Tracking Private Investments in Plastics Circularity Ahead of INC-5.2

In August, world leaders will convene in Geneva for the resumed session of the fifth and final negotiations for a global plastics treaty (INC-5.2). The urgency for strong global action to address plastic pollution is clear given its wide-ranging environmental and human health impacts. Negotiators will tackle a number of critical topics including production limits, phase-outs and bans of the most harmful chemicals and plastics, a just transition for the informal sector, and funding the transition to a circular economy. The latter point is of particular interest to The Circulate Initiative.

In 2023, The Circulate Initiative launched the Plastics Circularity Investment Tracker (“PCIT”), the world’s first database of private investments¹ made in solutions to address plastic waste. With investment data from 2018, the PCIT organizes information by circular economy activity, archetype (e.g., redesign, reuse, and recycling), geography, and investment source. Our goal is that the PCIT serves as an objective source of information that helps investors, policymakers, companies, and other stakeholders understand the state of private investment in plastics circularity and take action to increase investment.

Ahead of INC-5.2, we are pleased to share the updated PCIT with 2024 transaction data. With this update, we have organized the information according to the Circular Economy Activity Categories from the Harmonized Circular Economy Finance Guidelines published by the International Finance Corporation.

In 2024, private investment in solutions to plastic pollution totaled US$ 18.0 billion. This is up slightly (2%) from 2023, but well below the six-year average (2018 to 2023) of US$ 25 billion. As with prior years, a significant majority of investment in 2024 (83%) went to end-of-life solutions such as collection, sorting, and recycling. Investments in circular design and production were a distant second at 15%, while use-phase investments (e.g., reuse and refill) received only 1% of investment. Roughly 90% of investment in 2024 went to North America and Europe, with the balance spread across regions such as Asia and Africa where the plastic pollution crisis is more acute. Financing from banks increased significantly in 2024, while investment from private equity decreased notably. That private investment is mainly flowing to end-of-life solutions in North America and Europe is not surprising given the maturity of such markets and companies, and the availability of public funding for services such as waste collection. A summary of these points and more can be found in our summary publication.

A Significant Gap, But Solutions Exist

We face a daunting gap – US$ 18.0 billion is a small fraction of the US$ 1 trillion needed per year to meet 2040 targets for reducing mismanaged plastics.² But, we know that solutions exist, and progress is being made in certain countries. In a recent webinar convened by the Financing Coordination Group (FCG), a panel of experts from across the plastics circularity ecosystem shared perspectives on key enablers that can increase investment in solutions to plastic waste. In India, for example, national regulations on extended producer responsibility (EPR) and recycled content mandates have resulted in significant investment in recycling capacity, which is happening in other emerging markets such as Colombia. Panelists also shared perspectives that could explain why North America and Europe receive the majority of investment – that is, the presence of public funding in these geographies that support collection, and a history of successful investments, which breeds further investment. The panel also discussed the lack of investment in reuse and refill, noting that such models are challenged by various systems gaps and market failures that prevent the scaling of the growing number of pilots around the world, for example reverse logistics, cultural and individual preferences, convenience, and cost. Creative policy is needed, for example sales tax exemptions and credits, and grant funding may be best suited for such opportunities until they are commercially viable.

The panel also discussed the critical importance of informal waste pickers to plastics recycling in many emerging markets. In some countries, up to 90% of plastics collected for recycling is done by these individuals. Any financial mechanisms agreed in the global plastics treaty must ensure that adequate funding flows to the informal sector.

Looking Ahead to INC-5.2

We are hopeful that world leaders will agree on a strong and legally binding agreement to combat plastic pollution at INC-5.2. On the topic of financing, there are a number of key questions to be answered including how much funding will be prescribed, where the funding will come from (e.g., high-income countries) and through what mechanism (e.g., EPR). As seen in countries like India and Colombia, solutions are being deployed, and with the right policies and other enablers, private investment will increase and flow to the areas in which it is most needed. We encourage world leaders to heed these lessons.

References:

1. In brief, private investments are those which come from non-public entities, for example banks, private equity funds, and foundations. This is in contrast to public funding (e.g., governments, multilateral aid agencies). See the Frequently Asked Questions document for more detail.
2. Nordic Council of Ministers. (2023). Towards Ending Plastic Pollution by 2040 – 15 Global Policy Interventions for Systems Change [online]. Available from: https://www.norden.org/en/publication/towards-ending-plastic-pollution