Financing the circular economy - Capturing the opportunity
This report offers new analysis that highlights rapid growth in circular economy financing and...
Nearly half of the emissions that cause climate change come from how we make and use products and food. A gives us the tools to tackle climate change and biodiversity loss together. It can scale fast across industries to create value and jobs, while increasing the resilience of supply chains and delivering massive economic growth potential, estimated at 1.8 trillion EUR a year in Europe alone.
Analysis by Bocconi University of 200+ listed European companies across 14 industries has shown that the more circular a company is, the lower its risk of defaulting on debt, and the higher the risk-adjusted returns of its stock.
The adoption of circular practices has the potential to reduce risk and increase resilience through business model diversification, decoupling economic growth from resource use and environmental impact, and better anticipation of stricter regulation and changing customer preferences.
Circular economy investment opportunities are to be found across nearly every sector. This steep growth covers a range of financial products and services, including public equity funds, bonds, private market funds and banking. For example:
Assets managed through public equity funds increased 28-fold since the end of 2019, from USD 0.3 billion to almost USD 9.5 billion at the end of November 2021
The annual issuance of corporate and sovereign bonds with a circular economy focus increased 5-fold between December 2019 and December 2021, with at least 40 bonds issued in the last three years.
Improving future data quality and availability by scaling dedicated circularity measurement tools, such as Circulytics, and integrating circularity metrics into reporting and disclosure frameworks, can support finance and investment decision making and circular economy adoption by policymakers, business, and the financial sector.
Now is the time for the financial services sector to capitalise on new growth and investment opportunities. The following papers offer new analysis that highlights rapid growth in circular economy financing and investment, and evidence demonstrating how circular economy strategies can de-risk investments and drive superior risk-adjusted returns for investors and financial institutions.