Repair, Reuse, Recycle
#Market Strategy — 21.12.2021

Repair, Reuse, Recycle

2022 Investment Themes

Theme 3

Investment Theme 2 | BNP PARIBAS WEALTH MANAGEMENT

We focus on the concept of the “Circular Economy”, which works to bolster resource efficiency and introduce new business models that enable circular resource flows. We include the so-called “Blue Economy” theme which focuses more on the “sustainable use of ocean resources, improved livelihoods and jobs, and ocean ecosystem health”.

There is strong political pressure but also commitment and action seen recently. The EU Commission for example adopted in 2020 a so-called new circular economy action plan which is related to the massive public investments that were decided in 2020. We also expect massive business investments in this area. A similar trend is seen in the US.   

The challenge to save the planet

The average plastic shopping bag is used for  only 12 minutes. It is a similar story for a coffee cup, a toothbrush, a smartphone or a pair of running shoes. Each of these products are often made with finite materials and used for short periods of time before being disposed of. This “take-make-waste” approach to production and consumption is not only unsustainable, but increasingly uneconomical — for consumers, producers and the environment.

The circular economy offers a different approach, by designing out waste and pollution, keeping products and materials in use, and regenerating natural systems.

There is only one planet Earth, yet by 2050, the world will be consuming as if there were 3: the circular and blue economies will provide high quality, functional and safe products, which will be efficient and affordable, and designed for reuse, repair, and high-quality recycling. What’s more, they will last longer. A whole new range of sustainable services, product-as-service models and digital solutions will bring about a better quality of life, innovative jobs and upgraded skills. Governments need to invest huge sums of money over the coming years.

The European Green deal targets “no net emissions of greenhouse gases by 2050, economic growth decoupled from resource use, no person and no place left behind” with at least $1.1trn in sustainable investments by 2030. 

The themes highlighted by the EU that relate to circular and blue economy concepts are:

  • Fresh air, clean water, healthy soil and biodiversity;
  • Renovated, energy-efficient buildings;
  • Healthy and affordable food;

Longer lasting products that can be repaired, recycled and reused

In the US, we expect a $2 trillion plan to rebuild infrastructure and reshape the economy, with spending spread over eight years. Not all the details are available, but at this stage, we already see the following priorities:

Accelerate the fight against climate change by shifting to new, cleaner energy sources;

  • $111bn for water infrastructure;
  • $42bn for ports and airports

In July 2020, the UK launched “The Circular Economy Package policy statement”, a legislative framework identifying steps for the reduction of water and a credible long-term path for waste management and recycling. Canada launched its Blue Economy Strategy engagement in February 2021 and strives to have 90% of electricity from non-emitting sources by 2030. 

The Sharing Economy gathers momentum

  • We focus on 5 sub-themes: i) Circular Supplies, ii) Resource Recovery, iii) Product Life Extension, iv) Sharing Platforms  and v) Product as a Service (see below).
  • We will focus our attention on equities of companies that are key players in these areas or via actively-managed funds or ETFs.
  • Despite the relevance and high potential of this theme, investment solutions will be subject to fluctuations in the global equity markets. 

Sub-themes and Investment solutions

According to Blackrock, an American asset manager, “the circular economy is a major transformational force that will last decades”, leading to long-term winners and losers in companies and sectors.

1. Circular Supplies: renewable energy, bio-based or fully recyclable input materials to replace single-lifecycle inputs. In industrial sectors: Renewable Energy Generation, Renewable Energy Equipment, Biofuels and Fuel Cells.

2. Resource Recovery: recover useful resources/energy out of disposed products or by-products Industrial Sectors: companies active in Waste Management, Environmental Services & Equipment (Environmental Engineering & Consulting and Pollution Control Equipment).

3. Product Life Extension: products and services that extend the working lifecycle of products and components by repairing, upgrading and reselling. In industrial sectors: Apparel & Textile Products, Automotive, Chemicals, Construction Materials, Consumer Products, Packaging, Distributors, Electrical Equipment, Forest & Paper Products, Home & Office Products, Manufactured Goods, Metals & Mining, and Retail.

4.Sharing Platforms: products and services that enable increased utilisation rate of products by making possible shared use/access/ownership. Companies in the areas of Technology (Hardware, Semiconductors) and Shared Services (ride-sharing, house sharing, etc.).

5. Products as a Service: offer product access and retain ownership to internalise benefits of circular resource productivity. We focus on Technology (Software, Technology Services, Cloud Computer), Retail (leasing services) and Shared Goods (car, bike, etc.).

Suggested implementations include:

  • Circular economy funds and ETFs;
  • Blue economy and marine ecosystem funds and ETFs;
  • Renewable energy funds and ETFs;
  • Companies involved in recycling, repair and sharing/leasing platforms;