Ecosystem Deep Dive #1: Investment—The Role of Financial Services

Abstract

The circular economy requires substantial investments in a range of areas, from supporting start-ups experimenting with new circular business models to developing large-scale recycling infrastructure. The capital that will underpin the shift to new circular business models far outweighs what is readily available and accessible. By investing in circular initiatives, financial services companies can gain competitive advantage in three important ways: achieving growth, differentiating from competitors, securing license to operate, and mitigating risk. New types of financial metrics and instruments are needed to properly evaluate and fund circular initiatives. Financial institutions should find better ways to evaluate risk and use blended financial models to mitigate risk. Banks and lenders should collaborate with their clients to help them develop the business case for circular projects and better identify and quantify costs and benefits.