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Financing the Circular Economy - Capturing the Opportunity | Ellen MacArthur Foundation

INSIGHT by Ellen MacArthur Foundation

Published investESG on 2020-09-14
climate change circular economy circularity
© Paulius Dragunas
Representing over USD 18 trillion in assets under management, over 30 CEOs and senior executives from leading asset managers and banks are backing our latest research, Financing the Circular Economy - Capturing the opportunity.
The endorsers* of the report include BlackRock, Barclays, Citi, Credit Suisse, the European Investment Bank, the international business of Federated Hermes, Goldman Sachs, HSBC, LGIM, Lloyds Banking Group, ING, Intesa Sanpaolo, JPMorgan Chase, Morgan Stanley, Rabobank, Standard Chartered, and UBS.
The report, published today, offers new analysis that highlights rapid growth in circular economy financing and investment. It lays out the opportunities for investing, banking, and insurance - and calls on the financial sector to seize the full potential by scaling the circular economy in collaboration with governments and corporates.
This growth in investment in the circular economy is, in part, a result of the growing understanding of the central role the circular economy can play in tackling climate change and other Environmental, Social, and Governance (ESG) issues. Our report, How the circular economy tackles climate change, published in September 2019, showed that if the circular economy were adopted in just five key sectors (steel, aluminium, cement, plastic, and food), annual greenhouse gas emissions could fall by 9.3 billion tonnes of CO2e in 2050, equivalent to eliminating all transport emissions globally.

Andrew Morlet, CEO Ellen MacArthur Foundation: “We have seen huge growth in circular economy financing over the past three years, with major players capitalising on its value creation potential while meeting their climate change objectives. Investors, banks, and other financial services firms can play a vital role in rapidly scaling the circular economy by supporting businesses to make this shift, and in doing so seize new and better growth opportunities.”

Key findings of the report include:

The circular economy offers a major opportunity for the finance sector to deliver on Environmental, Social and Governance goals, including on climate change, while going beyond ESG as a source of new and better growth

While no such fund existed in 2017, by mid 2020 ten public equity funds focusing partially or entirely on the circular economy have been launched by leading providers including BlackRock, Credit Suisse, and Goldman Sachs. The total amount of assets managed through these funds increased 6-fold since the beginning of 2020, from USD 0.3 billion to over USD 2 billion. On average these funds performed 5.0 percentage points better than their Morningstar category benchmarks over the first half of 2020

In the last 18 months, at least ten corporate bonds to finance circular economy activity have been issued by global companies such as Alphabet, BASF, PepsiCo, and Philips, with help from leading banks including Barclays, HSBC, ING, Morgan Stanley, and others.

Since 2016 there has been a tenfold increase in the number of private market funds, including venture capital, private equity and private debt, investing in circular economy activities

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* To read full details of all the leading financial institutions contributing their support, please see our full report.
All opinions expressed are those of the author. investESG.eu is an independent and neutral platform dedicated to generating debate around ESG investing topics.
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