What do PepsiCo, Unilever and Coca-Cola have in common? These global conglomerates may produce a sizeable share of the world’s fast-moving consumer goods, but they are also looking to offset plastic waste — of which a substantial portion comes from its own bottles and packaging.
Corporate investors from these brands have joined forces to invest in a particular fund — one by an impact investment firm based in Singapore.
Circulate Capital is a three-year-old venture capital firm dedicated to tackling the ocean plastic pollution problem. They do this by financing companies, projects and infrastructure to stem the flow of plastic waste to the world’s oceans, while advancing the circular economy in South and Southeast Asia.
But why in this region? Rob Kaplan, founder and CEO of Circulate Capital, says 60% of plastic waste in the oceans originates from Asia. In order to bring Circulate Capital to life, the former director of sustainability at American supermarket giant Walmart packed up his entire family and moved to Singapore from the US to be closer to the core of the global ocean plastic crisis.
“I did a lot of work in Asia on behalf of Walmart in the supply chain and that’s really how I got introduced to the opportunities in the region,” Kaplan tells The Edge Singapore.
Kaplan: The number one thing that would enhance investment in recycling and plastic pollution prevention would be more consistent and reliable government regulation
At Walmart, he was responsible for packaging, customer engagement and integration with the consumables business, including personal care and household cleaning. In his nearly four years there, Kaplan reportedly helped eliminate 20 million metric tons of greenhouse gases (GHG) from the supply chain.
He is no stranger to the beverage industry, along with its huge disposable waste problem. Before joining Walmart, he spent nearly five years leading corporate responsibility and brand strategy for the Brown-Forman Corporation, which produces and markets brands such as top-selling American whiskey Jack Daniel’s.
After Circulate Capital was founded in October 2018 at the Our Ocean Conference in Bali, Indonesia, Kaplan’s team launched the US$106 million ($143.9 million) Circulate Capital Ocean Fund (CCOF I) the following October.
“As we were setting up the fund. It became very clear that there were tremendous opportunities here,” he says. “There’s some pretty compelling research that the circular economy in Asia alone could generate hundreds of billions of dollars’ worth of economic growth and opportunities, and millions of jobs.”
“I saw that personally as an opportunity to really create exciting financial returns and impactful returns on the environment and society… ESG [environmental, social and governance] is pretty nascent here. Having a decent-sized ESG impact fund is an exciting opportunity to differentiate ourselves and create more income.”
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CCOF I is a supply chain investment strategy, the world’s first fund dedicated to preventing ocean plastic in South and Southeast Asia. It was supported by the three big names mentioned above along with chemical manufacturer Dow, food company Danone, consumer goods corporation Procter & Gamble and others.
From flakes to exports
Thus far, the capital has been evenly divided between South and Southeast Asia, with seven investments completed. Six of those are in India and one is in Indonesia.
“India has been very exciting from an investment perspective. Obviously, it’s a huge country and there’s a lot of economic and manufacturing activity there,” says Kaplan.
In April last year, Circulate Capital deployed its first US$6 million from the fund into two companies: Tridi Oasis and Lucro.
Tridi Oasis is an Indonesian, female-led company specialising in recycling plastic bottles into plastic flakes, which are used in the production of packaging and textiles.
“A lot of recycling companies in Indonesia and Malaysia are collecting plastic; they’re grinding it and they’re washing it. Once they’ve processed it to that level, it’s no longer plastic waste; it’s now a recycled commodity called a plastic flake,” Kaplan explains.
Multi-coloured plastic flakes at a recycling centre. Photo: Seong Joon Cho/Bloomberg
Kaplan notes that Singapore could stand to benefit from a similar opportunity. “Much of that material is already being exported to Europe and it’s transiting through Singapore. The opportunity is: Can you do more to create more value and more jobs for Singapore, since it is already coming through here?”
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Lucro Plastecycle, or simply Lucro, is an Indian manufacturer that specialises in recycling flexible plastic packaging for use in its own manufacturing and for sale as high-quality commodities.
In February, Lucro and investor Dow entered into a memorandum of understanding (MOU) to co-develop a post-consumer recycled polyethylene film solution. This will be used to manufacture collation shrink films, a form of secondary packaging commonly used for bottles, cans and liquid cartons. It is expected to be available in India later this year.
According to Circulate Capital’s impact report released earlier this year, the firm expects to put a sizeable dent in the world’s plastic leakage by 2030.
Based on its current CCOF I portfolio, Circulate Capital says it will prevent 13 million tonnes of plastic pollution leakage, avoid at least 17 million tonnes of carbon dioxide equivalent or CO2e and create over 17,000 new jobs this decade.
“There are three key gaps that we’re looking to invest in that will help drive circularity and drive financial returns,” he says. “The first is improving the quantity and quality of material that’s collected; the second is making sure that it’s more affordable to use for recyclers; and lastly, that the data systems that underpin the entire value chain are more effective and comprehensive.”
Disrupting plastic
In June, Circulate Capital announced a US$14 million first close of its new venture capital fund, Circulate Capital Disrupt (CCD), a companion strategy to the CCOF I.
“If you look at the solutions to plastic pollution, we won’t be able to solve this problem by only looking at waste after it is generated, like recycling, processing and manufacturing collection; or the companies that we’re investing in through CCOF I,” says Kaplan.
Rather, CCD is looking further upstream, before plastic is even produced. These involve plastic alternatives, circular supply chains and recycling at a molecular level, which breaks waste back down to its original inputs.
One example is recycling mixed textiles like cotton-poly blend tee shirts by separating cotton and polyester.
Circulate Capital will announce its inaugural investments for CCD in the coming months.
“While the CCOF I was supported by large corporations with strategic goals, the CCD is supported by family offices,” says Kaplan. These offices include the Singapore-based Rumah Group and Australia’s Twynam Investments.
“We’ve had more success initially from investors outside of Asia looking for impact and returns in Asia. We’re just now starting to really ramp up our engagement with investors based in Singapore and across the region,” he adds.
With five team members based in Singapore, Circulate Capital has also been working with local institutions.
In September, independent non-profit The Circulate Initiative launched an open-sourced calculator that tracks GHG emissions reductions, energy and water savings of waste management and recycling solutions.
Sustainability reporting is hampered by a lack of standardised tools and data, a problem The Circulate Initiative hopes to solve with Places, or Plastic Lifecycle Assessment Calculator for the Environment and Society. Available online for all, the tool was built based on the findings of a paper published by Circulate Capital and the Singapore Institute of Manufacturing Technology (SIMTech), a unit of Singapore’s Agency for Science, Technology and Research (A*STAR).
Overcoming the problem
“When we created Circulate Capital, one of the things we recognised in Indonesia and the Philippines was that the ecosystem that we were trying to invest in was pretty underdeveloped, both from an entrepreneurial and investment perspective,” says Kaplan.
“That work of building an ecosystem has great outcomes but not really in financial returns. So, we felt it was a better fit for philanthropic work. The Circulate Initiative is an independent organisation with its own team and I sit on the board of directors,” he adds.
Outside of Singapore, Circulate Capital is active in India, Indonesia and Thailand. The firm is also setting its sights on Vietnam and the Philippines, says Kaplan.
But what would it take for the region to overcome its plastic problem? Kaplan says governments in Southeast Asia must first share in the vision. “The number one thing that would enhance investment in recycling and plastic pollution prevention would be more consistent and reliable government regulation in the space.”
“Most of the countries are in the process of developing those policy frameworks and it creates a lot of uncertainty for investors. That’s probably the biggest challenge,” he adds.
Some may think Singapore’s waste is limited by its small population, but Kaplan believes the island nation should look at becoming a hub for the region. “People here are able to purchase more [things]. But that also means there’s more waste per capita. We have more responsibility to think of solutions for that.”
With “relatively small” amounts of investment, Singapore could catalyse US$180 million in annual trade value, he adds. “There’s a need to punch above our weight, and look for opportunities that can be regional solutions and not just simple solutions.”
Photos: Albert Chua/The Edge Singapore
