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Summary
Most businesses underestimate the real potential of circular economy activities to boost profitability and secure financing. At the same time, financial institutions are eager to fund the sector — but both sides often struggle with clarity on what qualifies for investment beyond traditional recycling models.
Scaling the circular economy requires more than good intentions: it demands clear policies, strategic partnerships, and financial risk mitigation and incentives that tackle key bankability challenges. With a growing number of circular economy finance guidelines emerging worldwide, harmonization is the key to unlocking a shared understanding between companies and investors.
Harmonized Circular Economy Finance Guidelines aims to help investors, financial institutions and private companies identify and quantify opportunities to channel financing to projects that support a circular economy. It provides guidance to identify activities that are eligible for circular economy finance.
The Guidelines build on the success of other sustainable finance taxonomies for biodiversity, blue finance and green bonds that helped create new asset classes and mobilize private capital to support sustainable development. The Guidelines are intended to promote market convergence and to be fit for purpose globally. They are sector agnostic and build on the existing guidance for circular economy finance, aligning in particular with the European Union’s Categorization System and ICMA’s (International Capital Markets Association) Green Bond Principles.
Illustrative examples of project types are included across six sectors: electronics and appliances, packaging, textiles, construction and built environment, automotive and transportation, and agribusiness.
Aligned with the Green Bond Principles, the Harmonized Circular Economy Finance Guidelines complement guidelines for climate, biodiversity, blue, and social finance to help investors target desired impacts.
The Guidelines serve as a practical tool for financial institutions and corporations to identify, evaluate and quantify financial flows for circular economy projects.
For treasury, loan or business development officers, and investment staff, the Guidelines help identify qualifying assets within existing portfolios, identify new opportunities for circular economy finance products, and promote more circular economy investments within their client base.
For corporations and SMEs, they can help unlock access to circular economy finance and potential new investors by adapting projects and activities to meet circular economy criteria.
For investors, the Guidelines help identify and build confidence around qualified labeled finance products.
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