Interactive Investor

Tech investors and the problem no one is talking about

3rd September 2020 12:01

John Ditchfield from ii contributor

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We all hunger for the latest tech, but John Ditchfield considers where our gadgets go to die.

Theories persist about “built-in obsolescence”, which amounts to the design and manufacture of products with an artificially reduced lifespan. In reality, frequent tech upgrades means that we are generating huge amounts of e-waste and this has an impact on the environment. 

Not all e-waste is easy to recycle. Apple’s phenomenally successful AirPods have generated reports that claim that their lithium-ion batteries die in as little as 18 months. Users are then faced with a product that cannot be easily recycled since its battery cannot be easily separated from its plastic shell.

A growing awareness and understanding of the impact of waste, and e-waste in particular, is leading to more investor interest in the concept of the circular economy. Such an economy is concerned with rethinking design to build products and components that can be repaired, recycled and remanufactured. This approach allows manufacturers to “design out” waste and extend the life-cycle of products that might previously have ended up in landfill after a matter of months.

E-waste: an issue on a global scale 

E-Life, a 2018 documentary, reveals that 42 million tonnes of e-waste is produced globally each year - the equivalent of 115 Empire State buildings. 

There are now more operational cell phones on the planet than people, and the problem of how to dispose of old gadgets when they become obsolete is posing severe environmental issues on a global scale. 

The film highlights how much e-waste is exported to Africa, where it ends up in a number of unregulated disposal sites. The ad-hoc disposal of items, which can contain toxic chemicals such as arsenic, lead and cadmium, can lead to severe health threats for site workers, including respiratory problems, cancers and birth defects, alongside heavy pollution of the surrounding air, water, and soil. For example, Agbogbloshie, an e-waste disposal site in Accra, Ghana, is ranked as one of the most toxic places on the planet alongside Chernobyl. 

The opportunities of a circular economy 

Historically, many businesses have been able to avoid suffering the direct negative consequences associated with waste and pollution through “externalising” the social costs and passing them on to society. This allows companies to show higher profits, while society pays the costs of the pollution.  

However, the emergence of greater regulation and growing consumer awareness of the environmental footprint of brands means externalisation may no longer be feasible. Businesses that fail to respond responsibly to risks such as waste and pollution will ultimately be penalised by investors. 

Tackling e-waste also presents opportunities: a shift to a more circular economy could add almost £3 billion annually to the UK economy, according to 2015 research from Imperial College London, and save $700 million (£521 million) for consumer goods’ firms, while reducing carbon dioxide emissions by 48% before 2030, according to the Ellen MacArthur Foundation.

Investors must wake up to the consequences of investing in technology manufacturers without keen attention to their waste and recycling procedures. What’s more, given the high disposal costs associated with waste, it’s simply good business to be less wasteful. 

The role of investors in the great waste transition 

There are many ways that investors can leverage their influence as responsible stewards of capital to help develop and promote solutions to the urgent issue of e-waste, such as investing in companies and funds that support circular thinking. 

For instance, computer technology company Dell banned the export of non-working electricals to developing nations in 2009. Additionally, Fairphone has made it a top priority to extend the lifespan of its products  by using a combined approach of modular architecture and the power of repair. The company has opened up its source code to owners and developers and offers affordable spare parts and helpful tutorials so that owners can fix the most commonly broken parts. 

Through their Positive Impact Fund, M&G invest in DS Smith (LSE:SMDS), an industry leader when it comes to closed-loop recycling. This is a process in which waste is collected, recycled and then used again to make the same product. 

US-based investors Boston Common Asset Management also recently got Apple (NASDAQ:AAPL) and PepsiCo (NASDAQ:PEP) to join the Ellen MacArthur Foundation’s Global Commitment to building a circular economy for plastic. 

Preserving our planet over short-term profits 

For the concept of a circular economy to become meaningful in business, we need for companies to drastically rethink the way they operate. We’ve seen a shift in attitude among investors and consumers that foregrounds resource preservation over short-term returns, and many are demanding that companies think in the same way. 

Company assessments are now taking into account the reality that our planet isn’t an infinite mine for exploitation. Protecting its valuable resources takes systemic transformation, and investors are increasingly seeing the wood for the trees. 

John Ditchfield is chairman of Impact Lens and head of responsible investment at Helm Godfrey.

These articles are provided for information purposes only. Occasionally, an opinion about whether to buy or sell a specific investment may be provided by third parties. The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.

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