Identifying the Impact Potential of Early-Stage Circular Investment Opportunities

The “circular economy” is defined as a regenerative system in which resource inputs and waste are minimized by closing material and energy loops.[1] This exists in contrast to a “linear economy”, in which resources are taken from the earth, used to make products, and later sent to the landfill. Entrepreneurs are increasingly employing circular business models to design their companies around the principles of the circular economy, including the reduction of natural resource use and pollution, the reuse of products and materials, and the recycling of products and materials. Investors have found that companies with circular business models have the potential to generate environmental benefits and financial returns. However, each business must be holistically assessed to determine its environmental impacts as it competes in the marketplace and scales. Tools currently exist to assess circularity and environmental impact, but early-stage companies and investors often lack the necessary data, resources, or technical expertise to effectively use them. This project provides investors with a tool to examine circular and environmental impact indicators, and the assumptions that must be true for circular business models to have a net environmental benefit. The Circularity Assessment Tool (CAT) includes a questionnaire and a research guide. The questionnaire gathers data and insight into a potential investment company's environmental impacts and the research guide provides users with information about each section of the questionnaire. The CAT can be used for due diligence, continual monitoring of portfolio companies, and impact reporting.

[1] The Circular Economy (CE) is defined as a “regenerative system in which resource input and waste, emission, and energy leakage are minimized by slowing, closing, and narrowing material and energy loops. This can be achieved through long lasting design, maintenance, repair, reuse, remanufacturing, refurbishment and recycling” (Dissanayake & Weerasinghe, 2021).

Acknowledgements

Bren School: Kelsey Jack, Associate Professor; Vincent Thivierge, PhD Candidate

Regeneration.VC: Katie Hoffman, Partner & Investment Committee; Michael Smith, General Partner; Dan Fishman, General Partner; Destana Herring, Analyst; Eva Wallack, Analyst