taining to the best extent possible their economic value at all times and/or ensuring
that they are biologically degraded. CE-related projects focus on re-thinking and
redesigning products, processes, value chains, business and service models in order
to achieve the above-specified purpose” [1].
The circular economy can be seen as a green giant on the rise, on account of its
enormous potential to unleash sustainable growth and job creation as well as the
increasing traction it is gaining in the business world. Many businesses in different
sectors have already started to tap into this potential, displaying a large variety of
innovative technologies and business models. However, the transition to a CE is no
certain success and needs to tackle a number of hurdles. Ensuring access to finance
for innovative circular businesses, throughout their different growth phases, is one
of them.
2 Challenges and Opportunities in Financing CE Projects
Besides its environmental benefits, the circular economy offers tremendous economic potential, which businesses in different sectors have started tapping into,
displaying a large variety of innovative technologies and business models.
However, CE projects present a number of different challenges to access
return-based finance. On the one hand, the new technologies and business models
proposed are often unproven and complex, rely on uncertain supply chains and
operate in uncertain markets. Furthermore, CE projects usually involve small
sub-investment grade promoters, with limited collateral or few physical assets.
Because of the increased market and credit risks involved, the CE promoters often
have limited access-to-finance or face increased cost of capital. A study published
in 2015 by the Innovation Finance Advisory unit of the EIB on access-to-finance
conditions of projects supporting CE concluded that while market forces (commodity price fluctuations) alone could create a circular economy there is a risk of a
slow transition and high opportunity costs [1]. Hence, there is space (and need) for
policy intervention and support in form of innovative funding and financing
instruments.
3 Financing of Innovation and Circular Economy
in Practice
3.1 The EIB in the Circular Economy
Mr. Schempp explained the crucial role of the EIB, as the EU Bank, in bridging
financing gaps and catalysing strategic investments in key EU policy areas such as
CE, not only through tailored financial instruments but also through specialized
428
L. Goovaerts et al.
that they are biologically degraded. CE-related projects focus on re-thinking and
redesigning products, processes, value chains, business and service models in order
to achieve the above-specified purpose” [1].
The circular economy can be seen as a green giant on the rise, on account of its
enormous potential to unleash sustainable growth and job creation as well as the
increasing traction it is gaining in the business world. Many businesses in different
sectors have already started to tap into this potential, displaying a large variety of
innovative technologies and business models. However, the transition to a CE is no
certain success and needs to tackle a number of hurdles. Ensuring access to finance
for innovative circular businesses, throughout their different growth phases, is one
of them.
2 Challenges and Opportunities in Financing CE Projects
Besides its environmental benefits, the circular economy offers tremendous economic potential, which businesses in different sectors have started tapping into,
displaying a large variety of innovative technologies and business models.
However, CE projects present a number of different challenges to access
return-based finance. On the one hand, the new technologies and business models
proposed are often unproven and complex, rely on uncertain supply chains and
operate in uncertain markets. Furthermore, CE projects usually involve small
sub-investment grade promoters, with limited collateral or few physical assets.
Because of the increased market and credit risks involved, the CE promoters often
have limited access-to-finance or face increased cost of capital. A study published
in 2015 by the Innovation Finance Advisory unit of the EIB on access-to-finance
conditions of projects supporting CE concluded that while market forces (commodity price fluctuations) alone could create a circular economy there is a risk of a
slow transition and high opportunity costs [1]. Hence, there is space (and need) for
policy intervention and support in form of innovative funding and financing
instruments.
3 Financing of Innovation and Circular Economy
in Practice
3.1 The EIB in the Circular Economy
Mr. Schempp explained the crucial role of the EIB, as the EU Bank, in bridging
financing gaps and catalysing strategic investments in key EU policy areas such as
CE, not only through tailored financial instruments but also through specialized
428
L. Goovaerts et al.