Vice-President Fayolle on the systemic shift for corporates and investors

Ladies and Gentlemen,

I am pleased to see so many of you gathered here today, in person and online, at this conference dedicated to the circular economy.

It’s a subject too often overlooked by decision-makers and the media. Yet, it is the solution to so many of the challenges we face today: from energy and resource scarcity to exploding costs as well as our environmental crises such as dwindling biodiversity.

It is also very clear today that there can be no transition to a carbon-neutral economy without a transition to a circular economy, one where we keep resources in use for as long as possible and eliminate waste. The two simply go hand-in-hand.

Financial institutions have an important role to play as one of the drivers of the transition to the circular economy.

Banks – thanks to their unique position as investors across sectors – can not only finance circular projects but also use their knowledge and expertise to provide advice, for example in the form of legal and circular networking services – connecting viable companies together into a circular value chain.

At the EIB, we provide technical and financial advice to project promoters, and also foster knowledge development and ecosystem building. We plan to step up our advisory activities, for cities and regions in particular, to support them in their circular economy transition and decarbonisation. We launched the Circular City Funding Guide website and the Circular City Centre, a competence and resource centre within the EIB that aims to support European cities in their circular economy transition. The Circular City Center is a joint initiative of the EIB and the European Commission. It is one example of successful collaboration between our two institutions – providing advisory services and blending EU grants and EIB loans to support the circular economy.

You can learn more about how cities and regions can be catalysts for the circular transition at our Accelerator session tomorrow.

The good news is that more and more money is flowing to green investments. According to an analysis from Bloomberg, in 2022, for the first time, the world invested as much money into zero carbon technologies as it spent on fossil fuels.

The European Investment Bank welcomes this shift.

As one of the world’s main financiers of climate action and environmental sustainability, we have committed to align all our new operations with the goals and principles of the Paris Agreement and to support €1 trillion of climate action and environmental sustainability investments in the decade to 2030. Our lending to circular economy projects has consistently increased over the years, amounting to €3.4 billion over the past 5 years, with a record level of €1.1 billion alone in 2022. Some recently signed projects include:

• An €18 million loan to Tapojärvi, a family-owned Finnish mid-size company that specialises in handling, processing and recycling services for the mining and steel industry. The EIB funds will cover Tapojärvi’s investment in an innovative slag processing and valorisation plant in Umbria, Italy, with the aim to transform the slag into valuable by-products to avoid landfilling;
• A $20 million equity-investment in the Circulate Capital Ocean Fund I-B to prevent ocean plastic pollution and advance the circular economy in Asia;
• A €120 million loan to the Spanish Group Cosentino, a global leader in the design and manufacture of innovative and sustainable surfaces, to finance its innovation and sustainability strategy, focusing on key areas such as the circular economy, energy efficiency and the use of renewable energy. 

Nevertheless, a lot more financing needs to go into the circular economy:

To support the innovators developing new products and services;

To finance cities developing and adapting their infrastructure;

To finance research and development for new materials and re-use schemes.

For the plastics recycling sector alone, a recent EIB study found an estimated investment gap of at least €6.7 billion to achieve Europe’s plastics recycling targets.

While 58% of the EIB’s lending supported climate action and environmental sustainability projects last year, only about 1.5% of EIB lending was dedicated to circular economy projects.

Financing circular economy projects remains marginal, and not just at the EIB. For many financial institutions getting circular economy projects off the ground is a challenge.

Why is that?

Circular economy projects are often novel and complex. They feature new technologies and unproven business models or collaboration between various businesses and value chains for example. When assessed through a bank’s linear lens of credit risk assessment, this makes them seem risky.

This is why banks will need to adapt their own business models as a whole to become greener in their investment decisions and better evaluate climate and environmental risks. At the EIB, we have already started making significant progress in mainstreaming climate-related considerations across all our activities: we have realised that when integrating the climate considerations and the environmental and social externalities into our assessments, the circular solutions are often cheaper and less risky for society as a whole than the linear ones.

This is how we can decouple prosperity from consumption: by taking a holistic view of society and the environment – as a whole – realising that we are all connected.

Developing the capacity and tools for the proper assessment of circular economy investment will require collaboration between financial institutions.

This is precisely why the EIB has partnered with other multilateral development banks. Yesterday, at this conference, the EIB together with the African Development Bank, the European Bank for Reconstruction and Development, the Inter-American Development Bank and the World Bank met and decided to collaborate on key challenges for the financial sector. We will work together in order to:

• Increase our share of high-impact circular projects investments.
• Build capacity for using the circular economy as a strategy to achieve economic success and resilience in client countries.
• Develop mechanisms to de-risk investments in the circular economy and facilitate better access to blended finance through public-private collaboration.

This last point about public-private collaboration is critical. There are still too many regulatory bottlenecks preventing circular projects from taking off, and far too few incentives to go from linear to circular processes. It is essential that these regulatory barriers continue to be addressed. We also need to realise that jobs may be lost in the linear economy, and that the transition needs to be just. And this is where the incentives come into play.

I want to make one last point about the synergies between innovation and circular economy. The financing of innovation is, indeed, particularly important to support the emergence of circular economy solutions. Institutions such as the EIB can accelerate innovation by supporting relevant business models. To do that, at the EU level for example, we work with the European Innovation Council (EIC)’s Fund. This EIC Fund is Europe’s flagship innovation programme to identify, develop and scale up breakthrough and game-changing technologies. Our venture debt product, which is enabled by EU guarantees, allows us to complement the EIC Fund, by supporting slightly more mature companies, by absorbing the technology risk.

The EIB is committed to financing more circular economy projects across all the sectors and geographical areas in which we operate. We stand ready to partner globally to help preserve our precious resources, eliminate pollution and waste and fight climate change. It is about protecting the living planet, our home, to which our present and future fate is intrinsically linked, and thus ensuring prosperity for all.