US$106m Singapore-based fund to keep plastic from Asian oceans

Singapore

CIRCULATE Capital has launched a US$106 million Singapore-based fund dedicated to preventing plastic from entering Asia's oceans, and which it hopes can catalyse more investments into this area.

According to chief executive Rob Kaplan, Circulate Capital Ocean Fund aims for a mid to high single-digit internal rate of return at the outset.

"We feel this is a modest return. Our investors want to see impact before they want to see financial returns. But if we don't generate any financial return we won't be successful in bringing in ... significantly larger investors," Mr Kaplan told BT at the sidelines of the launch of the fund, which it says is the first of its kind.

"So that's a big part of the strategy. Catalytic capital - how can we take this hundred million and capitalise it into a billion."

Mr Kaplan added that the team has looked at over 200 investment opportunities across South and South-east Asia and their target markets are India and Indonesia, followed by the Philippines, Vietnam, and Thailand.

"In Indonesia we see some incredibly exciting opportunities because it's a nascent entrepreneurial sector ... and there's so much political will there. The government has... been dedicated to finding solutions in this space."

Asia is the biggest source of plastic leakage into global oceans, with 60 per cent of ocean plastic originating from the region. An Ocean Conservancy Report has identified a net financing gap of between US$28 and US$40 per ton of plastic waste collection in the five top ocean polluting countries in the world - China, Indonesia, Philippines, Thailand and Vietnam.

"The good news is that we are able to reduce nearly 50 per cent of the world's plastic leakage by investing in the waste and recycling sector in Asia, and even more if we invest in innovative materials and technologies," said Mr Kaplan.

The fund expects to announce its first investments in the coming weeks. It will make debt and equity investments of US$2-10 million into startups and SMEs across the entire plastics value chain.

"There are a lot of family businesses that have been operating in the waste and recycling space" that haven't had much attention.

"They're now seeing the second generation come on and are looking to see what scale means for them. Is that expanding horizontally into new materials, is it new facilities, or is it new cities? That's a big chunk of the opportunity," said Mr Kaplan.

Beyond investing in startups, The Circulate Initiative, a mission-aligned non-profit organisation, is working with innovation and collaboration agency SecondMuse on an incubation network aimed at developing, promoting, and incubating innovative technologies, business models and entrepreneurs in the region.

Matt Echols, vice-president, communications, public affairs and sustainability Coca-Cola Asia Pacific, said it is an exciting time for sustainability and impact investing.

Mr Echols, along with a handful of founding investors and partners were part of a panel at the launch. Other investors include PepsiCo (the first investor), Dow Chemicals, Chevron Phillips Chemical, Danone, Unilever, and Proctor & Gamble.

"For years, the private sector has looked at this space as sort of an opportunity for philanthropic giving. What's exciting here is now companies are thinking about this as a business opportunity and looking at it as a circular value chain economic business opportunity," said Mr Echols.

The fund's launch comes at a time when Singapore has initiated a slew of green investment programmes, including the Monetary Authority of Singapore's recent commitment to US$2 billion of green investments directed at sustainable projects and initiatives such as the Zero Waste Masterplan and a Resource Sustainability Bill.

Meanwhile, Asean countries have been taking China's lead following its abrupt banning of all plastic waste imports in 2018. Malaysia, which became the leading alternative destination for plastic scrap, also stopped accepting imports this year.