Since the Planet has had fewer temperature differences and has become more habitable in the last twenty thousand years, societies have settled down, started farming and the population increased as their welfare increased. However, we have come to the end of this period of prosperity, which we call the Holocene Age. Until recently, human was a part of nature, a limited effective element in the environmental cycle, but with the Anthropocene Age, it has become a factor that can affect nature alone, shorten and break cycles of the materials.

Today, we are in a period where the limits of growth are discussed much more seriously. Because of human influence, the ability of the planet to regenerate itself is gradually decreasing. According to the Earth Overshoot Day[1] data, while the world was able to take care of itself until December 1971, today humanity finishes its resources, which the Earth can regenerate during the entire year, as of July 28. So, what about the rest of the year? Of course, it will be stolen from the welfare of future generations.

At this point, sustainability occurs at the centre of our lives. It is possible to meet today's needs without compromising the ability of future generations to meet their own needs. However, it is almost impossible to achieve this with the current linear economy approach. An alternative model is needed. The name of this model is Circular Economy, in which saving is at the forefront, resources are reused for different purposes, product life cycles are extended, new common consumption patterns are developed, the amount of raw materials going to the grave is reduced and the damage to nature is minimized.

The transition to a circular economy is no longer an option but a necessity. In fact, The European Commission also announced a new action plan in 2020 after the first Circular Economy Action Plan consisting of 54 actions announced in 2015, and the main emphasis here is that the economy can grow independently without increasing the use of resources and that the circular economy should be a mainstream model.

When this action plan was published, the entire world had just met with Covid-19. The effects of Covid-19 once again revealed the importance of the concept of sustainability. The supply chains that were broken with the pandemic revealed the redundancy of transporting materials over long distances. By re-evaluating their internal resources, countries will be able to contribute to the use of resources and the reduction of emissions from transportation.

Will the transition to the circular economy be achieved in a brief time? Of course not. Time and resources are needed for changing consumption habits, redesigning production systems in a way that emphasizes circularity, improving waste separation and collection mechanisms, recycling infrastructure, conducting R&D activities to discover alternative uses of materials, and creating innovative business models based on common sharing.

The mechanisms that will provide this resource need are diversifying day by day. European Union funds, other global aids, advantageous instruments created by financial institutions with sustainable approaches, asset management funds, and the advantages of expanding green public procurement are the main driving forces in accelerating the transition to the circular economy. These driving forces are discussed in more detail below.

The European Union seems to have taken the most important initiative at this stage to accelerate the transition to a circular economy. The Union supports the stakeholders who intend to carry out research or invest in this field through different programs such as the European Structural and Investment Funds, Horizon EUROPE, and the LIFE Programme.[2]

Horizon Europe is the biggest EU (European Union) Research and Innovation Programme ever with a budget of €95.5 billion. The second phase of this research and innovation funding programme runs from 2021 until 2027. It tackles climate change, helps to achieve the UN’s Sustainable Development Goals, and boosts the EU’s competitiveness and growth. According to the previous Horizon 2020 Program evaluation report, 84% of the investments were allocated to Sustainable Development Goals. There will be a similar resource priority in the new period.

There are five main mission areas of the Horizon Europe Program. These are 1. Adaptation to climate change, 2. Cancer, 3. Healthy oceans, seas, coastal & inland waters, 4. Climate-neutral & smart cities, and 5. Soil health & food exists. Although all these topics are related to the circular economy approach in some way, there are concrete opportunities for intervention regarding the circular economy, especially under missions 1, 4, and 5.

For example, within the scope of the Horizon EUROPE Programme, the call for proposal named “Circular-by-design bio-based materials to improve the circularity of complex structures” is currently open and accepts applications until September 22, 2022.

Another tool for the financing of the circular economy in the EU is the Regional Policy Support. These supports can contribute to more recycling, improved waste management, resource, and energy efficiency, strengthening the bioeconomy, novel solutions in product design, new business models, and the creation of green jobs. Especially The European Regional Development Fund and the Cohesion Fund support investments for a greener, low carbon transitioning toward a net zero carbon economy.

The LIFE Programme is another EU funding instrument for the environment and climate action created in 1992. The current funding period 2021-2027 has a budget of €5.4 billion. It has four sub-programmes and one of them is Circular economy and quality of life. This sub-programme aims at facilitating the transition toward a sustainable, circular, toxic-free, energy-efficient, and climate-resilient economy and at protecting, restoring, and improving the quality of the environment, either through direct interventions or by supporting the integration of those objectives in other policies The LIFE Programme provides mostly action grants for projects implementing innovative and best practice solutions in these areas through the so-called Standard Action Projects (SAP). It also covers the implementation, monitoring, and evaluation of EU environmental policy and law through the so-called Strategic Integrated Projects (SIPs).

There are also funding opportunities under the Single Market Programme of the EU. Especially the projects on food safety make up 41% of the total budget. The call for “Grants for stakeholders to improve measurement of food waste and help implement food waste prevention in their operations and organizations,” which is open these days, offers investment opportunities, especially in the management of food waste.

The financing alternatives of the circular economy are not limited to project-based grants. Financial institutions also play a key role in the realization of sustainable investments. In the new business models that will emerge with the circular economy, innovative instruments, accurate risk measurement mechanisms, and effective management of resources are needed, and solutions for these are increasing day by day in finance. The world of finance has now begun to move beyond the traditional view of shareholder value maximisation. Not only profit maximisation but also social and environmental impacts are being considered with a holistic perspective when evaluating projects.

From the beginning of the 1980s to the end of the 1990s, the most frequently mentioned concepts in the financial world were portfolio investment, cost economy, corporate governance, reputation, and profitability, while in the last 5 years, concepts such as impact investment, climate finance, green bonds, sustainability, social investment, ethical investment, and responsible finance are being discussed increasingly.

Stakeholders can use various financial instruments to accelerate the transition to a circular economy. Most commons are:

• Green Credits: It is a credit mechanism designed to provide funding for projects under the headings of energy efficiency and reduction of carbon emissions. Example: World Bank's 212.5 Green Loan to Vietnam VPBank
• Green Exchanges: These are exchanges designed for investors who want to invest only in the shares of environmentally friendly companies. Example: Luxembourg Green Exchange
• Green Bonds: Some or all the proceeds are transferred to finance newly developed or already existing green projects. For example: TSKB Green Bond Issuance in 2016, 300 million USD, (The Demand was 14 times)
• Social Bonds: These are the bonds issued to find solutions to social and humanitarian problems and to raise funds for the projects to be developed. It is closely related to impact investing. For example: Starbucks provided support to farmers by exporting a social bond in 2016[3]

As the climate bank of Europe, The European Investment Bank (EIB) is one of the major financial bodies providing finance and advice for circular economy projects through the European Fund for Strategic Investments and the “EU Finance for Innovators” (InnovFin) Programme. EIB is supporting the transition to a circular economy, particularly in Europe, and in other parts of the world. It has lending opportunities for projects focusing on recycling and the recovery of waste and by-products in various sectors to increase lending to innovative circular economy projects aimed at systematically designing out waste, extending the life of assets, and closing material loops. The EIB also offers circular economy advisory services, and is active in networking, sharing best practices, connecting stakeholders, and facilitating access to finance for circular economy projects. They have financed circular economy investments in many projects in many sectors with more than a 2,4 Billion Euro budget.[4]

Another financial institution, The European Bank for Reconstruction and Development (EBRD) is also sharing at least 50% of its business volume with the green economy. They are providing credit support, technical assistance, awareness-raising activities, and disseminating best practices. To address barriers to the transition to a circular economy, they are launching a new programme, called the “Circular Economy Regional Initiative,” in Turkey and the Western Balkans. The programme will support investments in the private sector, particularly small and medium-sized enterprises (SMEs), to implement innovative and resource-efficient technologies and adopt circular business models. The Global Environmental Facility (GEF) is also funding the programme with US$ 13.76 million, which will be blended with EBRD finance of approximately US$ 140 million.[5]

Circular economy investments are of interest also to large wealth management companies as well as state and financial institutions. According to a study by the Ellen MacArthur Foundation, the annual issuance of corporate and sovereign bonds with a circular economy focus increased 5-fold between December 2019 and December 2021, with at least 40 bonds issued in the last three years. [6]

For example, BlackRock, one of the world's largest wealth management companies, manages a fund called BlackRock Circular Economy Fund. The Fund, with a total size of approximately $1.9 trillion, invests at least 80% of its total assets in the equity securities of companies globally that benefit from, or contribute to, the advancement of the “Circular Economy”. In normal market conditions, the Fund will invest in a portfolio of equity securities of companies that are rated by their ability to manage the risks and opportunities associated with the Circular Economy and on their environmental, social, and governance (ESG) risk and opportunity credentials.[7]

Another crucial tool in accelerating the transition to the circular economy is green public procurement (GPP) which is a process whereby public authorities seek to procure goods, services and works with a reduced environmental impact throughout their life cycle when compared to goods, services and works with the same primary function that would otherwise be procured. Public authorities spend approximately 1.8 trillion euros annually, representing around 14 % of the EU’s gross domestic product. By using their purchasing power to choose goods and services with lower impacts on the environment, they can make an important contribution to sustainable consumption and production.[8]

With green public procurement, the public authority can put pressure on the environmental issues it aims to achieve through purchases, increase awareness on the subject, develop the infrastructure of the contractors for sustainable solutions, and prepare a suitable ground for the financing of innovative practices in this regard. However, reasons such as the lack of sufficient political support, the perception that green products will be more expensive, and the lack of evaluation criteria for which products can be more environmentally friendly stand out as the issues that GPP should deal with in the short term. Today, 23 European countries have announced their National Action Plans regarding the GPP and have started to develop their implementation infrastructures within the framework of the EU Public Procurement Directive 2014/24/EU.

As a result, when we are pushing the limits of the planet, the importance of the circular economy model is increasing day by day, which will radically change our consumption habits, reduce the dependence of production systems on raw materials, increase the material life, and provide a product cycle from cradle to cradle, not from cradle to grave. Many policy documents, especially in Europe, have been developed in this regard, and governments, NGOs (non-governmental organizations), and private sector actors are making efforts to accelerate the transition. Various resources can be used for the transition to the circular economy model, both in the public sector and in for-profit enterprises. These are not only possible with the grant mechanism, but also with the attractive funding tools offered by the financial sector. Since the cost of delaying the investments necessary for the transition to the world will always be higher than the investment itself, it is for the benefit of the whole planet that all actors should act as soon as possible.

[1]https://www.overshootday.org/

[2]https://circulareconomy.europa.eu/platform/en/financing-circular-economy#:~:text=Financing%20the%20circular%20economy%20The%20European%20Union%20is,an%20overview%20of%20funding%20programmes%20at%20EU%20level

[3] Seda C, Sürdürülebilir Finans Mekanizmaları, Araçları ve Sürdürülebilir Kalkınma İlişkisi, 2021

[4]https://www.eib.org/attachments/thematic/circular_economy_guide_en.pdf

[5]https://www.ebrd.com/news/2021/ebrd-launches-first-circulareconomy-programme.html

[6]https://ellenmacarthurfoundation.org/topics/finance/overview

[7]https://ellenmacarthurfoundation.org/circular-examples/the-worlds-largest-investor-embraces-the-circular-economy-blackrock

[8]https://ec.europa.eu/environment/gpp/what_en.htm