ESG Thema #4 – Investing in the Circular Economy: Closing the loop

October 20, 2021

Circular Economy can be defined as an economic system of trade and production which, at all stages of the product lifecycle, aims to increase the efficiency of resource use and reduce environmental impact while developing the well-being of individuals.

Understanding why we must shift from a linear to a circular model is key for our future. Hard law is being introduced in many countries, especially in the European Union and is going to change the way companies can produce and sell their goods over the next decades. Besides, production of goods and land management represent 40% of CO2 emissions. Adopting Circular Economy principles, in particular through products life extension, eliminating waste, reusing products and components, and recirculating materials can contribute to limit global warming to 1.5°C by 2100, in accordance with the Paris Agreement.

This paper presents the main principles behind a Circular Economy, as well as the reasons why it is necessary to shift away from our linear models of production and consumption. As governments are increasingly pushing for regulation in this area, Circular Economy will continue to bring about a wide range of opportunities for investors to finance this economic model centered around the sustainable management and use of resources.

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