Just as money moves around in a financial system, seeding companies and wealth, investors are seeking startups that give trash a few extra spins through the economy.

Money is pouring into the so-called circular economy, as businesses and investors seek to profit from keeping trash out of landfills and transitioning to a low-carbon economy.

More than $850 million has been invested in 20 companies focused on sustainable packages and materials over the past three years, and more investment is expected. The cash will continue to flow because investors see the circular economy — which cuts down on waste by reusing resources — as a key factor in the move to industrial decarbonization, according to Bloomberg NEF.

“Funding for the circular economy from venture capitalists, companies, and large investors is growing,” Julia Attwood, the head of Bloomberg NEF’s advanced materials analysis, wrote. “Public concern about plastic waste has created an incentive for consumer companies to invest strategically in recycling and alternative packaging.”

The move to a circular economy faced a big setback in 2018 when China announced that it would stop importing low-quality plastic waste. The Chinese move sent prices for scrap plastic tumbling, but the market has turned the corner, Bloomberg NEF said. Consumer anxiety about plastic waste has led companies to boost the use of recycled products.

A circular economy has to be an important part of the transition to a low carbon economy because about half of the world’s greenhouse gas emissions come from extracting and processing of natural resources.

The number of circular economy funds is projected to grow in 2020, led by institutional investors, according to Bloomberg NEF. Venture capital deals will probably increase, but most of these will be small in size and will focus on local recycling efforts, Attwood said.

The circular economy has the potential to be a $4.5 trillion business opportunity, according to the World Economic Forum. Only 9% of the world’s economy is circular at the moment, leaving great potential for growth, according to a report released by the forum in January.

The Platform for Accelerating the Circular Economy is helping spur the move to renewable energy, ending the use of toxic chemicals and curbing waste. The organization provides the leaders of the circular economy with connections, knowledge and the chance to pilot and scale best practices quickly.

  • Members of the American Beverage Association — companies that include Coca-Cola, Keurig, Dr Pepper and PepsiCo — launched the Every Bottle Back initiative in 2019 to cut virgin resin use by boosting recycling to make new bottles.
  • The European Commission will aim to “absolutely decouple” economic growth from resource use, according to a draft circular economy plan scheduled for release in March. The plan is part of Europe’s aim to become the first climate-neutral continent by 2050.
  • Pitchbook identified 25 companies developing technology-enabled waste management solutions, and venture capitalists spent a record $188.4 million on them last year, more than four-fold of 2018. Circulate Capital, a Singapore-based investment management firm, launched Circulate Capital Ocean Fund of $106 million last December. It’s the world’s first investment fund dedicated to addressing Asia’s plastic crisis.