Schroders ranking companies in $25 trillion market in circular economies

Circular economies could be worth $25 trillion by 2050. That’s a major opportunity for investors, argued Schroders Fund Manager Jack Dempsey in a blog post published September 28.

“The transition to a circular economy will be one of the defining long-term growth trends of the coming decades,” wrote Dempsey, adding that investors needed to change their perspective if they wanted to take advantage of the trend. “It is driven by the need to decouple economic growth from resource consumption. Overconsumption creates two existential issues facing the planet and the economy today – lack of resources and climate change.”

The global economy consumes 70 percent more resources than the Earth can replenish naturally. By 2050, argued Dempsey, that ratio will reach 300 percent. Only circular economies, meanwhile, can help reduce greenhouse gas emissions that cause climate change to net zero. Materials will need to be sustainably reused and recycled to cut the consumption of raw resources.

Schroders, a Britain-based asset manager, has developed a Circular Score to rank companies with these concerns in mind. The system ranks alignment; furthering the circular economy; and externalities and risks. Companies are scored on a scale from one to 100. Scores of 50 and more denote companies eligible for investment. So far, the best company that Schroders has ranked scored 81.

The ranking determines whether companies are aligned with the aims of the circular economy, whether they are helping to reuse and recycle products and/or services, and what risks they face, like using unproven new technologies or working with hazardous materials. ce/jd