Fighting climate change the circular way - Editor's Blog -

While climate talks at the government level are bogged down, companies and banks are moving ahead with new initiatives in the circular economy, writes Brian Caplen.

Hopes for a renewed push against climate change were dealt a blow by 2019’s underwhelming COP25 conference in Madrid. But as governments argue and prevaricate, there are a lot of exciting things going on in the circular economy space.

In fact, measures at the macro level – government and consumer initiatives – could never be wholly successful without the rethinking of production and supply chains that circular economy initiatives aim to tackle.

The challenge of course is to find a way to combat the capitalist tendency to produce cheaper goods that are thrown away and then replaced – a system that both fuels profits and is attractive to consumers but dreadful for the environment. The fashion industry is particularly culpable.

But the good news is that digital technology is providing lots of solutions that both banks and investors are keen to back. Digital technology allows products to be sold more easily as services (starting with cars, but also with applications across both consumer and business goods) enabling the product to be used more efficiently and for longer and, at the same time, replacing product sales income with a rental or service stream. Philips’ decision to move from selling lightbulbs to offering lighting as a service is a clear example of what can be achieved.

Other initiatives involve designing products and supply chains to use and reuse renewable materials – different in conception from sustainability, which involves coping with the problem after the fact rather than solving it at the source.

When fund managers and banks start to get interested, it is clear that these strategies are not only viable but likely to be highly profitable. Both BlackRock and Credit Suisse have launched circular economy funds, HSBC Global Research has its ‘circular economy catch-up’ written by its ESG analysts and ING has set up a circular economy programme called Orange Circle tasked with funding for circular business models and doing circular deals.

Government involvement will be needed to fight climate change, not least at the regulatory level. But while international co-operation over emissions targets is proving elusive, the private sector is making a lot of less well-publicised headway. 

Brian Caplen is the editor of The Banker. Follow him on Twitter @BrianCaplen

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