Blackrock's circular economy fund has raised $900m in its first year
BlackRock has revealed that its investment fund dedicated to accelerating the global development of a circular economy has raised more than $900m in its first year, growing from just $20m of seed funding from the asset management giant itself.
Launched last October, the fund was developed in collaboration with the Ellen MacArthur Foundation. It has backed companies of varying sizes and sectors, with packaging, chemicals, forest products, electronics, food and drink and fast-moving consumer goods (FMCG) accounting for significant proportions of the cohort. Also featuring in the fund are businesses from sectors including textiles, software, healthcare and e-commerce.
Firms backed by the fund are grouped into three categories depending on the nature of their “exposure” to the circular economy. The categories are adopters, companies setting circular economy targets for their own operations; enablers, companies providing innovative solutions; and beneficiaries, firms which benefit from the transition to a circular economy, such as those selling recycled plastic feedstocks.
In its first annual update on the fund, sent to investors and media representatives today (29 September), BlackRock revealed that 44% of the companies backed by the fund to date are adopters. Among this cohort are Adidas, Nike, L’Oreal, Coca Cola European Partners (CCEP), Nestle, Microsoft and Trex.
The remainder of the companies are split, three-fifths of the remainder being beneficiaries and two-fifths being enablers.
To ensure that the allocation of the fund does not create unintended environmental or social consequences, the report states, BlackRock applies its ESG framework criteria to all companies screened for potential participation. “We believe that companies with sound corporate governance practices, including how they manage the environmental and social aspects of their operations, better mitigate risk over the long term, and offer better risk-adjusted returns,” the report states.
When the fund was first launched, fund manager Evy Hambro said he expected the fund to grow “just as rapidly” as BlackRock’s other thematic sustainable finance products – “if not faster”. He has called progress to date “encouraging”.
“At BlackRock, we believe that the companies that are the most progressive and innovative in reducing the amount of waste going to landfill, of non-renewable resources consumed and pollution generated, may also generate significant returns for investors,” he said, adding that “proactive disclosure” of information relating to circular economy metrics has increased in the past 12 months – as has the understanding of the link between climate change and systems of consumption.
On the latter, the Ellen Macarthur Foundation sees the shift to a circular economy providing up to 45% of the cumulative emissions reductions needed for a net-zero global economy by 2050.
Race to the top?
Looking back to January, the circular economy was a key talking point at Davos, with many across the global green economy believing it would, therefore, be a key focus for 2020.
Dutch think tank Circle Economy used its platform at the Forum to launch a landmark report, revealing that just 9% of the global economy is considered circular, meaning that less than 10% of the 92.8 billion tonnes of material extracted for use is reused annually.
Progress towards non-linear systems of production-consumption has been disrupted by the pandemic in many sectors – most notably plastics and packaging. Many retailers paused, delayed or scaled back refill and reuse offerings amid concerns around health and hygiene, while ‘big plastic’ lobby groups reportedly upped the pressure on governments.
On the flip side, however, Covid-19 has highlighted the ways in which extractive systems are harming naturev – both at a policy and a public level. On the latter, numerous pieces of research have highlighted how lockdown has changed individuals’ approaches to issues like food waste.