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Positive Circular Economy in Asset Management

If you’re an experienced investor, then you’re probably familiar with the idea of a circular economy. For a quick refresher, a circular economy is an industrial system that’s made with the intention of renewable and restorative design throughout the entire economy. While this is a promising construct, investors can be hesitant because they want to know what this theory looks like in everyday practice.

Cut the Electronic Waste

We can look at the technology sector for an example of this, instead of businesses using the policy of planned obsolescence, where end products are deliberately made to become useless by a certain time period, they would focus on more sustainable methods by tapping into the opportunities presented with electronic device recycling.

Examples of this is Microsoft’s Authorized Refurbisher Program, where the business encourages reusing hardware by offering cheaper software licenses for refurbished computers that have Windows pre-installed. This helps close the gap in recycling plastic materials and prevents down cycling, which is when the recycled material loses value with each reuse. Another benefit is that this reduces the need for virgin feedstock as we work towards 100 percent circularity.

Altering Fast Fashion

While textiles are essential to everyday life, the industry is a top contributor to pollution. There has been a major shift in the digital retail world, with an unprecedented upswing in organizations and consumers turning to online marketplaces to find a second life. Not only does this practice provide an additional stream of income, it also decreases the environmental footprint. Like the electronic sector, this avoids the issue of down cycling where the surplus which could contain a mix of synthetic fibers is thrown away to waste.

An example of an industry leader that uses the latest knowledge and research to lead the way is Adidas. The brand is introducing a new circular business model to improve sustainability with its Three Loop Strategy, which focuses on extending the use of recycled materials and bringing the negative effects on the environment to a minimum. As of last year, 50% of the polyester for Adidas’ items were recycled, with a goal of eliminating the virgin synthetic material by 2024. This could evolve into using more sustainable materials that don’t require the use of hazardous chemicals.

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