As environmental protesters bring cities around the world to a standstill, one of the world’s largest investment firms has launched a radical new fund to help eliminate waste and change the way goods are consumed.
In partnership with the Ellen MacArthur Foundation, Blackrock’s Circular Economy fund offers ordinary investors the chance to support and profit from the transition away from a “take-make-waste” economy that has created untold problems for the planet.
The prevailing philosophy among businesses for most of the past century, it describes a process in which “companies take resources, make something to sell, and then the product is wasted at the end of its life - at which point there is an opportunity to flog a fresh one”, says Simon Lambert in This is Money.
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“It’s what’s known as the linear economy and can be seen throughout our modern day world: from household appliances and electronics that can’t be fixed, to industrial farming that strips land of nutrients, and plastic packaging that can’t be recycled”, says Lambert.
Driving this is a combination of laziness among consumers and profiteering from companies, with catastrophic consequences for the global environment.
Andrew Morlet, chief executive of the Ellen MacArthur Foundation, said that 45% of the world’s carbon emissions come from how we make and use products and produce what we eat, citing they key areas of plastics, food and fashion.
The problem of waste is particularly stark. At present the world creates two billion tonnes of solid waste a year: this is expected to rise to 3.4 billion tonnes by 2050, according to the World Bank.
The circular economy aims to address this “based on the principles of designing out waste and pollution, keeping products and materials in use, and regenerating natural systems”, says the Ellen MacArthur Foundation.
Some large firms have already moved towards re-aligning their production methods along circular economy lines. Adidas, which aims to use recycled polyester in all shoes by 2024, has made 11 million pairs of shoes from upcycled marine plastic waste. The EU has also embraced the concept: its circular economy strategy, adopted last year, includes a 65% target for recycling and reuse by 2035.
The move towards a circular economy also cuts greenhouse gas emissions as well as waste. A report by the foundation says that for the EU to reach net zero emissions by 2050, emissions from industrial production of cement, plastics, steel and aluminium would have to be cut to almost nothing. By contrast, emissions from these materials could be cut by 40% just by reusing and recycling more of them.
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“A new generation of entrepreneurs is trying to do something radical - eliminate waste altogether” says Leslie Hook in the Financial Times.
“We have a real problem right now. About 70% of the stuff people throw out ends up in landfill even though it is perfectly usable,” John Atcheson, chief executive of Stuffstr, told the FT. His start-up buys used goods from customers before reselling or recycles them, depending on the kind of product and its condition.
This is exactly the kind of business Blackrock will be looking to fund.
However, it comes amid accusations the US fund giant, which has over six trillion dollars in assets under management, is looking to “greenwash” its record when it comes to environmentally-sound investments.
In July this year a report from the Institute for Energy Economics and Financial Analysis accused Blackrock of dragging its feet on addressing climate change, claiming that ignoring global climate risk had cost the firm $90bn in value destruction from its investment in just four companies: ExxonMobil, Chevron, Royal Dutch Shell and BP.
Euromoney says the firm “has attracted criticism over its voting record on climate-related shareholder proposals, despite CEO Larry Fink’s several declarations on the importance of tackling climate change and investing sustainably”.
Whatever the motivation, if other firms follow suit, the implications could be huge.
“If the circular economy takes off, then by 2050 purchasing and disposal will be radically different to today,” says Hook. “Imagine buying clothes that last for years, shopping for food using refillable containers or buying a home made with reused material. Today’s world is a long way from that - but it may be starting to shift.”
