Asset owners spy opportunities in Asia's waste management ecosystem
The natural world is near the top of the discussion agenda at COP 28 by virtue of the emphasis King Charles III gave it in his keynote address to the conference last week.
The debate is timely for Asia because, for all the natural beauty this region has to offer, arguably the most dispiriting aspect is the amount of plastic and other waste that pollutes its oceans and waterways.
“With an estimation that 11 million metric tonnes of plastic enters the ocean every year, plastic pollution is a serious threat to not just the health of our oceans but also the livelihoods of millions of people,” said Srini Nagarajan, head of Asia at British International Investment (BII), the UK development finance institution (DFI).
BII is one of the cornerstone investors in a new fund from Singapore-based impact fund manager Circulate Capital, focused on improving waste management in South and Southeast Asia.
Waste management infrastructure across emerging Asia is often inadequate and in some cases non-existent.
“We don’t have modern municipal waste management systems in Indonesia, even in a city like Jakarta,” Irman Boyle, head of advisory at Indonesia Infrastructure Finance (IIF), told AsianInvestor.
Nor does Indonesia have a municipal bond market that could be used for infrastructure project financing. Even a state-sponsored non-bank financial institution like IIF finds it challenging to bring projects to market.
“We are trying to do waste management projects,” said Boyle. “It is a difficult one at a local government level. We have been promoting municipal waste management projects since 2019 working with city governments, but political uncertainty and government indecision have prolonged the projects.”
IFF’s role extends to educating the market, working with governments on policy and regulations.
Antony Dirga, Jakarta-based president of Tremagah Asset Management believes that before a nation can start down the road to becoming green, it must first invest in educating the public about the dangers of pollution.
“The know-how and the ethics can really only be tackled by education,” he told AsiaInvestor.
Nadiem Makarim is Indonesia’s current minister of education. Prior to entering politics in 2010, he founded Gojek, Indonesia's technology platform and motorcycle taxi and delivery app, the country’s first startup valued at over $10 billion. Makarim is also the founder of the government’s pollution education project. It is part of a program to bring a more concise curriculum into schools.
"Less is more; it allows teachers to focus on the real foundational concepts and processes of learning that truly matter,” said Makarim.
"It's a long-term issue and it goes hand-in-hand with GDP growth," said Dirga.
"When people live better, they want a higher quality of life. Including waste management, recycling and even producing carbon for carbon credits, the progress really comes when you educate the people. Otherwise it’s really a lot of effort to make very little impact.”
FOCUSED PORTFOLIO
Circulate Capital’s fund is focused on advancing the circular economy for plastics in high-growth markets. This week, it has closed the Ocean Fund I-B, bringing the fund’s total assets under management to $76 million and the firm’s total AUM to $255 million.
The $7 million commitment from BII is the fourth investment from global DFI’s following commitments from International Finance Corporation, the European Investment Bank and Singapore’s Proparco.
Circulate have already prevented about 150,000 tonnes of plastic pollution leakage, reduced or avoided GHG emissions of about 227k tonnes, and managed or recycled a total waste of about 1.2m tonnes, according to BII’s Nagarajan.
Circulate Capital first launched four years ago, backed by global brands including PepsiCo, Procter & Gamble, Dow, Chanel, Unilever and Coca-Cola.
It has since gained backing from Asian-based investors including Rumah Group, a Singapore-based family office, Eden Impact, a Singapore-based investment firm managing a private family office fund, and family-owned industrial firm Jebsen & Jessen, based primarily in Southeast Asia.
Ocean Fund I-B invests in two strategies aimed at tackling the plastic pollution crisis and fighting climate change. The first targets climate-tech investments that reduce the need for virgin plastics and limit greenhouse gas emissions across the sustainable fashion, biotech and AI, and smart materials sectors.
The second strategy targets growth investments that transform recycling and waste management supply chains in South and Southeast Asia, scaling the highest-potential solutions and replicating their success.
Commenting on the close, Rob Kaplan, CEO and founder of Circulate Capital said the firm’s climate tech strategy has so far invested in four enterprises at the forefront of climate tech and recycling infrastructure in the region.
Kaplan notes increasing interest waste management from investors but he says “the lack of a visible pipeline, evidence-based track record and intermediated investment products have led to a missing middle – a disconnect between the investment opportunities and the capital needed to resolve the plastic waste crisis.
“There is a need to create benchmarks and track records of successful investments, in order to build a stronger appetite for investor participation,” he told AsianInvestor.
This story has been updated in para 15 and 16.