Financing the Circular Economy

19 oktober 2020

Jort van Aken

The circular economy is fast emerging globally, as companies and governments increasingly recognise its potential to tackle the root causes of climate change and other global challenges, while generating new and better growth opportunities. As a solution that can scale fast, its relevance has only become more apparent in recent discussions about economic renewal. All aspects of finance will be vital to scale the transition to the circular economy. Private sector investors, banks, and corporate finance departments, as well as governments and other public sector bodies that control trillions of dollars of public investment and set the regulatory frameworks, all have crucial roles to play. This paper focuses primarily on private sector finance and explores the circular economy’s value creation potential for investors, banks, and other financial services firms.

First, this paper shows how the circular economy can help achieve climate and other ESG goals while creating opportunities for new forms of better economic growth, effectively moving beyond the initial progress and focus that ESG investment has achieved over recent years. Second, it highlights how investors, banks, and insurers are already capturing these opportunities, showing that the market for financing the circular economy is rapidly taking off across asset classes and sectors. Third, it provides a direction of travel for finance to fully capitalise on the opportunity by helping to rapidly scale the circular  conomy. This paper is intended as an initial exploration rather than a detailed analysis of any individual aspect of finance. Its purpose is to stimulate discussion about how the financial services sector can help scale the circular economy to drive new and better growth that is more distributed, diverse and inclusive, and help build an economy that is restorative and regenerative by design.

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