Please upgrade your browser

We take your security very seriously. In order to protect you and our systems, we are making changes to all HSBC websites that means some of the oldest web browser versions will no longer be able to access these sites. Generally, the latest versions of a browser (like Edge, Chrome, Safari, etc.) and an operating system family (like Microsoft Windows, MacOS) have the most up-to-date security features.

If you are seeing this message, we have detected that you are using an older, unsupported browser.

See how to update your browser

Why reducing waste is a solid business opportunity

Waste is choking our land and our oceans – but a growing number of companies are turning rubbish to riches
13 June 2023

    Why reducing waste is a solid business opportunity

    Waste is choking our land and our oceans – but a growing number of companies are turning rubbish to riches

    A global switch to circular economy tools and processes is creating a major opportunity for investors, according to experts. Moving to production and consumption models that minimise waste could deliver up to $4.5tn in economic benefits by 2030, according to the World Economic Forum And the move is not seen as a fad but rather a fundamental adjustment to economic conditions in the 21st century.

    “The economic models we are working on were created in the 19th or 18th centuries, when resources were seen as completely unlimited and the world population was mostly below 1.5bn,” says Bénédicte Mougeot, Head of Climate Equity at HSBC Asset Management. “We are not fully conscious of the multiple pressure points arising from the scarcity of resources. This scarcity is linked to population growth and overconsumption, especially in developed countries. We have already started to exceed nature’s boundaries.”

    One of the most visible signposts of the overuse of global resources is climate change, which is largely caused by the unsustainable extraction and use of fossil fuels. But excessive consumption is creating resource challenges in many other areas. This year, Earth Overshoot Day – the date at which humanity is estimated to have used up the ecological resources that the Earth can generate in a year – fell on 28 July, marking one of the fastest rates of depletion ever2  and signalling a growing waste problem worldwide.


    The challenge now is reducing the amount of waste we create, reusing what we can and recycling the rest

    “We all know that as a society we are consuming more than ever before, which of course leads to more waste,” says Tim Duret, Director of Sustainable Technology for UK and Ireland at Veolia, a benchmark company for ecological transformation. “The challenge now is reducing the amount of waste we create, reusing what we can and recycling the rest.”

    New business models

    To address this challenge, companies and consumers need to break away from business models that reward consumption. However, adopting circular business practices already makes sound business sense on multiple levels. Foremost among these is consumer pressure. In the face of mounting levels of waste, environmental degradation and climate impacts, consumers are increasingly demanding products that can be produced and used in a sustainable way.

    “Failing to address demand for circular practices is now risky for businesses and could have an impact on a brand’s reputation,” says Mougeot. Reflecting this growing concern for the environment, businesses also face increasing regulatory pressure to reduce waste and increase circularity. But some experts argue regulations could still go much further.

    “In many countries, the sorting of municipal solid waste is not mandatory at the household level, resulting in a stream of mixed residues that is often not well processed, and ends up in landfills, open dumps or being burnt,” says Henrique Pacini, Economic Affairs Officer at the United Nations Conference on Trade and Development. “This results in a heavy and cumulative toll on the environment, and a missed opportunity in the form of various materials and components that could have a second life in the economy.”

    Dwindling resources

    Ultimately, some of the biggest drivers for the adoption of circularity could come from a simple evaluation of resource economics. Because they limit waste in all its forms, circular business practices are generally seen as being linked to greater efficiency, which can help improve margins and profits. A lack of recycling is also a problem for companies and countries that used to ship their waste abroad, typically to China.

    “With the Basel, Rotterdam and Stockholm conventions controlling trade of sensitive wastes, as well as the import restrictions for scrap materials adopted by China and others since 2016, shipping waste elsewhere became a difficult option for helping offload municipal infrastructures,” Pacini says. “I expect trade in waste to mostly be in pre-processed, certified-recycled secondary materials which are near or at par with virgin-grade materials, but those need a great deal of recycling infrastructure and value-addition before hitting a port. It’s far better to reduce overall waste production per person, which is the premise of circularity.”

    As demand grows for recycled materials, so does the investment in domestic reprocessing infrastructure

    On top of this, there is growing awareness of the challenges associated with exploiting dwindling resources, at a time when significant amounts of raw materials are being tied up in post-consumer waste. The World Bank estimates more than 2bn tonnes of solid municipal waste is generated worldwide a year. 3Recovering most of this for use as raw material could help reduce waste and resource depletion in one go. With recycling rates in the UK currently at around 45 per cent, there is still much that can be done in this area, creating a significant opportunity for investors.

    “As demand grows for recycled materials, so does the investment in domestic reprocessing infrastructure,” says Veolia’s Tim Duret. “Closing the gap quickly depends on maintaining investor confidence to build more, but the prize is that the economic benefits of an expanding circular economy will be delivered close to home.”


    Important information

    For professional investors and intermediaries only. This document should not be distributed to or relied upon by retail clients/investors.

    The value of investments and the income from them can go down as well as up and investors may not get back the amount originally invested. Past performance contained in this document is not a reliable indicator of future performance whilst any forecasts, projections and simulations contained herein should not be relied upon as an indication of future results. Where overseas investments are held the rate of currency exchange may cause the value of such investments to go down as well as up. Investments in emerging markets are by their nature higher risk and potentially more volatile than those inherent in some established markets. Economies in Emerging Markets generally are heavily dependent upon international trade and, accordingly, have been and may continue to be affected adversely by trade barriers, exchange controls, managed adjustments in relative currency values and other protectionist measures imposed or negotiated by the countries with which they trade. These economies also have been and may continue to be affected adversely by economic conditions in the countries in which they trade. Mutual fund investments are subject to market risks, read all scheme related documents carefully.

    The contents of this document may not be reproduced or further distributed to any person or entity, whether in whole or in part, for any purpose. All non-authorized reproduction or use of this document will be the responsibility of the user and may lead to legal proceedings. The material contained in this document is for general information purposes only and does not constitute advice or a recommendation to buy or sell investments. Some of the statements contained in this document may be considered forward looking statements which provide current expectations or forecasts of future events. Such forward looking statements are not guarantees of future performance or events and involve risks and uncertainties. Actual results may differ materially from those described in such forward-looking statements as a result of various factors. We do not undertake any obligation to update the forward-looking statements contained herein, or to update the reasons why actual results could differ from those projected in the forward-looking statements. This document has no contractual value and is not by any means intended as a solicitation, nor a recommendation for the purchase or sale of any financial instrument in any jurisdiction in which such an offer is not lawful. The views and opinions expressed herein are those of HSBC Asset Management and are subject to change at any time. These views may not necessarily indicate current portfolios' composition. Individual portfolios managed by HSBC Asset Management primarily reflect individual clients' objectives, risk preferences, time horizon, and market liquidity.

    We accept no responsibility for the accuracy and/or completeness of any third party information obtained from sources we believe to be reliable but which have not been independently verified.

    Investment involves risk. Past performance is not indicative of future performance. Please refer to the offering document for further details including the risk factors. This document has not been reviewed by the Securities and Futures Commission.

    HSBC Asset Management is the brand name for the asset management business of HSBC Group. The above communication is distributed in Hong Kong by HSBC Global Asset Management (Hong Kong) Limited.

    Copyright © HSBC Global Asset Management (Hong Kong) Limited 2023. All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, on any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the prior written permission of HSBC Global Asset Management (Hong Kong) Limited.