How finance works with innovation to create a circular economy | The Circular Economy Show

Making the economics work is a key component of accelerating the change towards a circular economy, and how does that work with innovators and SMEs? Jamie Butterworth from Circularity Capital and Georgia Sherwin from Closed Loop Partners discussed the issue at the Innovation Day.

And i’m joined on stage by two people who are at the heart of that world investing in circular economy on both sides of the atlantic jamie from circularity capital and georgia from closed loop partners thank you so much for joining us and so we’ve just heard from wino and i think i’m right in saying that that was the first investment that circulating capital made

And um so can you talk a bit about your personal story from moving from the previous ceo of the ellen macarthur foundation to setting up circularity capital yeah so i think when you’re at the foundation you’re constantly thinking how to scale and you’re thinking what interactions you could make to really scale up and back in 2009 we were captivated by the concept

Of the circular economy we’d read lots of literature about it but there was nothing out there about how it actually creates financial value so we ended up working together with mackenzie and producing a report called towards the circular economy to demonstrate how much value the circular economy could create and i believe that played a role in corporates getting

More interested in the circular economy as it was launched at the world economic forum in 2011. i think the next logical step in my mind was investors are a bit different and we have to think like an institutional investor so big sovereign wealth funds pension funds insurance companies funder funds who own the majority of the capital in the world and the way that

Those actors react is based on returns right so they invest more money if they see good returns so to me it became critical to demonstrate how the circular economy can drive premium financial returns alongside measurable positive non-financial impact and that was the genesis behind setting up a fund that had the right skill set to select the best of these types

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Of companies and then bring them the right support to help them to grow and achieve their full potential and georgia closely for another early mover in this space focusing on specific um needs of circular economy companies and innovation so what does that mean for the types of financial solutions that you offer thanks emily i think um what we’ve really seen

Is different kinds of companies require really really different funding needs and that’s based on their the growth stage of the company and the type of the company so for example a company that provides composting infrastructure versus a company that provides digital technology technological solutions to trace supply chains will have very different needs and

So closely partners was really set up to meet the diverse funding needs and meet companies exactly where they are so we span we have an innovation center and we then span venture capital growth equity project-based finance and private equity so that kind of goes through from the really early stage to the later stage where we’re actually acquiring companies uh to

Build circular supply chains so ultimately you know we really our goal is to build a circular economy and so our platform is set up to create that flexibility um to to meet the diverse needs so looking around the room today i think there are far more innovators than we would have seen even five years ago so jamie i’m wondering what are the things that have really

Created this market and that created a fertile ground for circular quantity investors yeah i think there’s four things i think the first one is just the recognition that in the right context these circular businesses can create more value so companies can develop deeper margin margins stickier customer relationships they become become more valuable and grow faster

Secondly i think we’re increasingly seeing a sustainability imperative so this is a generation of consumers demanding to know more about the provenance of products and it’s also more regulatory legislative pressure thirdly technology is definitely enabling this transition so knowing more about the status location demand condition of products allows us to develop

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More business models and finally there’s a really attractive exit environment so we’re seeing an increasing number of investors looking for financial return alongside some societal problems solved so call it esg in a more purest form impact investing and they’re combining to really accelerate this transition so those are some of the things that can help but we’ve

Heard you know for some of the speakers today that there are barriers and not every great circular economy idea gets invested in so what is already happening or could already happen or could happen to break those barriers and really drive momentum in this space yeah so i guess at our level that’s all about building up a really good picture of what best in class

Looks like for these kind of businesses so looking at lots of the same types of companies establishing what the key attributes are and also what the common challenges are and how as an investor we can bring the right toolkit to support the management teams to unlock their full potential i think at a higher level there’s a number of things and many of them being

Spoken about today but i think collaboration i also think anything that internalizing the external costs so for example reducing vat on remanufacturing through to increasing increa putting a cost on carbon and also organizations like this the alan mcarthur foundation which is bringing people together there’s also we’ve got zero a scotland we’ve got re london we’ve

Got people from all over the world who are actually bringing people together to hear more about the amazing solutions out there and georgia i want to stick on this driving momentum theme are you seeing your work start to filter through to the sphere of mainstream capital are larger investors starting to invest in the companies that you might have invested in yes

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Definitely which is really positive to see i think generally during the pandemic there was a concern that sustainability or circularity might be put on the back burner but really we’ve seen the opposite is is true and there’s been a massive acceleration of investment activity across the board um and maybe to make it a bit more tangible i think you know one example

Is a company that we invested in early on we gave them a loan which was a company called temper pack they create an alternative a sustainable alternative to styrofoam and they very recently closed on a new equity round of 140 million and that was led by goldman sachs and so it’s these kind of indicators uh that more traditional mainstream capital is seeing the

Value of circular solutions to you know mitigate climate risks to meet esg goals and then fundamentally to kind of build more resilient supply chains so it’s it’s really encouraging yeah definitely and so what’s your message to the innovators online and in the room and what should they focus on to really have the best chance of their circular innovation being

Investable great question i think it’s a couple of things i think number one is to be really effective in communicating that impact story i think as more and more innovators enter the space having verifiable impact data to support the work that they do is going to be really important to differentiate themselves and be authentic um i think the second is always

We’re looking for sort of the in the market appetite indicators and so whether that’s a letter of intent from a client pilots or contracts that are in place that helps show a market signal in the right direction and then lastly as the team always you know a phenom phenomenal team is critical and mission driven and smart

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How finance works with innovation to create a circular economy | The Circular Economy Show By Ellen MacArthur Foundation