From waste-sorting robots to a 3-D food printing appliance that cuts waste, Closed Loop Partners is backing products that aim to redefine recycling.
The investment firm’s driving force is Ron Gonen, who founded the company in 2014 after serving as New York City “recycling czar,” or deputy commissioner of sanitation, recycling and sustainability, under Mayor Michael Bloomberg. Closed Loop maintain’s Gonen’s recycling focus, with an eye on developing the so-called circular economy, which aims to cut trash by breaking from the current “make-use-dispose” pattern.
With warnings about pollution sounding increasingly apocalyptic, efforts to curb waste are gaining momentum as consumer giants like Coca-Cola and Starbucks to move away from disposable plastics. Both have invested in Closed Loop, which manages $86 million.
The funding is spurring technological innovations to help retailers and municipalities recycle. Last year, the recycling industry generated over $110 billion in economic activity.
Closed Loop Partners has secured other high-profile investors like Unilever and Procter & Gamble. As of 2018, it deployed $50 million across 21 projects, securing $210 million in addition co-investment.
“They’re pretty cutting edge, they are taking on some things that nobody else seems to want to try to do,” says Bob Akers, an enterprise director at e-Stewards Initiative, which promotes electronic waste recycling. The group collaborates with Closed Loop on Curb My Clutter, a mobile application that helps consumers recycle clothing and electronics.
The company also manages an early-stage venture capital fund, R&D center, and a private equity fund that focuses on generating “better than market returns” for family offices and financial institutions.
“My real interest is in building the firm that would be a solution provider for the circular economy,” Gonen told Karma. “And in order to do that, the firm needed to be able to invest all along the growth trajectory.”
The economics of recycling is simple, Gonen says, because at its core is the opportunity for a city to avoid landfill fees. For example, when Memphis, Tenn., received financing to buy carts and trucks to start a recycling program, the money it saved by cutting trips to the landfill helped repay the loan.
Other borrowers from the project finance fund also have repaid their loans on schedule, Gonen said.
Part of Gonen’s role is using his connections to open doors to decision-makers. Before joining the Bloomberg administration, he had founded RecycleBank, a company that awards points for recycling that consumers can redeem at restaurants and retailers. When the idea of the Closed Loop Fund was born, former partners such as Coca-Cola got on board.
“They are able to reach Fortune 100 companies and really explain what the problem is,” e-Stewards’ Akers says.
Amazon last year pledged $10 million to the fund, saying its investment will be used to increase the availability of street recycling for 3 million homes in the U.S.
Closed Loop Partners requires portfolio companies to report impacts such as landfill diversion. It plans to cut greenhouse emissions by at least 36 million metric tons of carbon dioxide through its investments by 2030, according to the annual report.
This may seem like a drop in the ocean. Global waste generation will increase from 2 billion metric tons annually in 2016 to 3.4 billion metric tons in 2050, according to the World Bank. And at least 33% of this waste is disposed of through open dumping or burning.
After China stopped accepting most scrap from the U.S. last year due to contamination, interest in domestic recycling soared and about $1 billion in investment has been announced in the past several months.
AMP Robotics, one of Closed Loop ’ portfolio companies, developed AI-guided robots that combine machine vision with deep learning to capture and recognize different materials in waste streams. The robots are able to pick 70 to 80 items a minute, twice as fast as humans and with greater precision. Google and Baidu Ventures are also investors.
“Robots are the future of the recycling industry,” said John Hansen co-owner of Single Stream Recyclers LLC, which deploys 14 robots at its facility in Sarasota, Florida.
Still, the flow of capital remains the biggest obstacle in advancing the circular economy, with “trillions of dollars” needed in order to create a lasting impact on the environment and meet the Paris climate agreement goals, says Erika Karp, founder and CEO of Cornerstone Capital Group.
“There is still this myth that when you invest for impact, you underperform in terms of financial returns. That myth should be dead,” Karp said last month at an impact investing conference. “Every piece of the capital market is in motion right now. We have a long way to go, but we are gonna get there.”