PRINT THIS PAGE Recycling investors need more options
15/03/2006. Source:Eco Investor. Adrian Herbert
Where there's muck there's brass, runs an old north of England saying. Private equity firms know that there is a lot of truth in that, both literally and metaphorically, says Eco Investor. Generation after generation, successful businesses have been built on the process of salvaging useful materials from waste. Today, rapidly increasing disposal costs and environmental concerns add new incentives to utilise waste. These pressures also frequently provide recyclers with opportunities to make profits at both ends of their businesses -charging to take away waste materials and also charging for the supply of recycled materials. As a result, recycling and waste disposal is both a growing industry and an industry which offers strong potential for increasing profits.
Investing in the sector, however, is problematic. No dedicated recycling funds have been set up in Australia along the lines of the recent specialist wind power funds, for example. Diversified environmental and ethical funds probably offer the best opportunities to invest across a range of businesses in this sector. Prominent players in the industry are large mature private companies which are unlikely to go public. The largest such business is Visy Industries which claims to be the world 's largest privately owned packaging and recycling business.
This means that the choice of investment is primarily either via angel investing in small companies or in a limited number of companies on the ASX of which few are pure recyclers. A few other ASX-listed companies focus on recycling as major parts of their businesses and a larger number include recycling among a range of activities.
Environmental and economic changes are, however, creating new niche opportunities in the area which may in the future be taken up by companies which are currently quite small. A few specialist recycling and waste disposal companies have been floated in recent years and this appears a likely path to expansion for others, particularly those which develop useful new technologies.
Recycling offers a range of ecological and economic benefits to the wider community and this is increasingly being recognised and rewarded by governments both through grants and regulations.
Recycling conserves natural resources, reduces costs of transporting materials, reduces energy required to produce new goods and reduces the volume of waste material that has to be disposed of in landfill. A wide range of resources are recycled including metals, paper, glass, plastics, oils, building materials, water, clothing, and vehicle tyres.
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Reprinted with permission from Eco Investor magazine February-March 2006 edition. For further information visit www.ecoinvestor.com.au.
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