Banking and finance giants issue support for circular economy investment

More than 30 chief executives from some of the world's largest banks and asset managers, including BlackRock, Barclays, Lloyds, ING and the European Investment Bank, have backed new research from the Ellen MacArthur Foundation (EMF) highlighting how green finance can spur the circular economy.

Banking and finance giants issue support for circular economy investment

The report is supported by companies representing more than $18trn in assets under management

The new EMF report shows the growth in green investing in closed-loop initiatives and the assistance that is providing to the global low-carbon trajectory. The report has been backed by the likes of Citi, Credit Suisse, the international business of Federated Hermes, Goldman Sachs, HSBC, LGIM, Intesa Sanpaolo, JPMorgan Chase, Morgan Stanley, Rabobank, Standard Chartered, and UBS, among others.

The report notes that no circular economy funding mechanisms existed three years ago, but now 10 public equity funds focus partially or fully on closed-loop models. Additionally, In the last 18 months, at least 10 corporate circular economy bonds have emerged, issued by the likes of Barclays, BNP Paribas, HSBC, ING and Morgan Stanley.

Since 2016, there has been a 10-fold increase in the number of private market funds focused on the circular economy, while the total amount of assets managed through these funds increased six-fold since the beginning of 2020, from $0.3bn to more than £2bn. In 2019, for example, BlackRock launched its first investment fund dedicated to accelerating the global development of a circular economy.

The report is supported by companies representing more than $18trn in assets under management who are eager to gain the benefits of investing in the circular economy. The report found that closed-loop funds performed five percentage points better than traditional category benchmarks since the start of 2020.

The EMF’s chief executive Andrew Morlet said: “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.”

Closed-loop decarbonisation

Last summer it was revealed that five major banks located and operating within the European Union (EU) have agreed to work with the European Investment Bank (EIB) on a €10bn initiative to promote circular economy projects. However, bonds and loans focusing on decarbonisation are much more common.

The links between decarbonisation and the economy are beginning to emerge, however. An EMF report recently found that moving to renewables across the globe will only address 55% of greenhouse gas emissions. To tackle the remaining 45%, the paper notes that transitioning to close-loop value chains, diet shift, emerging innovations and carbon capture and storage are all required.

That report found that if the circular economy were adopted across the steel, aluminium, cement, plastic, and food sectors, annual emissions could be slashed by 9.3 billion tonnes by 2050 – which is equivalent to the entire carbon footprint of the transport sector.

Matt Mace

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