Refining MMC’s approach to Circular Economy investment

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30.07.20

It’s been more than a year since we launched the Greater London Fund, backed by the Mayor of London, and partly dedicated to supporting the London Circular Economy ecosystem. Over the past 12 months, we’ve worked to refine and deepen our approach. Below we share our learnings and outline the key themes we are exploring.


Unlike traditional linear models, which follow the ‘take, make, break’ approach, in a circular economy:

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waste is minimised and the greatest value is obtained from resources for as long as possible.

Our motivations to participate in the Circular Economy remain unchanged— we see it as both an economic opportunity and a moral imperative. As outlined in our first article on the topic, circular business models should grow in adoption due to three major (and inter-related) factors:

Taken together the above factors yield an attractive financial opportunity.

In financial terms, the current linear economic model is resulting in more than trillion dollars being wasted (Ellen MacArthur Foundation). In London alone, the London Waste and Recycling Board estimates that the transition to a circular economy could release as much as £7bn in net benefits annually by 2036. This suggests circular businesses can benefit from both a new greenfield opportunity (utilising value that is being wasted today) and the ability to capture market share from existing businesses due to the shift in consumer preferences and behaviours.

Accelerating the transition to circular economy

As we’ve discussed previously, we see the circular economy as broader than just recycling — it is a cross-cutting theme that touches virtually all sectors of the economy. Hence, when assessing circular opportunities we are guided by Accenture’s five circular business models: 1) circular supplies, 2) resource recovery, 3) product life extension, 4) sharing platforms, and 5) product-as-a-service.

Over the past year, we were able to further sharpen our approach. Our experience suggests that achieving large-scale impact requires a more wholistic transition to new economic models. If investors were to focus only on businesses with a directly-circular product or service, the transition would be slower and possibly have a reduced impact.

Technology and financial capital are key to unlocking this larger opportunity:

We look to support all types of participation in the circular economy

Most sectors have complex value chains where migration to a more circular model requires change from multiple participants. Thus, in addition to the companies directly employing a circular model, other businesses support that value chain or provide key components that allow the creation and wider adoption of those models.

We believe this is best summed up in the matrix below (the examples are from MMC’s past and present portfolio). Essentially, we are interested in three broad categories of businesses: 1) those employing circular business models, 2) those participating in the circular value chains (e.g. waste reduction), and 3) those enabling and accelerating adoption (e.g. enabling technologies such as computer vision).

Some businesses provide multiple parts of the chains. For example, our portfolio company, Qflow, (1) directly increases the proportion of material waste that gets recycled in a construction site; (2) helps large construction companies to understand the flow of materials across their sites; and (3) enables a wider industry shift by creating auditability and enabling new contractual arrangements.

Types of participation in the Circular Economy. Source: MMC, Accenture


Sector agnostic approach to investment but seeking to invest behind catalysts that can accelerate the transition to circular models

As emphasised above, we consider the Circular Economy to be a cross-sector theme. However, the adoption of circular business models is not homogeneous across industries. The most common factor hindering progress is the lack of sufficient economic incentive to transform. Consequently, enterprise and institutional investment in circular initiatives have not developed as rapidly as hoped.

Policy action, consumer behaviour and other externalities (e.g. Covid-19) can all serve as catalysts for change. We are focused on determining those catalysts and backing companies that benefit from the acceleration in adoption of more sustainable models. Our recent investments in the fashion and food supply chains, construction tech, and recycling tech illustrate this approach well:

Beyond investment, we are also contributors to this important movement. As a fund, we seek to catalyse support for, and participation in, the move to a circular future. We are also constantly looking for opportunities to strengthen our own ESG commitments.

If you’re an early stage company helping us move to a circular future, get in touch to see how we can accelerate your journey.