The surge in interest in the circular economy issues of climate change, renewables and recycling, has given birth to entire new industries. In this paper, we look at the reasons for the move from the linear to circular economic model, what it would involve, and the opportunities this revolutionary market change presents for investors.
The surge in interest in the circular economy issues of climate change, efficiency in energy and resource use, and waste management, has given birth to entire new industries that have breathed new life into existing companies and gave birth to new ones.
The United Nations adopted 17 Sustainable Development Goals for 2030, which include “affordable and clean energy” and “sustainable production and consumption patterns”. In 2020, the EU published its new Circle Economy Action Plan with an emphasis on preventing overpackaging, while in 2018 China, which was previously the centre of the global recycling trade, imposed strict restrictions on what kind of plastic can be imported.
In energy, hydrogen is set to follow solar and wind as the next big new thing in green energy generation and it is already attracting government subsidies and substantial inflows from institutional investors.
There will be many business opportunities to provide better solutions at recycling. This is driven by economic, as well as regulatory factors as, in most cases, manufacturing from recycled materials is considerably less energy intensive and bears lower overall costs.
Proliferation of cheap disposable goods and materials is a key negative by-product of the linear economy. If this if to stop, a move to a circular economy will have to involve a significant change in today’s consumer culture and the values on which it is based.
While the world economy is currently only about 9% circular, this is likely to change quicker than many people think, spurred by a sense of urgency and innovation. As a responsible investor we have an important role to play by allocating assets to companies working to build circular economy.
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