Banks “risking billions” by investing in plastic production, says NGO FairFin

03 Jun 2022 --- Investment in chemical giant Ineos’ plan to build a state-of-the-art ethane cracker in the port of Antwerp, Belgium – which would significantly increase the production of ethylene for plastics – presents a huge financial risk for the European economy, according to researchers.

Over the past five years, several of the world’s largest banks – including JP Morgan Chase, Barclays, HSBC, Citigroup, BNP Paribas and ING Group – have collectively invested nearly US$22 billion in petrochemical companies Ineos and Borealis. 

These investments have largely gone to Ineos’ “Project One” ethane facility and Borealis’ “Kallo Project.” Leaders of these companies say the developments will bring needed employment and capital to the region. 

However, a new report by financial research nonprofit FairFin, commissioned by legal firm ClientEart and NGO Break Free From Plastics, says rapidly growing anti-plastic legislation could mean the loss of billions of euros and a huge economic hit for taxpayers and banks alike. 

Tatiana Luján, a lawyer at ClientEarth who is leading a legal challenge against Ineos’ Project One, tells PackagingInsights: “A myriad of policies and new laws are being adopted following the EU Green Deal, which creates an economic and regulatory ecosystem less favorable to linear business models based on the extraction of fossil fuels, such as Ineos’ Project One.”

Policy barriers 
Ineos says Project One will not fuel the production of single-use plastics but create products like pharmaceuticals, environmentally friendly automotive, water pipelines and wind turbines. 

ClientEarth is appealing the Ineos expansion in Belgium, saying it will create pollution and human health damage.Luján disputes this, and says the ethane cracker will inevitably rely on producing single-use plastic products that are increasingly restricted under EU legislation – meaning a potentially dangerous disparity between supply and demand. 

“As so much of ethylene production is used to make plastic, much of which is single-use, there are many EU laws that will have a big impact on decreasing the demand for ethylene,” she says. 

“Some of these include the reform of the Packaging and Packaging Waste Directive, the Waste Framework Directive and the completion of the implementation by the Member States of the Single Use Plastics Directive.” 

“Other relevant policies are the Due Diligence Directive, the REACH reform, the reform of the Industrial Emissions Directive, and the Carbon Border Adjustment Mechanism.” 

Circularity for job creation 
Ineos’ CEO Jim Ratcliffe, who invested €3 billion (US$3.2 billion) in Antwerp in 2019 with top Flemish politicians, asserts the company’s expansion will grow the Belgian economy and provide resources for the transition to greener energy production.

Luján says the employment prospects of Ineos’ project are negligible, especially given the environmental and human health side effects of such a facility. 

“The operation of Project One would create approximately 300 permanent jobs, but these jobs would mostly be short-term. However, the creation of these jobs will not outweigh the project's impact on people’s health, nor the impact that increased ethylene production would have,” she says. 

Ineos argues its new facility would have less than half the environmental footprint of traditional ethane crackers, and construction will provide advanced electronic and transport infrastructure for local society. 

Luján insists this view is short-sighted. “There is an oversupply of ethylene that creates an extremely low price for plastics, which results in an unbalanced playing field for business models who do not rely on single-use plastics.”  

“Instead, investing in the circular economy could create more than 700,000 net jobs – but this requires business models based on reuse and recycling and less production of plastics.” Anti-plastics legislation could cost banks billions in losses, according to FairFin.

Global pushback against petrochemicals 
Since the binding UN agreement for a Global Plastics Pollution Treaty was reached in March, many anti-plastics NGOs and legal activists feel emboldened to hold petrochemical companies and packaging corporations responsible for plastic pollution. 

This trend is not restricted to Belgium. “Around the world, we are seeing people take action to block the construction of petrochemical projects. For example, in the US, there are fights against the construction and operation of petrochemical installations, some of which have yielded important successes,” says Luján. 

Recently, the attorney general of California opened an investigation against ExxonMobil for its role in exacerbating the plastic pollution crisis as well as executing an “aggressively” spreading decades of disinformation on plastics and their damage to human and environmental health. 

Force mounting against finance 
NGOs are starting to meet with investors to explain to them the impacts of petro-plastics production and the impacts that the lifecycle of plastics has on the environment, taxpayers, and people’s health, says Luján. 

“New disclosure obligations, including those that come from the Taxonomy Regulation, will force banks to measure and reveal how much of their portfolio is sustainable and how much of it contributes to the climate crisis and environmental devastation.”

“Investors are also starting to force companies to shift away from fossil fuels, both because of the need to preserve a healthy planet and because they can see the exposure of companies to physical, transition and legal business risks if they don’t.”

A decision on a legal appeal filed by 13 NGOs (including ClientEarth) against Ineos’ permit for Project One is expected on June 8. 

By Louis Gore-Langton