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Where to invest in the Circular Economy
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Where to invest in the Circular Economy

We have asked BlackRock, BNP Paribas, and Decalia to share with us their thoughts and insights on where to invest in the Circular Economy.
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21 JAN, 2022

By Constanza Ramos

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The Circular Economy action plan was adopted by The European Comission in March 2020, as a one of the main blocks of the European Green Deal, which is the new agenda created by all European countries for a more sustainable growth. The Circular Economy is main goal is to redesign economic activity towards the use of resources that have been already produced previously, and can be given a second life, reinforcing efficiency in the use of resources.

As one of the big investment themes of this 2022, we wanted to understand the investment opportunities behind Circular Economy, and how we can move towards a more sustainable way of living, as well as a more sustainable investment that has some impact in our planet and communities. In order to learn a bit more about its potential, we have asked BlackRock, BNP Paribas, and Decalia to share with us their thoughts and insights on where to invest in the Circular Economy.

Tania Salvat, member of BlackRock's Distribution team in Spain, Portugal and Andorra

At BlackRock, we have found four areas where this change is critical. The first of these is plastics, which have traditionally been associated with the problems caused by under-recycling, but could be part of the solution. The circular economy has brought innovative uses of plastic to the table to mitigate the harmful effects of plastic after its first use, such as the development of biodegradable plastics, a development that is being integrated into an increasing number of markets.

Another breakthrough relates to one of the most disruptive developments of our time: technology. Firms in this sector play a very important role in circular processes, as they encourage constructive habits towards the environment. However, there is still a long way to go and we are confident that technology firms will be able to leverage their commitment to the circular economy to respond to current problems, such as the renewal of obsolete equipment.

The third sector at the forefront of this trend is healthcare, as the medical equipment segment has adopted very favourable practices in this regard. Hospitals increasingly have modern equipment that reduces consumption cycles, and processes have been put in place to collect, refurbish or dismantle used equipment to ensure that the rates of recycled and reused materials are increased.

Finally, the fourth key field in driving the circular economy is fast fashion, which has undergone a profound transformation process in recent decades. This is a sector that is under intense consumer scrutiny, which should accelerate the transition to a regenerative model. At BlackRock, we pay close attention to those supply chain firms that are developing innovative solutions to adapt business models to the circular practices that are increasingly in demand by the public.

Angel Borrego, Director de Inversiones y Responsable de ISR y de Inversiones de Impacto de BNP Paribas Wealth Management.

It is within this context, that we place the circular economy. It is an economic concept that is interrelated with sustainability and seeks to reinforce efficiency in the use of resources by introducing new business models that abandon the traditional linear model of extraction, manufacture, use and disposal, and develop a circular model that optimizes the flow of materials and energy and reduces the generation of waste.


The development of the circular economy will last for decades and is generating the growth of activity sectors related to circular supplies such as renewable energy, biofuels and fuel batteries; as well as the recovery of resources through the generation of energy from waste, environmental equipment, pollution control equipment and environmental consultancy. The circular economy also seeks the development of shared platforms and the extension of the useful life of textiles, packaging, electronic equipment and household products, among others, by repairing, upgrading and reselling them.


Currently, it is estimated that more than 100 billion tons of raw materials are consumed worldwide, of which barely 9% are recycled. If we continue at this rate, by 2050 we will be consuming as much as three planets Earth. The current consumption model is unsustainable. A plastic shopping bag is estimated to be used for only 12 minutes on average. The linear economy is not only unsustainable, but also increasingly uneconomical, both for consumers and producers, as well as for the environment.


Fortunately, in Europe, we are moving in the right direction, with the adoption of a new circular economy action plan, and similar moves are being seen in the US. The development of new regulations, such as the Green Deal or Taxonomy regulations and disclosure of sustainability information will drive the development of a more sustainable and circular economy.


The circular economy is regenerative in its design and it is reorienting the productive capacity of countries as a new source of greener jobs and wealth in a new more social economy.

Antonio Garufi, Lead Portfolio Manager, DECALIA Circular Economy

The circular economy is a cross-sector trend. It is possible to find targets in most business areas, excluding those related to oil & gas or commodities. Investment opportunities lie in obvious recycling or renewable energy businesses and in fashion, retail, food & beverage, marketplaces, etc. The circular economy is conducive to quality business models. One does not have to sacrifice returns to invest in "green" companies. We think of it in terms of “investing in the new business opportunities arising from the circular economy transition.” 

As an example, we think that one of the most compelling opportunities lies in second-hand marketplaces. Those companies benefit from the strong trend in buying "vintage" clothing or furniture, a behavioral pattern shift that makes the consumer "feel good." Consumers not only feel good because they save money ("I found a bargain" type of feeling), but also because they are doing something more environmentally friendly ("I am avoiding waste and doing something green").

As shareholders of some marketplaces companies, we can therefore enjoy a strong growth pattern given by consumer demand. Once these marketplaces are established, they enjoy one of the most robust competitive advantages, network effects. Network effects are generated when the value of the business increases as buyers or sellers increase.

In other words, as the buyer has more choice, he will value the marketplace more and will come back. Likewise, the seller will find more buyers for its products. eBay and Etsy, for example, have given local artisans or households access to a vast potential market. More consumers mean more sellers and transactions, and more transactions mean more consumers. Other reasons why we like marketplaces as investments: they have a very low capital intensity (low capex needs), and they are very scalable. Once the platform is up and running for one mln users, it will comfortably host many more. During the pandemic, the customer acquisition cost has gone down considerably, and this will pay rich dividends in the years ahead.

We look at investment targets through three lenses: 1) Pure players; 2) Beneficiaries/transitioning; 3) Enablers. While last in listing order but not least in importance order, enablers provide the essential services for the CE transition to happen and accelerate. Materials reuse is a pressing issue. How will companies reuse materials if they don't have a capillary reverse logistics network and efficient tracing technologies? We have seen commodities prices spiking in 2021, and we are witnessing what that means for the supply chain. The circular economy appears to be a plausible solution for this issue.

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