“We now live in a world of three dimensions in investing terms. We have lived, since the 1950s and [modern] portfolio theory, in a world that has worked with risk and return, but we are adding a third dimension of sustainability and responsibility, which is increasingly becoming a fiduciary duty to add to investment funds and to deliver for society.”
Clive Emery, fund manager. Invesco*
Whether it’s due to the sudden shift from ‘global to local’ manufacturing caused by the pandemic, recognising that climate change calls into question ongoing returns from ‘brown’ investments or the economic implications of the emerging multipolar world, investing in our future is beginning to take a very different shape.
As a new company looking for investment, one thing is clear – conventional investors can’t provide what we need.
Helping businesses to deliver viable, commercial products, using alternative-to-plastic materials in the midst of this perfect storm of changes requires more than money.
So what’s different?
The value of the CirQulor platform is in what we can earn from making it easy for product makers to find, and buy from, alternative material producers. However, as with all digital platforms, our ‘product’ is in fact the data this process generates. The value is in the many interactions taking place over the network that enables the matching.
And the potential worth of that data can vary widely from user to user. For one, access to metrics validating CO2 emissions could support an ESG pitch to their consumers and investors. For another, access to an alternative-to-plastic material will allow the shift from producing a low-value plastic commodity to making a premium product sold at a higher margin. Valorising crop waste as feedstock for a bio-based material can be a life-changer for subsistence farmers and potentially significant new revenue for agri-business. There is potential return in almost every data interaction on the platform and the ecosystem it generates.
But whatever the value-generating scenario, the basic difference for an investor in a platform as opposed to a business selling units coming off the end of an assembly line is that it’s not simply: ‘put ‘x’ amount in for ‘y’ amount of time and see ‘z’ return’.
One can of course evaluate a platform in those simple terms; n transactions over t period with % margin yields $ return. But that would be a very limiting approach. As the global platform market giants Amazon and Alibaba evidence, iceberg-like, the real returns are made from the part one doesn’t see – the data; customer behaviour, product use, market dynamics and analysis, modelling … the list of value-generating assets is endless.
Given this multi-form, variable-value product, it’s understandable that platform businesses pose a challenge to investors used to the ‘single product’ model. And one that is made even greater when one considers the global scale aims and ambitions of projects like CirQulor.
Our inspiration and guiding purpose is to rid the world of plastic and support the use of natural waste material to produce what we need, where it’s needed. A social benefit that’s hard to quantify in purely financial terms.
This demands a truly progressive investor. One that recognises both the potential for financial return from innovative projects like CirQulor, but also that there’s great worth in enabling the move away from producing poisonous materials, helping reduce energy use, providing opportunities for local, sustainable industries to flourish and in protecting the environment.
In developing the postplastic supply chain we’re finding, and partnering with, people and organisations committing time and resource to all these initiatives. From concept to product, there’s a growing recognition that value is wider than just the dollar earned.
And in investment too there are encouraging signs of a growing understanding of where one finds reward and new approaches to finding value:
Sustainable investing for companies making a positive impact like researching renewable energy or tackling climate change.
Impact investors supporting projects that deliver measurable, positive outcomes – say, reducing carbon emissions by a set amount each year.
Light Green investing enabling efforts that make a positive contribution to the world, rather than simply excluding the ones that do harm.
Green investment funds, both private and public, with a commitment to projects conserving natural resources and promoting environmental responsibility.
Finally, it is worth noting that globally ESG funds held in sustainable, mutual and exchange-traded funds rose by 53% last year to $2.7tn**.
As a project at the leading edge of the change, we want the investment we and our partners are making in time and energy to make a positive difference in the world. It would be good to think we can also have an impact on the growth and development of the market for investing.
*Capital Monitor
** Source: Bloomberg.
Image: Xavier Badosa
