Attracting investment in recycling and circular economy


Financial institutions and investment funds have to face some obstacles im making investment into plastic recycling sector.

Since its appearance, plastic materials have become more and more popular in daily life, generating more plastic waste. In Vietnam only, an estimated 2,500 tons of plastic waste is discharged across the country daily.

Writing on World Economic Forum, Rob Kaplan, CEO of Circulate Capital, said while investment in the recycling and circular economy space is occurring, particularly in the South and Southeast Asia regions, the flows of capital are neither large enough nor sufficiently consistent to scale solutions.

Meanwhile, the plastic pollution crisis persists. Despite progress on several fronts, only 9 per cent of all plastic waste ever generated has been recycled.

Rob Kaplan stated that to-date, much of the capital behind solutions is strategic, for example put up by plastics supply chain actors, concessionary in nature from international development institutions, or from highly focused impact investors and philanthropic funders.

Conspicuously absent are mainstream financial institution, broadly comprising financial intermediaries, asset managers and trading venues, which seeks a commercial rate of return.

Low potential investment option?

The absent is seen despite solid evidence that emerging markets offer a significant opportunity for achieving the largest impact on plastic waste mismanagement and an attractive risk-adjusted return, according to white paper developed by Circulate Capital.

It said negative perceptions of recycling and the circular economy in emerging markets persist, particularly when it comes to the lack of a track record for investment and a landscape dominated by small deals.

Rob Kaplan analyzed that there are two biggest obstacles to recycling and waste treatment.

The first is that early-stage technologies are concentrated in developed markets, lacking capital, and risky to transfer to emerging markets.

The second is that applying such innovations in emerging markets carries additional risks, including legal/regulatory, management expertise and workforce, and supply chain risks.

Moreover, the recycled plastic market is quite unstable when depending mainly on the cost of primary plastic materials and instability of input.

Packaging Recycling Organization Vietnam (PRO Vietnam) commented that poor quality input due to shortcomings in the collection, sorting and pre-treatment process is a considerable difficulty for recycling.

Solutions to attract investment

Rob Kaplan suggested a several ways that financial institutions and investment funds can use to mitigate fluctuations in waste management and recycling.

Firstly, financial institutions can create financial instruments such as futures, options, insurance-like vehicles to manage absolute and relative price risk.

Secondly, they can participate in cross-sectoral planning at the national level to ensure transparency in local projects. For example, Vietnam launched National Plastics Action Partnership Program, an initiative highly appreciated by Circular Capital fund.

Thirdly, financial institutions can expand their cooperation with partners having experience in sustainable development investment in general and investment in plastic recycling in particular.

It will help investment funds and financial institutions get easier in finding suitable investment projects when their ability to identify and assess risks is enhanced.

Credit: TheLEADER

Related articles
Mondelēz Kinh Do ready to shake hand with others for environment

Mondelēz Kinh Do affirms it is willing to cooperate with other companies to find solutions that benefits environment, aiming at realizing circular economy model. Like other FMCG businesses, from 2024, Mondelēz Kinh Do has to carry out extended producer responsibility (EPR), which is a policy approach under which producers are given a significant responsibility – financial and/or […]

Duy Tan Plastics follows green path

Having modern technology and high-skilled labour, Duy Tan Plastic enters the high risk recycling industry with high confidence. Duy Tan Plastics Corporation has announced its $60 million-investment, the first green credit from HSBC to a Vietnamese company, to build a plastics recycling factory in Long An. It is a huge amount of capital compared to the […]

Private companies committed to net-zero emissions

Companies in different economic sectors has shown a strong shift towards sustainable development, paving the way towards the realisation of Vietnam’s net zero targets by 2025. HSBC Vietnam introduced Vietnam’s first card made from recycled Polyvinyl chloride (rPVC) plastic. Its ambition is eliminating single-use PVC plastic by the end of 2026, in favour of rPVC. […]

Main goals of PRO Vietnam in 2022

After a long time was constrained by Covid-19, PRO Vietnam’s pilot activities will be stimulated this year. Last year, the complication of the Covid-19 pandemic has significantly constrained Packaging Recycling Organization Vietnam’s (PRO Vietnam) pilot collecting program. Against that context, in addition to the strategically switch to online platforms for media exposure, PRO Vietnam and their […]

Hội An aims to be ‘zero plastic waste’ destination

HỘI AN – The International Union for Conservation of Nature (IUCN), the centre for Supporting Green Development and PRO Việt Nam have donated 54 ‘green houses’ (dust bins made from reform plastic) and waste classification tools to Hội An City’s Women’s Union to boost recycling and zero plastic waste in the community. The dust bins, which were […]