Blog No. 2 Making Circularity investible: what investors need to see
LuxFLAG, Luxembourg — 10 September 2025 (by Dr. Oliver Heiland, Capital for Resilience Advisors and Blanca Hidalgo, EY Luxembourg)
Thesis point
The EU circular economy is shifting from policy aspiration to a mainstream investment theme, tied directly to supply chain security and competitiveness. For investors, regulatory pressure, supply chain security and financial incentives for corporates converge to create tangible investment opportunities.
Four takeaways for investors
1.Macro outlook: why circularity matters
EU Green Deal, the Circular Economy Action Plan and most recently move the market with mandatory targets, product standards, and Taxonomy alignment. The European Commission estimates circular models can deliver €600bn in annual savings and €1.8tn GDP growth by 2030—with geopolitics underscoring supply-chain resilience for critical raw materials.
2. Corporate investment drivers
Circularity is a strategic competitiveness lever, not a CSR add-on. Why? Regulation (25% recycled PET quota in beverage bottles), cost efficiency (resource/energy savings and cheaper access to capital e.g. via Sustainability-linked Loans), market demand (consumer pull and B2B procurement), and innovation of new business models (product-as-a-service, reverse logistics, materials) force adaption and open new opportunities for growth for early adopters.
3. Investment cases that resonate
Private Equity investment case: PET recycling platform in Northern Europe adapting to binding recycled content quotas for EU beverage producer. Early adoption positions PE-backed PET recycling company to benefit from binding recycled-content quotas and secured feedstock, meeting compliance profitably.
Banking case: €200m sustainability-linked loan for a packaging company with KPIs on recycled inputs, virgin-plastic reduction, and Scope 3; margin ratchets tie financing cost to circular performance. Outcome supports Bank’s reporting obligations. Borrower benefits from a direct financial link between capital costs and circular economy performance.
4. Financing gaps create opportunities for financial product innovation
Early-stage tech and circular infrastructure lack risk capital. A scale-up gap persists between venture and institutional investment, which still trends lower in portfolio allocations compared to peers in North America. At the same time, new business models often lack collateral and fragmented deal sizes impede scale. This points to blended structures and pooled vehicles to de-risk and mobilise institutional investors at scale.
Link to presentation:
https://www.cfr-advisors.com/s/Making-Circularity-investible-what-investors-need-to-see-092025.pdf
Photo credit: Oliver Heiland (Outer Hebrides I Isle of Harris I Traigh na Cleavag)