Investors are increasingly dividing investment prospects into two groups: Those that are part of the traditional linear economy in which products are created, used, and then disposed of; or the new sustainable circular economy. And they’re increasingly choosing to deploy capital to companies in the latter group.
Since 2019, assets in public equity funds dedicated to the circular economy grew 28-fold from US$300 million to almost US$9.5 billion by the end of November; bond investments are up 500% during that period; and the number of private equity funds are up more than 10-fold, according to the Ellen MacArthur Foundation, a United Kingdom-based non-profit group.
As its name indicates, the circular economy is a sustainable closed-loop model in which companies are committed to reusing, recycling, repurposing materials, with the goal of producing no waste.
Rather than a niche within environmental social and governance (ESG) investing, the circular economy is a lens through which investment prospects can be sized up, says Rob Kaplan, founder and CEO of Singapore-based Circulate Capital, a private investment firm with some US$106 million in its Circulate Capital Ocean Fund, which invests in companies in South and Southeast Asia focusing on improving recycling and waste management capabilities, and US$25 million in its climate tech fund Circulate Capital Disrupt.