Today we focus on recycling and the news that a significant recycler of PET (CarbonLite) has filed for Chapter 11 protection. This is another indication that there is not much money to be made in recycling and it is a little shocking given that the company was focused on PET, which has some of the better recycling rates in the country. The company blames the Bankruptcy on COVID and it is clear that the timing of some major capital commitments related to expansions that were delayed by COVID are part of the problem. While the restructuring is unlikely to see the company liquidated, it appears that the company owes money to customers (pre-payments for the product or for capacity rights – most likely). There could be worse timing for CarbonLite – while the company will look to restructure the debt that it has with customers, it is unlikely that any of them want to run a recycling business and they all need the rPET to meet customer commitments. The negative is that it shines another light on the marginal nature of recycling, even for the better products, and may provide a further incentive for packagers to look to other materials or renewable-based sources
Separately, we note the focus on ESG enforcement from the SEC and hope that this flows in both directions. Institutional investors need to be clear about what they are offering investors but they cannot do so if the ESG data provided by corporates and interpreted by rating providers is inconsistent – or selectively disclosed. This is a topic we will cover in detail in our ESG and Climate piece this week – spoiler alert – we will be making an example of someone we believe is greenwashing in a recent ESG presentation. We struggle to see a solution whereby there is enough resource to accurately audit environmental strategies within complex industries, such as Industrials, Materials, and Energy.
