This is a sponsored article from Schroders.

Samuel Thomas, sustainable investment analyst

Waste management has long been one of society’s primary challenges. It is an industry that is ripe for disruption considering how little it has changed over the last few centuries.

Why is waste a problem?

Poor waste management contributes to climate change, directly affects ecosystems and generates air, water and land pollution.

For example, landfills alone – in which 37% of global municipal solid waste (MSW) is disposed – account for 8-10% of human activity-based methane emissions.

Food waste is a pressing issue – its economic cost is estimated to be US$1 trillion a year, according to the Food and Agriculture Organisation of the United Nations. It can lead to greater water scarcity, loss of biodiversity, adverse health effects and soil erosion – which in itself can lead to increased risk of conflict and loss of livelihoods.

Is waste creation being regulated?

Social and political pressure for waste creators to handle waste in more sustainable ways is intensifying. As a result, the regulatory burden is ratcheting up.

There appears to be unanimity among regulators to enforce a “polluter pays” principle. This could include increased taxes on waste imports/exports, rising landfill gate prices and increasingly punitive fines for the mismanagement of waste and illegal dumping.

Furthermore, regulators are looking to incentivise countries to dispose of the waste they create domestically rather than exporting it to other countries – a common practice due to the strong international trading market for waste.

These shifts in the regulatory landscape create a growing need for society to develop new and innovative ways in which to handle waste in socially and environmentally friendly ways.

As such, there is an increasing opportunity for companies with new technologies to enable this.

What is the opportunity for investors?

Because of the rapid, expected rise in MSW generation over the coming decades, there are three areas we believe are particularly interesting:

• AI and automated sorting

It is estimated that over half of all waste management tasks in material recovery facilities can be automated. Using computer vision, 3D laser scans and metal sensors, combined with machine learning and advanced robotics, the accuracy and sensitivity of automated sorting can be dramatically improved.

• Waste-to-energy

This is a method by which electricity or heat is generated from the processing and treatment of waste. It cuts demand for landfill and dumping sites, lowers dependence on fossil fuels and in some instances, reduces environmental pollution.

It is expected to be the fastest growing waste management sector over the next five years.

• Landfill methane capture

Landfills account for 11% of global methane emissions – this is the gas that is generated as organic matter decomposes. It has higher global warming potential than carbon dioxide.

But the gas can be captured and used as a clean fuel source, preventing landfill gas emissions and displacing the use of fossil fuel alternatives.

One million tonnes of MSW can capture enough methane to power about 1,850 European homes for a year.

While other methods of transforming waste to energy have higher energy conversion efficiency, where landfills already exist, the environmental impact of capturing the methane that would otherwise enter the atmosphere is clearly positive.

Society’s waste problem is here to stay

Underpinned by strong social megatrends and increasingly stringent regulations, the need to manage waste in an energy-efficient, socially and environmentally friendly way, is increasing.

In an industry that has remained broadly unchanged for centuries, we believe this presents a significant opportunity for emerging technologies to become market leaders in this rapidly growing market segment while tackling one of mankind’s biggest social and environmental challenges.

Find out more about Schroders’ insights and capabilities on sustainable investing here.

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This is a sponsored article from Schroders.