Investing in the in circular economy with Eurizon

The transition from linear to circular economy…

Modern economies are based on linear systems, in which the resources are drawn from the environment and not returned, which means that for mass production ends resources are used that turn into waste even after being used only once.

This production and consumption model is no longer compatible with the planet’s resources, therefore we now need to make the transition from a linear economy to a circular economy.

What is the difference between circular economy and linear economy?

The transition from the linear economy to a circular economy consists of revolutionising the production system in order to prevent the irreversible exhaustion of natural resources – towards which the linear economy tends – and achieve the net zero greenhouse gas emissions target. 
There is more to the circular economy than just recycling: reducing the use of virgin materials, pollution and waste to a minimum, by adopting new production and consumption models based on sharing, extended use, repairing, regenerating and, only as a last resort, recycling. 

The advantages of a circular economy: reduced use of Natural Capital, greater use of Human Capital

Reducing pressures on the environment
A circular economy can reduce greenhouse gas emissions thanks to better waste management and the reduction of the resources used for production ends (energy, water, land, and materials) with a positive impact on the climate.
More secure procurement of raw materials
A circular economy can reduce the risks tied to the procurement of raw materials, such as price volatility or the availability of, and dependence on, imports.
More competitiveness
The circular economy can enable companies and consumers to save money by improving the efficiency of resources.
A circular economy can trigger a strong drive towards innovation in all the sectors of the economy, to redesign materials and products for a circular use.
Growth and employment
The circular economy can support economic growth and the creation of new jobs.

Why invest in companies that are leaders in the circular transition

Cost efficiency
The leading companies in the transition to a circular economy are less exposed to the commodities market, use materials more efficiently, and can achieve greater cost efficiency.  
More stable revenues
By offering services that accompany and replace the sale of products, leading companies are able to build up customer loyalty and generate more stable revenues.
Growing and stable net cash flows 
The initial investment made to restructure production processes and business models are expected to generate growing and stable net cash flows in the medium term.
Eurizon’s approach to the circular economy: here at Eurizon, we integrate the circular economy in dedicated investment strategies and, going forward, will do so in active ownership strategies as well.
The challenge we have taken up is to measure as accurately as possible the degree of circularity of the companies in which to invest, using the public information made available by them. At present, however, sufficiently detailed reporting standards to this end do not yet exist. Therefore, the Long Term Sustainable Strategies team has built a proprietary system to measure the degree of circularity focused on the characteristics of the production process, the business model, and the corporate management’s willingness to progress in the circular transition.

Eurizon Fund -
Equity Circular Economy

A global equity investment focused on the circular transition

(Risk Class: 4, the risk indicator assumes you keep the product for 4 years)

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