Venture capital player Circulate Capital launches US$106M fund for tackling ocean plastic

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Singapore-based venture capital fund manager Circulate Capital has launched the Circulate Capital Ocean Fund (CCOF) with US$106 million (S$144 million) at its first closing, marking what may be the first investment fund devoted to addressing plastic waste in Asia.

Asia is the biggest source of plastic leakage into oceans, with around 60 percent of ocean plastic originating in the region, Circulate Capital said in a statement Wednesday.

Circulate Capital said CCOF will provide equity, debt and convertible debt financing to Asia’s waste sector, including waste-management, recycling and circular economy start-ups and small-to-medium sized enterprises in South and Southeast Asia.

Rob Kaplan, CEO of Circulate Capital, said the some of the more than 150 million tons of plastic in the oceans has economic value that can be captured.

“You can integrate new business models, but also technologies to clean, sort, process, flake and pelletize what was a waste stream and turn that into a commodity that can be sold,” Kaplan said at a media event to announce the fund’s launch.

“At each stage of the value chain, we see profitable businesses that need capital to grow and that’s how we make money and that’s how institutional investors will ultimately make money in this space,” he added, noting that currently many of the players in the space were relatively small, leading to a lack of investible products for larger investors, such as pension funds and sovereign wealth funds.

Founding investors in the fund include PepsiCo, Dow, Proctor & Gamble, Unilever, Danone, Coca-Cola and Chevron Phillips Chemical Co., the fund manager said.

Matt Echols, vice president of communications, public affairs and sustainability for Coca-Cola Asia Pacific, said his company’s investment in the fund was in line with Coca-Cola’s commitments for 100 percent of its packaging to be recyclable by 2025, use 50 percent recycled materials by 2030 and have the collection equivalent of 100 percent of its packaging globally by 2030.

“No one entity can do this alone,” Echols said at the media briefing. “We need catalytic capital investing at the right places along the value chain to create these closed loop systems.”

Echols noted that outside of package-less products, Coca-Cola’s packaging with the lowest carbon footprint was recycled PET bottles and it was investing in recycling facilities in the Philippines, Australia and Hong Kong to expand capacity.

Kaplan said the fund has looked at over 200 potential investments in its target markets, including India, Indonesia, the Philippines, Vietnam and Thailand. China was not a target currently, he said.

The ticket size of the investments the fund is considering are in the US$2 million to US$10 million range, with projects or full raises in the US$5 million to US$20 million range, he said.

“The pipeline is pretty robust. We’ve been very pleased with the opportunities in front of us. And our team has been conducting active due diligence on our first transacations for the last six to 12 months,” Kaplan said.

He said the fund was seeing “huge demand” for PET plastic recycling facilities, as well as facilities for other materials, such as polyethylene and polypropylene, with the technology to be used in those plants already in use in Europe, China and the U.S.

The fund was also looking at investments in technologies that deliver packaging and products in more recyclable and compostable ways, as well as digital investments which can add transparency and traceability to the industry, Kaplan said.

CCOF was also looking at advanced recycling technology which can turn polymers into monomers, allowing the creating of virgin-quality plastic from recycled plastic, he said.