Investing in the circular economy

The traditional linear economy based on the “take-make-dispose” production and consumption model has pushed the planet’s capacity out of balance, and has led to a growing coalition of scientists, innovators, policy-makers, and consumers calling for a transition to closed-loop production and consumption systems that minimize waste and emissions as well as material and energy losses. The switch to the circular economy could unlock an estimated USD 4.5 trillion of value globally by 2030, with innovative technologies providing new ways to create service models and to extract value from closed-loop systems.

Technology is becoming a key enabler of the transition to a circular economy. Advances in artificial intelligence (AI), digital platforms and cloud-based solutions have greatly eliminated the need for physical assets, helping to de-materialize entire value chains. The ongoing digital penetration of production and logistics improves the traceability of resource and product flows and can help optimize product use over their lifetime, including predictive maintenance solutions. Increased visibility enables not only better control over potential waste creation, but also creates more accountability for companies along the value chain. Meanwhile, the advancement of new chemicals and catalysts enables production of bio-based materials to replace fossil alternatives.

We have identified four investment clusters that are set to benefit from the transition to the circular economy: the redesign of production inputs, enabling technologies, circular use, and loop resources.

The first cluster – ‘redesign inputs’ – captures investment opportunities that exploit the shift from fossil-based inputs to renewable ones. The ‘enabling technologies’ cluster focuses on solutions that either provide the infrastructure for circular economy businesses, contribute to the de-materialization of production or create new, non-linear business models such as product-as-a-service. The ‘circular use’ cluster includes companies that support circular consumption patterns through sustainable sourcing, sharing economy, product longevity, and reusability. The ‘loop resources’ clusters focuses on providers of solutions that extend product lifecycles or recover embedded value from disposed products.