UBS suggests ‘waste reduction bonds’ to tackle growing global problem

Waste reduction sector expected to double by 2025

Swiss banking giant UBS has outlined a framework for both investor value and waste reduction in the new concept of ‘waste reduction bonds’, pointing out that just 4% of green bonds in issuance actively address subjects such as food waste or energy and plastic pollution.

Investors say the waste sector could be on the cusp of significant growth prospects.

In a new white paper, titled, Future of Waste, UBS says: ‘Waste reduction (WaRe) bonds’, in a similar structure to green bonds, would see proceeds used to finance projects, covering three broad areas: energy, packaging, and food.”

Future of Waste is the first in a series of regular white papers where UBS will explore longer-term sustainable investment opportunities.

'Waste management is going to play an increasingly important role in delivering commercial returns as well as tackling the climate crisis'

The paper finds that currently around 30% of food globally is wasted at a cost of $1trn a year, while 10% of the global population goes hungry. 

In addition, it says plastic packaging volumes are expected to more than quadruple by 2050, yet 95% of the value of such plastic is lost after one use, at a cost of up to $120bn each year. 

UBS says investors can capture long-term returns by investing in waste reduction opportunities, aligning with lawmakers’ drive for stricter regulation and consumer demand for positive impact. 

Urs Wieslisbach, co-founder of Partners Group, the Swiss private equity group, interviewed for the paper, says: “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 significantly – we expect it to double between 2017 and 2025.”

Future of Waste lists dedicated management companies in the waste sector and flags companies that generate material levels of waste but reduce it more proactively than peers. It also flags companies with potential for corporate engagement to improve their waste management. 

The white paper also introduces the new concept of waste reduction bonds, noting that waste currently represents only 4% of the reported use of proceeds of the $700bn green bond market. 

“Like green bonds, these would be standard bonds that appeal both to mainstream traditional investors and to the growing cohort of sustainable investors,” says the paper.

UBS suggests a framework for waste reduction bonds using a simplified version of the Green Bond Principles without the requirement of external auditing and a dedicated programme specifying use of proceeds to make it less burdensome. 

"Companies should, however, disclose the intended use of proceeds at issuance, and provide annual reporting on the effective projects financed and ideally also their respective waste reduction outcome," says UBS. 

It comes as UBS today announces its 100% sustainable cross-asset portfolio for private clients has attracted $10bn in assets since its launch two years ago.

UBS also announced that its $471m Oncology Impact Fund, focused on cancer research, has donated $4m to the UBS Optimus Foundation and American Association for Cancer Research using proceeds from performance fees.