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Building resilience with circular economy funds

Circular economy concept. Sheet metal in arrow infinity recycling symbol with layered color of gray and blue, isolated on white background. 3D illustration.

The covid-19 outbreak has exposed the vulnerability of humans to viruses that can jump the species barrier and the subsequent disruption to global supply chains.

A global move to circularity would not only build resilience against these threats, but also decrease biodiversity loss, deforestation, resource scarcity and greenhouse gas emissions.

David Czupryna, head of ESG development at Candriam, tells Expert Investor: “The pandemic has served as a reminder, and very vivid illustration, of the negative consequences [that follow] when we destroy biodiversity.”

Clément Maclou, portfolio manager at Decalia Asset Management, remarks that disrupted supply chains triggered big concerns during the crisis, especially in critical areas such as healthcare.

The resilience of nations could be increased if they transition away from a linear economy, which discards products, to a circular economy – in which products are reused, repaired, remanufactured, shared and recycled.

Resource scarcity

A global transition towards a circular economy is central to the EU’s Green Deal, which is part of its recovery plan.

Even before the outbreak of the virus, circularity was ranking high on the EU’s green agenda, as it helps to build resilience against resource scarcity and environmental damage.

In 2019, the European Investment Bank (EIB) and five European financial institutions launched a Joint Initiative on Circular Economy (JICE) to provide loans, equity investment or guarantees to eligible projects and develop innovative financing structures for public and private infrastructure among others.

The current rate of consumption and production processes have become unsustainable. Societies are overconsuming by 1.75 times more than the planet can regenerate, according to the Global Footprint Network.

But the pandemic has accelerated the urgency to transition to a circular economy.

Circular investing

The EU Commission has integrated the circular economy objective into its taxonomy regulation that is yet to be finalised.

The taxonomy is expected to help define and harmonise the sector.

Czupryna says that, as the circular theme is heterogenous today, investing in circular companies can be about finding viable business ideas and productions that are scalable.

“Some of the companies are quite young and their technology might not be 100% proven yet; and therefore, there is a certain degree of immaturity in some areas,” he explains.

Richard de Groot, global head investment centre at ABN Amro, tells Expert Investor that competitive and listed companies embracing circularity are rare.

While recycling, packaging and companies for reusable products belong to this category, he says that “circular economy funds are in a very early stage of development, as there are not many stocks available to invest in to create a well-diversified fund”.

In De Groot’s view, given the early stage of the circularity theme, it is more suitable for multi-themed funds.

Yet, Holger Frey, senior portfolio manager at RobecoSam, argues that companies falling into this theme are abundant.

He points out that circularity is about keeping products and resources in the loop at a much earlier stage, which he calls ‘pre-cycling’.

“The circular economy theme offers much more breadth compared to other sometimes narrow thematic strategies, and we actually reduced the number of companies in our universe to keep it more manageable,” he explains.

Circular funds

Some of the funds currently available in the market are:


The RobecoSam Circular Economy Equities fund, which was launched in January, invests predominantly across six sectors and has a preference for quality growth, Frey says.

It has €38m of assets under management, as at end of June, and invests in companies that foster resource-efficient business models. Its top holding is Canadian wood products company West Fraser, with 3.58%.

“We invest directly in solution providers, whose products or services drive the circular economy transition, for which competitiveness or price leadership is actually a key differentiator of their business model and should drive positive relative performance,” he notes.


The Decalia Circular Economy fund was launched in May 2018 and invests in companies that will structurally benefit from the shift away from the linear economy.

Decalia’s investment team has defined eight sectors, which form its underlying circular investment universe of about 600 stocks, including nutrition, prevention and diagnostics, recycling and the sharing economy.

The latter makes up the largest share of the portfolio, with 33%, and its top holding is Microsoft, with 5.4%.

Another example is Dutch company Corbion, which produces recyclable bioplastic from sugarcane.

The fund’s institutional share class, with $71m of assets under management, has outperformed its benchmark the MSCI World since inception in 2019 and returned 7.10%. But it has underperformed year-to-date, returning -2.20%.

Decalia’s Maclou says that the team’s key strength is its agility when managing the portfolio.

During the crisis it increased stocks within sub-themes, such as remote work and prevention and diagnostics.

“We try to avoid [companies] that would be disrupted [by the circular transition] and invest more in those that would benefit from it at some point,” he explains.


Candriam launched the Candriam SRI Equity Circular Economy fund in April.

It aims to invest in companies that have their core business either aligned with circularity – recycling, replacement, repurpose and rationalisation of products and resources – or they facilitate the transformation of the linear into a circular economy.

Its top holding is US software company Adobe, with 4%.

Among its other investments is a company which replaces animal-based protein with plant-based protein, thereby reducing the large environmental impact that beef production has on biodiversity.

Czupryna explains that the fund benefits from changing consumer behaviour, regulation and the resource efficiency gains of circular companies.

Firms that become less reliant on very volatile and finite fossil resources become more financially viable, he says.

International transition

To steer the circular economy transition, government intervention, such as with plastic regulation, is key.

The Commission wrote in its Circular Economy Action Plan that a transition “will require an alignment and cooperation of all stakeholders at all levels – EU, national, regional and local, and international”.

“The transition to the circular economy will be systemic, deep and transformative, in the EU and beyond.

“It will be disruptive at times, so it has to be fair,” it said.

Elena Johansson

Senior Reporter

Part of the Mark Allen Group.