13 Nov 2023 — The Circulate Initiative has launched a new global edition of the Plastics Circularity Investment Tracker, the world’s first tool to track the scale of private investments into the plastics circular economy. Findings reveal that nearly 90% of all plastic circularity investments since 2018 went to North America and Europe, developed economies with stable investment and supportive policy environments, despite the top 20 countries for ocean plastic leakage being emerging economies. 

Assessing over 3,700 deals occurring in 91 countries between 2018 and the first six months of 2023, over US$160 billion in private capital has been directed to the plastics circular economy, which equates to approximately US$29 billion annually. 

Umesh Madhavan, research director at The Circulate Initiative, tells Packaging Insights that most private investors focus on North America and Europe because these markets are developed economies that offer a stable investment and supportive policy environment. 

“The EU, for instance, has a mature policy environment, with rules on minimum recycled content in packaging, which drives demand for recycled plastics being one such example,” explains Madhavan.

“These are also countries where the waste management and recycling infrastructure is much more established, with well-established businesses operating at a larger scale offering investment opportunities deemed lower credit risk. Nine of the top ten transactions in plastics circularity during January 2018 and June 2023 involved large-scale recovery and recycling companies in North America and Europe.”

Investing into local start-ups can help boost a country’s circular economym, stresses Madhavan.Plastics treaty offers hope 
The second edition of the Plastics Circularity Investment Tracker expands the coverage of the tool beyond emerging markets to provide global data, including a new feature for comparing investments across countries, across the value chain and investment categories.

Recent circularity investments have been significantly below the US$60 billion of annual investment needed under the systems change scenario, which reduces plastic leakage to the ocean by approximately 80% by 2040.

“Addressing the plastic waste crisis scale will require concerted and collaborative action from stakeholders and investors. Global data from the Plastics Circularity Investment Tracker demonstrates the crucial need to drive more capital to emerging markets, where plastic pollution is at its most severe,” comments Madhavan. 

“This month, global leaders will meet at the third session of the Intergovernmental Negotiating Committee meeting to discuss the legally binding instrument on plastic pollution. We hope these insights will be a timely call to action to address the urgent need to scale capital flow toward plastic circularity solutions, particularly in those markets most impacted by plastic pollution.”

Supporting emerging businesses
Although emerging markets in Asia and other regions such as Africa and Latin America are regarded as hotspots for plastic pollution, they received very little investment, finds the new tracker. 

Asia accounted for 8% (US$12 billion) of plastics circularity investments, and Latin America and the Caribbean followed, recording less than US$2 billion in investments over the period. Private investments into plastics circularity in Africa were staggeringly low at approximately US$150 million or 0.09% of total deal value over the review period.

A starting point to facilitate the growth of a circular plastics economy in emerging markets would be providing catalytic capital that supports emerging businesses at their early stage of operations, highlights Madhavan. 

“This includes, for example, blended finance, which drives private investments through catalytic capital.”US$60 billion of annual investment  are needed to reduce plastic leakage to the ocean by 80% by 2040, finds the initiative.

Tridi Oasis, an Indonesian recycling start-up, benefitted from the support of a circular plastics-focused blended finance vehicle. “Impact investor Circulate Capital extended its first loan to Tridi Oasis in early 2020 to expand and upgrade its flake production capacity,” notes Madhavan.

“The loan benefited from a 50% credit guarantee provided by the US International Development Finance Corporation, which partially de-risked the fund’s investment while allowing the founders to maintain their existing equity. Thanks to Circulate Capital’s investment, Tridi Oasis has evolved from a local start-up into a key player in Indonesia’s circular plastics transition.”

Challenges and solutions
Regarding materials’ circularity, investors and businesses do not work in isolation. Madhavan says a supportive environment must bring about the systems change required to tackle the plastic pollution challenge in emerging economies. 

“For example, refill and reuse solutions received less than US$150 million in private capital between January 2018 and June 2023 in emerging markets. For plastic waste reduction solutions such as refill and reuse in these countries to stand a better chance of attracting investments, supportive policies, infrastructure such as reverse logistics for tracking and cleaning used packaging and changes in consumer behavior all need to work in tandem,” asserts the initiative’s research director.

Madhavan continues that the nascency of some solutions can also deter private investors from investing due to the lack of established business models. “Through our work researching case studies on investment, there are examples of how impact-focused, strategic, and concessionary capital sources — together with pioneering companies and governments — have driven early-stage investment in circular solutions.” 

“Small- and medium-sized enterprises creating new solutions to tackle the plastic crisis benefit from a combination of de-risked financing and technical assistance to scale. Catalytic investors and blended finance structures can prepare a pipeline for later-stage investment in the near future,” he elaborates.

By Natalie Schwertheim 

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