Feb 14

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February 14, 2023 – Newsletter – Circular Economy

By Leeland Zhang Finance, Purpose of Finance No Comments

February 14, 2023 – Newsletter – Circular Economy

In this edition of Purposeful Finance:

Topic Breakdown: State of Energy Transition – Net Zero
World: Tour De Headlines
Market Updates: Deal Flow
Internships in Impact
Professional Spotlight

Topic Breakdown: State of Energy Transition – Circular Economy

What is the Circular Economy?

By definition from the United States EPA, a circular economy is one that keeps materials, products, and services in circulation for as long as possible.
It is a change to the more traditional model that follows resource mining, production, then waste. Instead, it tries to recapture waste to create new products and minimizes materials and resources to make production more resource efficient.

What industries and technologies are we focused on?

The most prevalent sectors include built environment, electronics and ICT (information and communications technology), textiles, organic and biodegradable waste, packaging and plastic, and energy among others.
Some numbers to back this up from Circular Cities Declaration managed by ICLEI Europe have it that construction and demolition activities are responsible for 30% of all waste generated in Europe. Europe also has the capacity to collect and reuse 90 million tonnes of biowaste, a 300% increase from the current 30 million tonnes.

Still a bit vague…how about some specific examples?

Enerkem is a Canadian energy technology company that extracts carbon from trash that can’t be recycled. Through a complicated process, the company is able to mostly turn that carbon into gas which can be used to make biofuels. One of the company’s city projects, Edmonton, now reuses an astonishing 90% of its waste.
Leigh Technologies turns old tyres and other rubber parts into micronized rubber powder, able to be reproduced into plastics, asphalt, and construction material, winning Leigh Technologies the Award for Circular Economy SME.
Winnow Solutions is a British startup that uses AI and smart meter technology to reduce waste in commercial kitchens. The company has claimed to be able to eliminate $25 million of food waste every year, and has earned the Circular Economy Tech Disruptor award.

How important is it really?

The most obvious outcome is environmental production. Circular economies reduce emissions, minimize consumption of limited natural resources, and generate less waste.
What is often missed is that underserved communities are disproportionately impacted by the negative environmental and health impacts caused by non-circular economies. Landfills and manufacturing facilities are in close proximity to low-income communities, and circular economies can help create safer jobs, and healthier communities.
According to the CGR (Circularity Gap Report), only 8.6% of our world economy is circular, an actual decrease from the 9.1% measured two years earlier in 2020.

More about the CGR, the best circular resource?

CGRi, or Circularity Gap Report Initiative, was founded and published their first Circularity Gap Report in 2018 during the World Forum in Davos.
The initiative uses input from cross-sector shareholders from academia, businesses, NGOs and governments to evaluate and endorse the authoritative annual report.
The report not only identifies issues within uncircular global economics, but also provides solutions including a set of 21 circular strategies for the global economy. CGRi also publishes separate country reports, having touched on Norway, Netherlands, Austria, Scotland, Ireland, and Canada, providing these countries methods to slash emissions and improve their circularity rate.

How does it operate?

You can read their full methodology report here. To summarize, the circularity index is measured primarily the net trade balance of cycled materials, recycled waste, and raw material consumption. These are individually broken down into national supply, national use, and auxiliary accounts.
The core data of supply and use of waste from packaging, machinery, crop residue, emissions, and other related data come from the EXIOBASE3 dataset, a dataset containing 43 nations, 164 industries, 39 resources and 66 emissions categories.
The scientific methodology itself is made in collaboration with many academic and research institutions such as the World Resource Institute (WRI), The Netherlands Organisation for Applied Scientific Research (TNO), Institute of Environmental Sciences at the University of Leiden (CML), Doughnut Economics Action Lab (DEAL), among many others.

World: Tour De Headlines

WEF launches initiative to unlock $3 trillion for climate and nature; UNEP & S&P launch nature risk profile methodology; Fidelity pledges $250 million to support minority students; UN Chief urges “credible” net zero pledges or risk greenwashing; King Charles redirects £1 billion wind farm profits towards “public good”; NASA to invest $425 million to Boeing; Schnitzer Steel named most sustainable company in by Corporate Knights; NextEnergy Capital launches $1.5 billion solar fund; Danone announces plan to reduce emissions; Benjamin Huang appointed Head of Sustainability at Fonda Global; Aussie climate fintech Bloom raises $525,000; and €240 million financing secured by Power Capital Renewable Energy. (ESGNews)
Eni Doubles Sustainability-Linked Bond Offering to €2 Billion. Eni S.p.A. announces that the gross annual nominal interest rate of its first sustainability-linked bond dedicated to public in Italy has been set at 4.30%. The offer of the Bond, which was initially expected to end on 3 February, was closed in advance on 20 January thanks to the high demand received from Italian investors. (ESGNews)
responsAbility Announces First Closings of Two Sustainable Food Strategies Totaling $274 Million. responsAbility Investments AG is pleased to announce the closings of its second private equity growth strategy in Asia and its first mezzanine financing strategy in Latin America. These strategies leverage on the already extensive experience of responsAbility deploying capital to target regional opportunities in globally transforming Agriculture and Food value chains. (ESGNews)

United States of America

Biden-Harris Administration Announces $490 Million to Address the Wildfire Crisis. Agriculture Secretary Tom Vilsack announced expanded efforts to reduce wildfire risk across the western U.S. These investments, made possible through President Biden’s landmark Bipartisan Infrastructure Law (BIL) and the Inflation Reduction Act (IRA), will directly protect at-risk communities and critical infrastructure across 11 additional landscapes in Arizona, California, Idaho, Nevada, Oregon, Utah and Washington. (ESGNews)
2023 marks the first time the United States has started a new calendar year with actionable climate policy on the books. The passage of the Inflation Reduction Act (IRA) in August 2022 – in conjunction with The CHIPS and Science Act – fundamentally changed the game, ensuring a minimum investment of $370 billion into climate-related programs and projects. (WhiteHouse)
According to U.S. Treasury Secretary Janet Yellen, the U.S. expected to see swifter progress with the World Bank’s evolution road map on reforming its lending capacity to address climate change. (Reuters)

Europe

King Charles Redirects £1 Billion Offshore Wind Farm Profits Towards “Public Good.” King Charles has asked for profits from a £1bn-a-year crown estate windfarm deal to be used for the “wider public good” rather than as extra funding for the monarchy. Under the taxpayer-funded sovereign grant, which is now £86.3m a year, the king receives 25% of the crown estate’s annual surplus, which includes an extra 10% for the refurbishment of Buckingham Palace. (ESGNews)
EIB Confirms €900 Million to Greece for Social Cohesion, Sustainable Urban Regeneration and Just Transition Toward Climate Neutrality. The European Investment Bank (EIB) and the Greek authorities have announced €900 million in new financing agreements that will support priority investments in high-impact, large scale projects across the country, focused on the green and digital transition. The two key agreements will help build a more competitive, innovative, and export-oriented growth model for Greece, and promote urban regeneration in local municipalities. (ESGNews)

Asia

India Identifies $4.92 Billion in Projects To Be Funded by Green Bond Sales. The Indian government expects to issue its first green bonds at a ‘greenium,’ with yields below prevailing market rates, and has identified 400 billion rupees ($4.92 billion) in projects that can be funded with the proceeds, said two government sources. (ESGNews)

Market Updates: Deal Flow

M&A/Investments

State-owned QatarEnergy in talks to acquire a 30% stake in TotalEnergies‘ $27B Iraqi energy projects (RT)

Funds Raised

NextEnergy Capital, based out of London, launched a $1.5B fund to invest in 3.5GW of installed capacity additions. (PVT)
Vision Ridge Partners, a sustainable real assets investor, raised $700M for its SAF Annex Fund (BW)
ArcLight, a middle-market sustainable infrastructure investor, closed a $407M continuation fund (PRN)
VC firm Dimension raised $350M for their oversubscribed first fund to invest in firms at the intersection of life and computer sciences (FRB)
Sony Ventures Corporation, the Tokyo-based venture capital arm of Sony, raised 26.5 billion yen ($206.2 million) for a fund focused on all stages of emerging technology companies and environmentally-focused startups.
Florida-based Govo Venture Partners debuted a new $50M VC fund to invest in government and regulatory-focused startups (BJ)

Sustainability

South Korean solar manufacturer Qcell announced a $2.5 billion investment in Georgia to spur forward domestically produced solar equipment, thanks to tax credits introduced by the Inflation Reduction Act. President Biden called it the “largest-ever” U.S. solar investment. (GreenBiz)
ONE MOTO, a London, UK-based provider of last-mile delivery EVs, raised $150m in Growth funding. (CTVC)
Boston Metal, based out of Boston after spinning out of MIT, raised $120M in funding to decarbonize steel production and make steel without coal. Steel giant ArcelorMittal led. (CNBC)
Mill, a San Bruno, CA-based startup developing a novel food waste kitchen bin, raised $100m in funding from Breakthrough Energy Ventures, Prelude Ventures, Energy Impact Partners, John Doerr, GV, and Lowercarbon Capital. (CTVC)
Outrider, a Golden, CO-based maker of autonomous electric yard trucks, raised $73m in Series C funding from Fraser McCombs Capital, ROBO Global, Presidio Ventures, NVentures, Abu Dhabi Growth Fund, B37 Ventures, Lineage Logistics, Koch Disruptive Technologies, and New Enterprise Associates. (CTVC)
Summit Nanotech, based out of Calgary, Canada, raised $50M in Series A2 funding for its lithium extraction technology. Evok Innovations and BDC Capital co-led. (PRN)

Healthcare VC

Pearl Health, a startup focused on physician enablement and risk bearing in value-based care, raised a $75M Series B ($55M in equity / $20M line of credit) led by a16z’s growth fund and Viking Global Investors (PRN)
Grey Wolf Therapeutics, a biotech company focused on generating anti-tumour immune responses, raised a $49M Series B led by Pfizer Ventures and Earlybird Venture Capital (PRN)

Affordable Housing

Online real estate business CoStar Group is in talks to acquire real estate media site Move Inc. from News Corp for ~$3B (BBG)
Gropyus, based out of Vienna, Austria, raised ~$109M in Series B funding for its prefabricated home development business. Vonovia, a German real estate company, led. (TechEU)

Catalytic Capital

The U.N. has called for $4.3 billion in funding for immediate aid for Yemen, where 21.6 million people require humanitarian assistance in 2023. (AP News)

Internships in Impact

Investment Banking

Interested in Sustainability and Renewable Energy? Have you ever heard of Clean Energy and Renewables Investment Banking?

The Purposeful Finance team has collated different industry groups within Investment Banking where you can make a positive impact in your work. Click here to get the full list of resources! (We will be adding more soon and will release an article on this soon, do share it with friends that are recruiting!)

Join Our Network!

Here’s the quick spiel: We are currently reaching out to smaller impact funds that offer internship opportunities for freshmen/sophomores. While many firms are interested, we also need to show firms that there is interest from genuinely purpose-driven students that will apply.

If you are a freshman/sophomore and you like the positions you see below, fill out this form to get direct access to passionate impact investors and companies: https://forms.gle/TEexYGphRYNeLXcz8

Open Positions

Clean Energy Transition Jobs
Pebble Legacy Partners is looking for a Remote Deal Sourcing Winter Internship – Impact Search Fund. Email athena@pebblelegacy.com with a short paragraph on why you are interested and your resume.
Stonehenge Capital is looking for a Summer Intern – Lender/Specialty Finance. Send your resume to internship@stonehengecapital.com.
University of Utah – Sorenson Impact Center is looking for a Venture Capital Student Internship – Remote
Capshift is looking for an Impact Investing Intern
CoBank is looking for an ESG Intern – Summer 2023
Franklin Energy is looking for a Sustainability Intern
Jonathan Rose Companies is looking for an Investments and Acquisition Summer Intern – New York
U.S. International Development Finance Corporation (DFC) is looking for a Mission Transaction Unit Intern
Enterprise Community Partners is looking for an Intern, Enterprise Advisors and an Intern, Investment Analyst
Sealaska is looking for a 2023 Summer Finance & Investment Intern and a 2023 Summer Community & Economic Development Intern
World Bank Group is looking for a ESG Innovation, Data Science and Impact Investment, Economic Impact and Research, and ESG Data Science Intern – Graduate Level
Jonathan Rose Companies is looking for an Investments and Acquisitions Summer Intern
APTIM is looking for an ESG Corporate Sustainability Intern and a Sustainability Intern
STERIS is looking for an ESG Intern

Professional Spotlight

The Purposeful Finance team was fortunate to sit down and speak with Aaron’s ex-boss to learn more about her career. Athena is an entrepreneur and engineer who is currently founder of Pebble Legacy Partners, a search fund aiming to buy and operate a business that’s making the world a better place.

Athena started her career at E.ON, a German multinational energy company. In 2014 she moved to East Africa where she managed the scale-up of multiple off-grid energy companies. In 2016 she founded a regional B2B waste management company in Tanzania, contributing to the building a circular economy in developing markets.

We talked about choosing an impactful career, stepping out of your comfort zone and a little about personal sacrifices. Some key takeaways include:

Understanding the spectrum of impact companies in finance and understanding where you fit on the spectrum.
Using your 20s for learning and exploring different areas of interest.
Book recommendations to learn about sustainability and impact within large corporations

Read more here. Athena’s Pebble Legacy Partners is a great place to learn and she is hiring for Spring and Summer interns. Whether you are a freshman or recent graduate, feel free to contact Athena at athena@pebblelegacy.com with a short paragraph on why you are interested in the position and your resume.

Feb 06

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Interviewing Athena Kiriacopoulou, Principal at Pebble Legacy Partners

By Justin Chow Green Investing, Purpose of Finance No Comments

Interviewing Athena Kiriacopoulou, Principal at Pebble Legacy Partners

By Justin Chow, Purposeful Finance

Q: I saw that all the previous companies you have worked for all have a very strong ESG and sustainability focus, so my question is how do you make your career decisions and choose the companies that you’re working for?

In the 2014 G8 Social Impact Investment Taskforce, Asset Allocation Working Group report, it illustrates the landscape based on both investor financial objectives and impact. Because it shows the spectrum of impact investing, the range of purely financial motives helps companies deliver impactful solutions addressing UN SDGs and this does not have to apply strictly to finance.

At Pebble Legacy Partners LLC, our search fund falls right in the middle of financial and impact. We’re an impact search fund but we are focused more on finances than just impact. If you have an impact investment fund or a nonprofit fund, these are probably going to be on the ‘far right’. When looking at career opportunities, you should spend a lot of time to decide what is important to me. The question was where I draw the line on the spectrum.

I personally believe that impact is critical, and I am never motivated to get up every morning and do a job that does not make the world a better place. I simply have no interest in working ‘the left side’ of the line just out of personal choice.

There are a lot of people, especially your colleagues, going into investment banking that lies more around the left side of the spectrum and that’s not a bad choice. Conversely, someone who is going into nonprofits might be on this same side and say, ‘I never want to go there’. Again, that is totally fine.

Understand what drives you personally and knowing that there is no judgment but instead it’s just a fact. The sooner that you accept wherever you are on the spectrum, the sooner you are going to be able to find opportunities that really motivate you.

Personal Sacrifices: Now, that’s from an impact perspective. But there is also a career perspective, and what sacrifices you’re willing to make. If you want to work around the world, and you want to move every two years, and I can tell you from experience, it’s an incredible career. But that means that you’re sacrificing other things, such as stability, routine, and the ability to really put roots down. Again, it’s neither good nor bad, just different. For some people having that stability, being able to get a mortgage on a house, build a family, place their kids through great education is a very admirable thing. And if that’s something that drives you personally, then that’s an understanding that helps you to find the boundaries.

So this is not just with impact, but much broader, and as soon as you know the things that you want out of life, then when an opportunity crosses you, it will become glaringly obvious if it fits those criteria or not. The reason that we often struggle with what jobs to take is because we’re not clear what we want.

Now, that struggle is good. But what happens when you’re 20 to 24, and you’re about to graduate college, and you know nothing about life. Looking back when I was 22, I thought I knew everything, I didn’t know anything. My advice is, if you know your money motivated at that age, great, go to investment banking, work on Wall Street, and make your top dollar. If you don’t know what you want to do. Prioritize learning over money. As a young millennial, I know this is being debated and I don’t know how applicable it is to Gen Z. But this is advice I followed.

In your 20s, go and do all the different things, explore all the different stuff. Money will come, opportunities and experience will not. It’s very easy to get stuck once you have that big salary, the opportunity costs of going and learning something or taking two years to work in Kenya is a lot bigger than if you didn’t have that job on Wall Street. There’s the prestige of working on Wall Street and private equity. And for some people, that’s what they want. And that’s great. I love that for them. But if you’re not certain, all I can say is go do the crazy things. You can always come home. And the money. It’s easy to make money. It sounds crazy. It sounds privileged. But I promise you, especially when you’re talking to your classmates at UCLA, we come from a place where it is easy to make money. Yeah. You’ll make enough to be happy.

I’ll tell you, the only things I’ve regretted in life is when I passed up on great adventures, because I thought I had a deadline due. And I was like, oh, I need to do this so that I can advance and get a promotion. Five years from now, it doesn’t matter. Nobody cares. A lot of my interns are ambitious and when I talk to them, they’re like oh gosh, I don’t have a, you know, this GPA and I only got an A minus, and I’m never going to be able to get a job. It’s like, honestly, if you’re going to Morgan Stanley, they do look at grades. And that’s one thing, but no one cares, it won’t matter. Learn. I’m not saying don’t do your homework, do your homework and learn, you won’t have an opportunity like this again. But don’t stress the grades, don’t stress the jobs.

Q: What does learn from discovering opportunities in investment firms during your early 20s?

Personal Sacrifice: Get out of your comfort zone when seeking jobs that you might not be fully qualified for. Saying yes to projects that terrify you. At the same time, be completely open and ask for help. Take those hard projects and jobs, but also ask the dumb questions, seek support, and build a network of mentorship. You are not going to grow unless you try and do something you think you can’t.

Comfort zones: View your comfort zone as a circle. It is never a static size. Your comfort zone grows every time you step out of your comfort zone and return. When you push the boundaries of your comfort, you are saying, ‘okay, I didn’t die, your comfort zone grows’. However, your comfort zone starts to shrink if you never push outside of it. This is a malleable zone that represents your entire life.

You would be filled with happiness when you get a job, do not leave the two square mile radius of your house, and go to the same restaurant every week. However, your comfort zone gets much smaller. Whereas you are constantly expanding your comfort zone if you do something that scares you every day.

Q: That is great advice, now let’s move on to talk about the circular economy and the search fund that you started: Pebble Legacy Partners?

A circular economy is one that keeps materials, products, and services in circulation for as long as possible. It is a change to the more traditional model in resource mining, production, and waste. Instead, it tries to recapture waste to create new products and minimizes materials making production more resource efficient. Under the Sustainable Materials Management (SMM) umbrella, a circular economy demonstrates continuity by reducing the negative lifecycle impacts of materials, including climate impacts, reducing the use of harmful materials, and decoupling material use from economic growth and meeting society’s needs.The circular economy has the potential to protect the environment, improve economics, and elevate social justice. Sustainability from its foundation requires social equity as the extracting, using, and disposing of resources often affect vulnerable communities disproportionately.

Source: https://www.epa.gov/recyclingstrategy/what-circular-economy

Q: What do you believe are the biggest misunderstanding of the waste infrastructures?

I believe there are two main misunderstandings that professionals have about the circular economy.

First, with a circular economy, people often think that finding a purpose for waste, asking ‘how do we divert this waste from the landfill?’ But we need a paradigm shift in our thought-process.

What I always advise my clients at Phenix Recycling is that we should stop calling it ‘waste’ and should start calling it ‘leakage’. Throughout a business’s normal operations and supply chain, you have leakages in energy, resources, and materials. Waste is a leakage and when you start to see it that way, you create a business case for going back to the design board and redesigning the waste out of the system. This mindset shift will help business processes stop leaking “waste”.

Of course, some things are inevitably going to come at the end of your supply chain. For example, if you look at a safari resort in the middle of the Serengeti National Park (a geographical region in Tanzania, Africa) that has high-end clients, they’re going to be serving a lot of wine which comes in a wine bottle. You cannot design out a wine bottle because it must be packaged, but you can design in a reusable and returnable form of the same bottle.

Source: Zero Waste Hierarchy of Highest and Best Use 8.0 | Zero Waste International Alliance

Q: What might be an example of a waste infrastructure that falls under the circular ecosystem?

In a Philadelphia bar, you can build waste infrastructure where you return the wine bottles, but the wine you are getting is probably a global product bought from Chile or France. If you already bought this bottle, you are not going to ship bottles back to its original location.

There are technical ways of designing the wine bottle, but practically, you are going to have this wine bottle on hand. In the case where this wine bottle is already given to you, there’s not much you can do other than recycle it. Recycling is not necessarily so much within a circular economy, but it should be your last ditch. That is an example where the circular economy does have a product at the end where you must recycle it.

Source: The Lifecycle of a Wine Bottle, From Sand to the Economy of Recycling | Wine Enthusiast Magazine

Within the circular economy, it’s about reframing, taking a step back, and understanding what the problem is. It’s not about tackling the result, but the whole supply chain process and how it all works together.

In biases with impact investing, a lot of people confuse Environmental, Social, and Governance (ESG), Corporate Social Responsibilities (CSR), and impact with each other. I am constantly explaining the difference that an ESG company is not necessarily an impact company.

ESG is a framework for measuring your risk, it is not an attempt to improve that. ESG is a snapshot of what we’re doing on these different things at a certain point in time. You can use that to create a strategy, but it is not inherently a strategy. It’s about understanding what value is in ESG investments.

Q: What issues are you looking at right now? What are you reading up on, and what is the newest news in this space?

My challenge now is identifying industries that fit in that part of the impact spectrum (refer to fig 1 above) and fits the search fund criteria. I have been [researching the] mapping industries to open myself up to other opportunities and industries that can create significant impact. I am trying to read about every industry to understand if it fits my criteria.

In terms of finance, you should read The Outsiders by Will Thorndike. He’s a popular search fund investor. This book is the antidote to all of Steve Jobs autobiographies that talks about unicorns, massive valuations, and the fear-of-missing-out that comes with it.

The Outsiders talks about CEOs who have been vastly successful but are not unicorn founders. Because what we’ll find is that there’s a pattern in what these other CEOs do to create huge value above and beyond their market [price]. So far, I have been enjoying this book because most of the CEOs have never ever heard of it, and they’re all humble, frugal and incredibly smart CEOs.

Two more books about impact in business. Firstly, Ice cream social: the struggle for the soul of Ben and Jerry’s, by Brad Edmondson. This book is all about impact in business. It shares about Ben and Jerry’s struggle to reconcile their social desires with business needs. Secondly, Let my people go surfing by the founder of Patagonia, Yvon Chouinard. This book is the Bible of responsible business leadership. This book talks about him struggling because he hates calling himself a businessman, but he’s the founder of the widely successful Patagonia. He believe this is not who he is, [talking more] about his values and how he runs that company.

February 2023