid assets to their portfolios—are well positioned to further
the mission of waste reduction by dedicating capital to private
markets.
While we are not making specic recommendations in
privatemarkets, we summarize in the table below a sample
ofcurrent/recent oerings that appear to be related to waste
reduction, as listed by the independent nancial data provider
PitchBook.
46
February 2020 – Future of waste
Chapter 4 – Where are theinvestment opportunities in waste?
Table 6
Sample list of current/recent private market oerings of companies related to waste reduction
Name Description Why Link Location Deal
Type
Global
Environmental
Management
Services
Provider of waste management, recycling, industrial and engineering
services in Saudi Arabia. The company oers systems, products and
s ervices for waste management, industrial efuent treatment, sewage
treatment, odor control, bioremediation, and environmental cleanup.
CleanTech /
Industrials / TMT /
Environmental
Services (B2B)
gems-ksa.com Jeddah,
Saudi Arabia
Buyout /
LBO
Renewi Canada Provider of waste treatment services. The company specializes in
the treatment and recycling of organic waste to create compost and
non-agricultured sourced material (NASM) for the Canadian market.
CleanTech /
Environmental
Services (B2B)
renewi.ca London,
Canada
Buyout /
LBO
HolaLuz Developer of a cloud-based energy analytics platform designed to
monitor and optimize energy usage. The company’s platform integrates
sensors and analytics soware that track individual energy consumption,
recommend protable rates, and suggest ways to reduce energy usage
through green energy meters, enabling clients to save energy costs and
reduce pollution.
Cleantech /
Saas, TMT /
Energy Production
holaluz.com Barcelona,
Spain
Later
Stage /
VC
Allied BioScience Developer of clean surface coating products created to deliver eco-
friendly, research-driven products and services, resulting in cleaner
human environments. The company’s clean surface coating products are
used to reduce the presence of pathogens on hard and so surfaces
within a hospital setting or, for example, on a cruise ship.
CleanTech /
Industrials /
LifeSciences /
Environmental
Services (B2B)
alliedbioscience.com Dallas, TX Angel
(Individ-
ual)
Natural Air
E-Controls
Developer of HVAC control systems designed to incorporate residential
building ventilation. The company’s systems provide fresh air and remove
pollutants by taking in outdoor air in amounts needed to improve indoor
air quality, enabling users to stay healthy.
CleanTech /
Electronics (B2C)
naturalair.com Lake Wales, FL Angel
(Individ-
ual)
ION Engineering Developer of carbon dioxide capture technology designed for greenhouse
gas mitigation. The company’s technology uses an advanced liquid
a bsorbent system to capture carbon dioxide, providing industries with
efcient commercial options, while signicantly reducing capital and
operating costs.
Other Equipment ion-engineering.com Boulder, CO Angel
(Individ-
ual)
Phytonix Operator of an industrial biotechnology company intended to produce
sustainable chemicals directly from carbon dioxide. The company uses
aprocess that employs cyanobacteria, which are the same organisms
responsible for creating a breathable atmosphere on Earth, enabling a
wide variety of industries to produce butanol at less than half the current
cost of using propylene in a sustainable manner.
CleanTech /
TMT – Multi-line
phytonix.com Black
Mountain,
NC
Later
Stage /
VC
Simply Good Jars Developer of smart jars designed to reduce food waste. The company’s
product is portable with no checkout required at the purchase point,
using advanced convenience technology.
FoodTech / Food
products
simplygoodjars.com Philadelphia,
PA
Seed
Round
February 2020 – Future of waste 47
Chapter 4 – Where are theinvestment opportunities in waste?
Name Description Why Link Location Deal
Type
Onvector Developer of water treatment technologies designed for sterilization and
oxidation of industrial wastewater. The company’s watertreatment tech-
nologies use ddirected energy to treat water and wastewater treatment
non-chemically, with a high-voltage plasma-based technology for waste-
water disinfection and oxidation as well as a low-voltage radio-frequency
technology for cooling water scale suppression, enabling clients to
reduce energy costs.
Cleantech / Other
equipment
onvectorllc.com Somerville,
MA
Grant
Oceanvolt Developer of hybrid electric power and propulsion systems designed
tomanufacture clean and silent electric motors for boating. The compa-
ny’s propulsion systems use afolding propeller to regenerate electricity
that can be used onboard to power the electronics and appliances or
charge devices and batteries while sailing, providing clients with technol-
ogy that makes sailing safer, quieter, and more pleasant and ecological.
CleanTech,
Industrials /
Manufacturing /
Electrical
Equipment
oceanvolt.com Vantaa,
Finland
Angel
(Individ-
ual)
MICROrganic
Technologies
Developer of a transformative technology intended for industrial and
municipal wastewater treatment. The company’s technology makes bio-
electrochemical systems that convert the chemical energy of organic
waste to electricity for high energy efciency in wastewater treatment,
enabling people to get sustainable organic waster services.
CleanTech /
Environmental
Services (B2B)
microrganictech.com Castleton- on-
Hudson, NY
Seed
Round
Divinia Water Producer of puried bottled water. The company’s product is water that is
puried through a patented technology that removes pollutants and
contaminants. The water is then sold and distributed in environmentally
friendly glass bottles.
LOHAS & Well-
ness, Beverages
diviniawater.com Idaho Falls, ID Product /
Crowd-
funding
Stella Carakasi The company primarily operates in the clothing industry. Stella Carakasi
was founded in 2012 and is headquartered in Berkeley, California.
E-Commerce,
LOHAS & Well-
ness, Clothing
stellacarakasi.com Berkeley, CA Seed
Round
StixFresh Developer of a food sticker created to curb fruit wastage. The company’s
sticker coating contains compounds that plants naturally make to protect
themselves from predators and can beeasily used, keeping fruit fresh up
to seven days longer.
FoodTech /
OtherConsumer
Non-Durables
stixfresh.com Kirkland, WA Product
Crowd-
funding
Source: PitchBook, 2019
This interview contains views which originate
from outside Chief Investment Ofce Global
Wealth Management (CIO GWM). It is there-
fore possible that the interview does not fully
reect the views of CIO GWM.
Interview
Urs Wietlisbach
Urs Wietlisbach
Partner, Co-Founder, and Member of
the Board of Directors, Partners Group
Urs, how important is reducing
waste to improving financial and
environmental outcomes?
Waste management is going to play an
increasingly important role in delivering
commercial returns, as well as tackling
the climate crisis. The sector is growing
signicantly—we expect it to double
between 2017 and 2025. And although
the majority of people think waste starts
in the home, residential accounts for
only 10% of it. Bigger areas of waste
generation and opportunity are in the
construction and industrial sectors.
In what ways can private capital
investments play a role in tackling
waste?
There are multiple investment channels
to tackle waste. It’s easiest to illustrate
their diversity by giving some specic
examples.
First, we have made a number of invest-
ments into catering and grocery busi-
nesses that explicitly tackle food waste
while delivering commercial returns. In
one Partners Group investment into an
organic grocery chain in Brazil, we iden-
tied signicant food waste because
customers wouldn’t buy blemished
goods. Creating a process to turn these
otherwise discarded fruits and vegeta-
bles into soups has cut food waste and
generated savings of around USD
600,000 per year. Similarly, we made an
additional substantial investment into a
Western European cafeteria business;
the money was used to create soware
that shows managers and cooks what
people eat at dierent times of the year.
The data collected helped the company
to design seasonal eating plans to meet
demand and reduce waste—and the
investment’s payback period was just a
year and a half.
Second, we believe waste-from-energy
projects could generate potential invest-
ment opportunities. For example, PG
Impact Investments came across a
Kenyan company that installs lavatories
in some of the country’s poorest areas.
125,000 people use these every day,
improving social conditions and making
waste collection cleaner and easier. By
introducing worms into the waste, it can
be turned into safe organic fertilizer for
agriculture, and the worms can be sold
as feedstock for pigs, chickens and to
sh farms. Importantly, private invest-
ments in these areas could provide ser-
vices at scale, at pace, and at a fraction
of the cost of the government doing it.
Third, digitalizing businesses can also be
an opportunity to reduce waste. In one
of Partners Group’s portfolio companies,
a European real estate management
business, we identied high paper con-
sumption as a critical environmental
issue we needed to tackle. By investing
in digitalization initiatives, such as
launching a platform to share docu-
ments with clients and suppliers elec-
tronically instead of posting them, the
company was able to reduce its paper
consumption by 49 tons in a year, equiv-
alent to saving 1,180 trees.
February 2020 – Future of waste 49
Chapter 4 – Where are theinvestment opportunities in waste?
A third category includes mainstream companies with poten-
tial for corporate engagement to improve company waste
management and commercial performance.
This category applies to companies that seem not to be
addressing waste management in their operations but for
whom waste is material to their operations (i.e., it has a large
impact on their commercial performance). Examples in this
category include:
– Engagement opportunities in equities and bonds of compa-
nies that tend to tackle pollution and waste less proactively
than their peers, and that operate in sectors where waste is
of material importance and where sentiment toward waste
is negative (i.e., companies view waste as a business risk
rather than an opportunity).
Examples of investors using engagement strategies to reduce
waste, emissions, and pollution could include: encouraging
construction rms to apply new design and build techniques
that reduce waste; pressing them to reduce waste and raise
efciencies across supply chains; and engaging with them to
drive up energy-efciency levels both in new and in existing
buildings.
However individual investors are unlikely to be able to engage
directly with companies to drive waste and pollution reduction.
Engagement is more likely to take place through an invest-
ment manager that uses commercial expertise and their nan-
cial power (as a signicant holder of company equity or debt
and with potential voting or board inuence) to eect corpo-
rate change that can improve company performance and
enhance investor returns.
One way to identify engagement opportunities could be to
usea waste and pollution data set to establish the materiality
of waste for business operations and then use search tech-
niques to scan a variety of information sources about the com-
pany tosee how frequently they mention waste or related
terms (asa proxy for their actions on tackling waste or related
terms in their business) or to gauge their sentiment towards
waste (i.e., whether waste is perceived as an opportunity or a
threat). In the next column is one example from UBS Evidence
Lab of how such search techniques could work (see further
regional, country-level, and sectoral details in the next chapter).
UBS Evidence Lab search techniques:
Howdo they work?
UBS Evidence Lab is developing a set of search technique
tools that can identify particular search terms related to a
broad theme (such as waste) and nd terms that frequently
occur together with the original thematic search term (such
as energy waste co-occurring with the term waste) in a statis-
tically meaningful way.
The search technique tools would then search across multiple
data sources (including earnings calls transcripts, news,
blogs, industry journals, company llings, and UBS Group
Research reports) and aggregate the number of mentions of
a thematic term (like waste) or related terms (such as energy
waste or food waste).
Over time such search technique tools could be extended to
analyze the sentiment around a theme and its related search
term(s). For example, do companies talk about waste in a
positive way (as a driver of revenue, for example) or in a neg-
ative one (as a source of costs, for example)?
Knowing how oen a search term is mentioned across com-
pany publications can indicate the importance of that theme
and related search terms to a company’s day-to-day opera-
tions or nancing. Such search technique tools can also be
combined with sustainability data sets to identify companies,
regions, or sectors where waste is not frequently mentioned
in company data (and by inference is not a high operational
or nancing priority), but where waste is material (i.e., waste
has a major commercial inuence on a company’s costs or
revenues).
Mainstream companies with poten-
tialfor corporate engagement to improve
c ompany waste management and
commercialperformance
50
February 2020 – Future of waste
Chapter 5 – Regional, country, and sector insights on waste
Regional,
country, and
sector insights
on waste
Powered by UBS Evidence Lab
Chapter 5
Source: Gettyimages
February 2020 – Future of waste 51
Chapter 5 – Regional, country, and sector insights on waste
1) American companies mention waste most oen but
tackle it less proactively than Asian or European com-
panies.
The average number of corporate mentions of waste or related
terms for American companies is nearly 50% higher than for
those in EMEA and more than double those in Asia. However,
aggregate waste and pollution data suggests that while Amer-
ican rms talk most about waste, they may be less proactive in
actually tackling it than companies in other regions.
In addition, corporate sentiment toward waste is most positive
in APAC and less so in the Americas and EMEA, potentially
suggesting Asian companies see waste as more of a business
opportunity (i.e., a way to reduce costs or open new lines of
revenue) than a risk.
American companies talk most about waste but
seem less proactive in tackling it
Fig. 30
Sour
ce: UBS Evidence Lab, UBS CIO GWM, as of February 2020
Average number of mentions per company (2010–2019, companies with at
least one waste keyword mentioned, le scale)
Average pollution and waste score (CIO methodology, as of January 2020;
industry average calculated based on MSCI ACWI companies only, right scale)
0
30
60
90
120
5
6
7
8
Americas APAC EMEA
Overall this data indicates that companies in the US mention
waste most frequently (as it may be particularly material to
their operations), but oer the most potential for improvement
on waste and pollution reduction (including through engage-
ment strategies).
2) The majority of countries where waste is most oen
mentioned appear least proactive in tackling it.
Companies in France and the US mention waste more fre-
quently than other countries. Nevertheless, it’s interesting to
note that in many of these countries companies generally
tackle waste and pollution less proactively than others, espe-
cially when compared to companies operating in Northern
and Western Europe.
Share of positive and neutral sentiment about
waste in all mentions
Fig. 31
Sour
ce: UBS Evidence Lab, UBS CIO GWM, as of February 2020
Positive and neutral sentiment
Negative sentiment
Americas APAC EMEA
67% 80% 63%
Our analysis in collaboration with UBS Evidence Lab, of waste and pollu-
tion data and search techniques across regions, countries, and sectors
yields three main insights about trends inwaste. These may indicate
opportunities to tackle waste and pollution in a more targeted way, such
as through an engagement strategy.
52
February 2020 – Future of waste
Chapter 5 – Regional, country, and sector insights on waste
There are a number of possible explanations for these results,
including stricter environmental regulation or increased stake-
holder pressure to tackle waste in Europe relative to other parts
of the world. However, the data may oer investors particular
pointers on those countries where companies in certain parts
of Europe stand to benet most from tackling waste and pollu-
tion more proactively.
3) Companies in sectors where waste is important
mention it more (on average) in their company
reports. However, these companies also tend to
manage pollution and waste less proactively than
companies in other sectors.
This suggests that companies that produce the most waste as
part of their operations are well aware of its importance (and
so discuss it more frequently in company disclosures or other
news reports). Nevertheless, they seem to manage waste and
pollution less proactively than companies operating in other
sectors.
The majority of countries where waste is most
oen mentioned appear least pro-active in
tackling it
Fig. 32
Source: UBS Evidence Lab, UBS CIO GWM, as of February 2020
United States
Canada
Brazil
Singapore
Hong Kong
New Zealand
Australia
France
UK
Germany
Norway
Finland
Spain
Italy
South Africa
Average numbers of mentions per company
Average pollution and waste score
33.0
36.5
110.5
20.2
56.0
32.0
114.0
212.4
62.5
56.3
43.2
25.7
21.6
12.6
3.7
5.8
5.5
5.5
4.8
3.5
5.6
6.4
7.4
7.4
7.4
6.7
6.7
6.6
6.1
8.1
Americas APAC EMEA
This data may oer insights as to where investors could
engage with corporate managers to improve waste manage-
ment practices and most eectively boost corporate and nan-
cial performance. Logically it would make sense to target com-
panies working in sectors where waste matters most, and
companies that have a less proven record of managing waste
and pollution relative to peers.
Industrials are a notable outlier in this sectoral analysis. Compa-
nies in this sector mention waste (on average) the most and
seem to tackle it proactively, yet waste is not deemed material
for the aggregate sector as a whole. Here aggregate data hides
the wider variation at the subsector and company level, with
waste being material for some parts, but less so for others.
Companies in sectors where waste is material
mention it more…yet seem less proactive in
tackling it
Fig. 33
Sour
ce: UBS Evidence Lab, UBS CIO GWM, as of February 2020
0
40
80
120
160
3.5
4.5
5.5
6.5
7.5
Average number of mentions per company* (le scale)
Average pollution and waste score** (right scale)
Title
Subtitle
Fig. xx
Source: Please provide
0
40
80
120
160
UtilitiesMaterialsInformation
Technology
IndustrialsHealth CareFinancialsEnergyConsumer
Staples
Consumer
Discretionary
Communic.
Services
3.5
4.5
5.5
6.5
7.5
Average number of mentions per company (les scale) Average pollution and waste score (right scale)
Communication Services
Consumer Discretionary
Consumer Staples
Energy
Financials
Health Care
Industrials
Information Technology
Materials
Utilities
* 2010–2019, companies with at least one waste keywor
d mentioned.. Material industries in
darkened color
. N/m refers to insufficiently lower number of companies with mentions.
** CIO methodology
, as of January 2020; industry average calculated based on MSCI ACWI
companies only
.
N/m
February 2020 – Future of waste 53
Required Disclosures
For a complete set of required disclosures relating to the companies that are the subject of this report, please mail a request to UBS
CIO Global Wealth Management Business Management, 1285 Avenue of the Americas, 8th Floor, Avenue of the Americas, New
York, NY 10019.
Analyst certication
Each research analyst primarily responsible for the content of this research report, in whole or in part, certies that with respect to
each security or issuer that the analyst covered in this report: (1) all of the views expressed accurately reect his or her personal
views about those securities or issuers; and (2) no part of his or her compensation was, is, or will be, directly or indirectly, related
to the specic recommendations or views expressed by that research analyst in the research report.
Statement of Risk
Equities – Stock market returns are difcult to forecast because of uctuations in the economy, investor psychology, geopolitical
conditions and other important variables.
Fixed income – Bond market returns are difcult to forecast because of uctuations in the economy, investor psychology, geopo-
litical conditions and other important variables. Corporate bonds are subject to a number of risks, including credit risk, interest rate
risk, liquidity risk, and event risk. Though historical default rates are low on investment-grade corporate bonds, perceived adverse
changes in the credit quality of an issuer may negatively aect the market value of securities. As interest rates rise, the value of a
xed-coupon security will likely decline. Bonds are subject to market value uctuations, given changes in the level of risk-free inter-
est rates. Not all bonds can be sold quickly or easily on the open market. Prospective investors should consult their tax advisors
concerning the federal, state, local, and non-US tax consequences of owning any securities referenced in this report.
Municipal bonds – Although historical default rates are very low, all municipal bonds carry credit risk, with the degree of risk
largely following the particular bond‘s sector. Additionally, all municipal bonds feature valuation, return, and liquidity risk. Valuation
tends to follow internal and external factors, including the level of interest rates, bond ratings, supply factors, and media reporting.
These can be difcult or impossible to project accurately. Also, most municipal bonds are callable and/or subject to earlier than
expected redemption, which can reduce an investor’s total return. Because of the large number of municipal issuers and credit
structures, not all bonds can be easily or quickly sold on the open market
Please note that ratings will change with market conditions and are only valid as of the publication date.
Disclosures (21 February 2020)
ConocoPhillips 1, 2, 3, CSX Corp. 1, 4, 5, 6, 7, 8, Dominion Energy 1, 7, 8, 9, DuPont de Nemours Inc 1, 2, 7, 8, 9, 10, 11, Eastman
Chemical 1, Exelon Corp. 1, 7, 8, 9, General Motors Company 1, 9, Gildan Activewear 1, Honeywell International Inc. 1, 7, 8, 12,
International Flavors and Fragrances 1, 7, 8, Kinder Morgan Inc 1, 13, Linde 1, Market Vectors Environmental Services ETF 1, Nex-
tera Energy Inc. 1, 4, 5, 6, 9, 12, Nike Inc. 1, 14, 15, Phillips 66 1, PowerShares Cleantech Portfolio 1, Republic Services Group 1,
12, 16; Southern Co/The 1, 5, 7, 8, 9, 11, 16; Steel Dynamics Inc. 1, Union Pacic 1, 7, 8, 9,
1. UBS Securities LLC makes a market in the securities and/or ADRs of this company.
2. The equity analyst covering this company, a member of his or her team, or one of their household members has a long common
stock position in this company.
3. Because this security exhibits higher-than-average volatility, the FSR has been set at 25% above the MRA for a Buy rating, and
at -25% below the MRA for a Sell rating (compared with 6/-6% under the normal rating system).
4. Within the past 12 months, UBS AG, its afliates or subsidiaries has received compensation for investment banking services
from this company/entity or one of its afliates.
5. UBS AG, its afliates or subsidiaries has acted as manager/co-manager in the underwriting or placement of securities of this
company/entity or one of its afliates within the past 12 months.
6. This company/entity is, or within the past 12 months has been, a client of UBS Securities LLC, and investment banking services
are being, or have been, provided.
7. This company/entity is, or within the past 12 months has been, a client of UBS Financial Services Inc, and non-investment bank-
ing securities-related services are being, or have been, provided.
8. Within the past 12 months, UBS Financial Services Inc has received compensation for products and services other than invest-
ment banking services from this company.
9. Within the past 12 months, UBS Securities LLC and/or its afliates have received compensation for products and services other
than investment banking services from this company/entity.
Appendix
54
February 2020 – Future of waste
10. This company/entity is, or within the past 12 months has been, a client of UBS Securities LLC, and non-securities services are
being, or have been, provided.
11. This company/entity is, or within the past 12 months has been, a client of UBS Securities LLC, and non-investment banking
securities-related services are being, or have been, provided.
12. UBS Financial Services Inc., its afliates or subsidiaries owns a net long position exceeding 0.5% of the total issued share capi-
tal of this company.
13. UBS AG, its afliates or subsidiaries expect to receive or intend to seek compensation for investment banking services from this
company/entity within the next three months.
14. An employee of UBS AG is an ofcer, director, or advisory board member of this company.
15. UBS AG, its afliates or subsidiaries held other signicant nancial interests in this company/entity as of last month’s end (or
the prior month’s end if this report is dated less than 10 working days aer the most recent month’s end).
16. UBS AG, its afliates or subsidiaries benecially owned 1% or more of a class of this company’s common equity securities as of
last month’s end (or the prior month’s end if this report is dated less than 10 days aer the most recent month’s end).
Nontraditional Assets
Nontraditional asset classes are alternative investments that include hedge funds, private equity, real estate, and man-
aged futures (collectively, alternative investments). Interests of alternative investment funds are sold only to qualied inves-
tors, and only by means of oering documents that include information about the risks, performance and expenses of alternative
investment funds, and which clients are urged to read carefully before subscribing and retain. An investment in an alternative
investment fund is speculative and involves signicant risks. Specically, these investments
1. are not mutual funds and are not subject to the same regulatory requirements as mutual funds;
2. may have performance that is volatile, and investors may lose all or a substantial amount of their investment;
3. may engage in leverage and other speculative investment practices that may increase the risk of investment loss;
4. are long-term, illiquid investments; there is generally no secondary market for the interests of a fund, and none is expected to develop;
5. interests of alternative investment funds typically will be illiquid and subject to restrictions on transfer;
6. may not be required to provide periodic pricing or valuation information to investors;
7. generally involve complex tax strategies and there may be delays in distributing tax information to investors;
8. are subject to high fees, including management fees and other fees and expenses, all of which will reduce prots.
Interests in alternative investment funds are not deposits or obligations of, or guaranteed or endorsed by, any bank or other insured
depository institution, and are not federally insured by the Federal Deposit Insurance Corporation, the Federal Reserve Board, or
any other governmental agency. Prospective investors should understand these risks and have the nancial ability and willingness
to accept them for an extended period of time before making an investment in an alternative investment fund and should consider
an alternative investment fund as a supplement to an overall investment program.
In addition to the risks that apply to alternative investments generally, the following are additional risks related to an investment in
these strategies:
Hedge Fund Risk: There are risks specically associated with investing in hedge funds, which may include risks associated with invest-
ing in short sales, options, small-cap stocks, “junk bonds,” derivatives, distressed securities, non-US securities and illiquid investments.
Managed Futures: There are risks specically associated with investing in managed futures programs. For example, not all manag-
ers focus on all strategies at all times, and managed futures strategies may have material directional elements.
Real Estate: There are risks specically associated with investing in real estate products and real estate investment trusts. They
involve risks associated with debt, adverse changes in general economic or local market conditions, changes in governmental, tax,
real estate and zoning laws or regulations, risks associated with capital calls and, for some real estate products, the risks associated
with the ability to qualify for favorable treatment under the federal tax laws.
Private Equity: There are risks specically associated with investing in private equity. Capital calls can be made on short notice, and the
failure to meet capital calls can result in signicant adverse consequences including, but not limited to, a total loss of investment.
Foreign Exchange/Currency Risk: Investors in securities of issuers located outside of the United States should be aware that even
for securities denominated in US dollars, changes in the exchange rate between the US dollar and the issuer’s “home” currency
can have unexpected eects on the market value and liquidity of those securities. Those securities may also be aected by other
risks (such as political, economic or regulatory changes) that may not be readily known to a US investor.
February 2020 – Future of waste 55
UBS CIO WM equity selection system
We provide two equity selections: Most Preferred (MP) and Least Preferred (LP).
Most preferred
We expect the stock to outperform the benchmark in the next 12 months.
Least preferred
We expect the stock to underperform the benchmark in the next 12 months.
Suspended
Sometimes legal, regulatory, contractual or best-business-practice obligations restrict us from issuing research on a company. This sit-
uation normally stems from UBS Investment Bank’s involvement in an investment banking transaction associated with that company.
Equity selection: An assessment relative to a benchmark
Equity selections in Equity Preferences lists (EPLs) are assessments made relative to a sector/industry, country/regional or thematic
benchmark. The chosen benchmark is disclosed on the front page of each EPL. It is also used to measure the performance of the
individual analyst. Including a stock in the EPL constitutes neither a view on its expected, standalone absolute performance nor a
price target. Rather, EPLs are meant to support the UBS House View, with the stocks included in them selected for their superior
risk/return proles.
Our selection is based on an assessment of the company’s fundamental outlook and valuation, the risks owning the stock entails and
the diversication benets it provides in an investment portfolio, among many other factors. UBS WM CIO‘s selection methodology
enables wealth management clients to invest in a specic investment theme or focus on a sector/industry or country/region.
Stocks can be selected for multiple EPLs. For consistency’s sake, a stock can only be selected as either Most Preferred or Least Pre-
ferred, not both simultaneously. As EPL benchmarks dier, stocks do not need to be included on every list to which they could the-
oretically be added.
Only stock views prepared by UBS Financial Services Inc. (UBS FS) which are compatible with the above equity selection system are
provided. A stock cannot be selected as Most Preferred if it is rated Sell, while a Buy-rated stock cannot be selected as Least Preferred.
Whenever CIO has an investment view (such as with the tactical asset allocation TAA) on an entire country/region, or sector/indus-
try on a three to 12-month time horizon, we state our preference by using the terms overweight, neutral and underweight.
For more information about our present and past recommendations, please contact [email protected]
Preferred Issuer Type denitions
Attractive: Preferred securities deemed Attractive are those that we view favorably based on (1) fundamental credit quality, (2) val-
uation and (3) structure (security characteristics).
“Core” issuers have investment grade senior debt ratings. Note: the credit rating agencies typically notch the rating of preferred
securities lower than that of the issuer rating (or senior debt rating) to reect the subordination of preferreds in an issuer’s capital
structure. Therefore, Core issuers may have non-investment grade rated preferreds.
UBS Global Research: Global Equity Rating Denitions
For information on the ways in which UBS manages conicts and maintains independence of its research product; historical performance
information; and certain additional disclosures concerning UBS research recommendations, please visit www.ubs.com/disclosures.
Global Equity 12-Month Rating Denitions
Buy: FSR is > 6% above the MRA. Neutral: FSR is between -6% and 6% of the MRA. Sell: FSR is > 6% below the MRA.
Key Denitions
Forecast Stock Return (FSR) is dened as expected percentage price appreciation plus gross dividend yield over the next 12 months.
Market Return Assumption (MRA) is dened as the one-year local market interest rate plus 5% (a proxy for, and not a forecast
of, the equity risk premium).
Under Review (UR) Stocks may be agged as UR by the analyst, indicating that the stock’s price target and/or rating are subject
to possible change in the near term, usually in response to an event that may aect the investment case or valuation.
Exceptions and Special Cases
Core Banding Exceptions (CBE): Exceptions to the standard +/-6% bands may be granted by the Investment Review Committee
(IRC). Factors considered by the IRC include the stock’s volatility and the credit spread of the respective company’s debt. As a result,
stocks deemed to be very high or low risk may be subject to higher or lower bands as they relate to the rating. When such excep-
tions apply, they will be identied the Companies Mentioned or Company Disclosure table in the relevant research piece.
56
February 2020 – Future of waste
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February 2020 – Future of waste 57
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58
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February 2020 – Future of waste 59
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Version 06/2019. CIO82652744
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