Abhimanyu Chakravorty
ISWA Technical Communications Coordinator
Circular Economy is a popular term in policy documents, yet funding for circular projects accounts for only 1% of the total EU budget (European Investment Bank). This was one of the main challenges highlighted in Session #3 on “Financing circular economy needs” at the European Circular Economy Stakeholder Platform (ECESP) conference in Brussels in April.
ISWA represented two Horizon Europe projects under its umbrella, Wood2Wood and iBot4CRMs, at the annual conference. Over two days, April 22-23, ISWA listened to the ongoing discussions on the Circular Economy Act (CEA) and engaged with the stakeholders responsible for driving momentum towards this agenda, which will ultimately enhance the Single Market for circular products.
The main question that took centre stage was: How can the EU address investment barriers and financing?
The discussion which followed suggested that the issue is not a lack of capital availability but the conditions under which it moves.
“I don’t think capital availability is the issue, but bankability of operations,” said Emmanuel Chaponniere, Head of Division at European Investment Bank (EIB). Later, another speaker would confirm the same trend.
You need to create the market and ensure there is enough feedstock and demand for that, he emphasised.
Taking the example of the renewable energy industry’s growth over 2-3 decades, Chaponniere said the market is looking for the right signals, and accordingly, investments in circular initiatives will follow.
“Investing in renewable energy 20–30 years ago wasn’t considered bankable, but today we have a very important renewable energy infrastructure. The circular economy is more complex — energy is just one vector — but the key lesson from renewable energy is that if we send the right signals to the market, European investors will follow.”
For the uptake of circular initiatives, the right market signals are important, but so is risk assessment in the face of rapidly shifting geopolitics, especially in the context of strategic and critical raw materials.
“Risk is the primary driver for bankability,” said Anna Douglas, Senior Sustainability Adviser at SEB Group.
“When we look at bankability, we look at risk. Risk is the primary driver given geopolitical disruptions and the sectors that are more prone to it, like critical minerals. We must also see another perspective, the business model side and look at potentially an ecosystem response.”
Douglas’ remarks are indicative of SEB’s direction, moving beyond sector-level risk assessment towards evaluating whether an entire ecosystem of actors — suppliers, offtakers, recyclers, manufacturers — can collectively de-risk a circular model.
“With SEB, we are co-creating with our clients a few pilots, for example, looking at cash flows potentially in future in a circular business model, product to service specifically. Instead of looking at assets as an accumulation of things, but as future income streams and how we can make that bankable.”
For Andrei Geica, Chief Policy and Impact Officer at Sporos Platform, the financing gap in circularity initiatives exists because the financial sector still favours a linear model. He offered three insights from a private capital perspective that explain the lacunae.
1️⃣Capital behaves exactly like water — it flows naturally. Financial gravity is still overwhelmingly in favour of the linear model, and that is why the financing gap exists.
2️⃣There is plenty of capital available, but not for circularity.
3️⃣Companies and SMEs are not always rational actors — they are resistant to change and prone to short-termism.
You can change this by changing the underlying math, he said. “If you want capital flow, then they need to be predictable, bankable, and it starts with policies. Anything that reduces the profitability of the linear models in favour of the Circular model matters.
In the end, the speakers crystallised a common insight that to reduce the EU funding gap in circular initiatives, predictability in policies, bankability of operations, including risk assessment, and right market signals are key ingredients to ensure the progress towards a Circular Economy is tangible and achievable.
