Closed Loop Fund (CLF), a private sector investment fund that finances recycling infrastructure and sustainable manufacturing technologies to advance the circular economy, released its first public progress report. Details reveal investment opportunities in the recycling industry that deliver clear environmental and financial returns for cities, companies, and private investors, despite the headwinds of low commodities prices.
“The recycling industry is poised for a new phase of growth,” says Closed Loop Partners Managing Partner Ron Gonen. “Based on data from our first ‘live’ investments, we are seeing municipalities and private companies – especially those with integrated models – generate savings, revenues, and profit as a result of improving recycling infrastructure. And so far, each investment is paying back as expected.”
CLF's Rob Kaplan
the Fund’s Investment
and Circular Economy
at New Metrics '16.For example, Lakeshore Recycling System’s new Heartland single-stream facility in Lakeshore, Ill., launched in March, is already generating a profit within its first 6 months, and is poised to divert more than 1 million tons of material from landfill by 2025. Lakeshore CEO Alan Handley says, “The success of the Heartland MRF illustrates our ability to increase both profitability and environmental impact as we scale.”
Key highlights and statistics from the report include:
- CLF has invested nearly $20m in nine projects, unlocking over $50m in co-investment from municipalities, banks and impact investors.
- A huge demand for investment capital: The Fund has received over 150 inquiries for more than $350 million in financing.
- 4 live projects have already diverted nearly 50,000 tons of material, avoiding the equivalent of 112,000 metric tons of GHG emissions
- 100 percent on-time loan repayments
- Nearly $250,000 in economic benefit to municipalities
- Activities reach or represent recycling generated by nearly 900,000 households around the country
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The opportunities to generate environmental and economic return are real, but few traditional investors are getting on board at the moment. According to Jennifer Pryce, President & CEO of Calvert Social Investment Foundation, "Closed Loop Fund is helping impact investors like Calvert Foundation understand the investable opportunities within the circular economy."
Closed Loop Fund – backed by companies including Kellogg, Procter & Gamble, Unilever, Campbell Soup, PepsiCo, General Mills and Johnson & Johnson - is just getting started and achieving scale is its biggest priority.
“Closed Loop Fund investors have exhibited tremendous leadership in coming together to support a new model for systems change,” Gonen says. “We are building the case for more consumer product companies, impact investors and institutional investors to capture the value of optimal recycling and circular systems in the United States by demonstrating these investments make financial sense.”
Unstable commodity prices expose the challenges in the current system, as operators adapt to ever-evolving single-stream materials with outdated equipment, operational inefficiencies, and misaligned contracts.
“We have focused our investments on municipalities and companies that are doing what works - writing smart contracts, showing commitment and leadership, and building forward thinking business models and operations,” Gonen said.
Key insights from the report on how projects are ensuring success in the recycling system:
- Commitment of public leadership
- Alignment of contracts and RFPs among parties
- Focus on performance and data
- Diversified resources from a variety of investors
- More market pull created by new end markets for post-consumer recycled materials
Ultimately, end market demand will ensure success moving forward. CLF is committing 20 percent of its capital to develop robust end markets to ensure the system economics work.
“You can expect to see several end market investment announcements from us in 2017,” Gonen said. “We have some great business models in our pipeline that will maintain value across a range of commodities. Stay tuned.”
This year, the CLF-affiliated Closed Loop Foundation has expanded the Fund’s reach into other aspects of eliminating waste, offering grants and loans to innovative solutions for food waste and film plastic packaging recycling.