The Opportunity of Catalytic Capital 

For 10 years, our thesis at Closed Loop Partners has remained consistent. The linear economy of materials management––characterized by extraction, single use and disposal––is inefficient. A more effective system exists: a circular economy, whereby people and businesses are custodians of materials over perpetual life cycles. The circular economy creates new value––a fundamental shift in the way society has managed resources over the last 75 years. But to sustain itself well into the future, circularity must be more profitable than the linear system. 

Closed Loop Partners saw the economic, environmental and social opportunity in circularity. It was one of the first investment firms to bring together incumbent and emerging players to collectively accelerate this transition. As the firm enters its tenth year, cross-industry stakeholder participation continues to prove its effectiveness in advancing systemic change. Today, markets are experiencing the momentum driving the acceptance and understanding of circularity. Tailwinds including technological innovation, consumer sentiment, regulatory incentives, net-zero commitments and the need for supply chain resiliency propel the current transition. As the circular economy disrupts the status quo, it also presents investment opportunities, inviting collaboration across unexpected corporate, financial, government and community stakeholders.  

The opportunity of the circular economy goes far beyond recycling. It represents full systems change, revamping each point in the supply chain: product design, logistics technology, collection capacity reprocessing and remanufacturing. Industries from consumer package goods (CPG) to food & agriculture, retail, technology, energy and the built environment stand to benefit from more efficient management of materials such as plastics & packaging, organics, textiles and critical minerals. To advance systems change across the product life cycle of different materials, different forms of financing are needed.  

Today, Closed Loop Partners manages three primary investment strategies: early-stage venture capital, buyout private equity and private credit and catalytic capital. But 10 years ago, our work started with catalytic capital, to amplify the opportunity of circularity and to crowd traditional investment into the capital gap for the transition. 10 years later, it continues to be a critical piece of the puzzle.  

Alongside traditional equity and debt solutions, catalytic capital––defined as flexible financing that prioritizes specific outcomes over prevailing market returns––can send a market signal to direct capital flows. This accelerates the uptake and scale of private businesses, municipal projects and infrastructure that are key contributors to durable, circular operations. For a decade, our catalytic investments, provided by Closed Loop Partners’s Infrastructure Group, have been connecting profit incentives with urgent environmental and social impact outcomes. Backed by global retailers, consumer package goods, technology and material science corporations and foundations such as Walmart, Unilever, Starbucks, PepsiCo, P&G, Microsoft, Keurig Dr Pepper, Kenvue (formerly Johnson & Johnson Consumer Health), Danone, Colgate-Palmolive, The Coca-Cola Company, BlueTriton, Amazon and 3M, these private credit and hybrid investments support innovations, private businesses, municipal projects, equipment upgrades and facility development.  

By deploying below-market rate and more flexible financing than would otherwise be available, the Closed Loop Infrastructure Group aims to:   

• attract follow-on capital from traditional capital markets  
• increase the quality and quantity of recycled material kept in the system 
• mitigate greenhouse gas emissions 
• create more jobs across communities  
• advance corporate strategic goals of integrating circularity into their operations.  

As early champions of catalytic capital, Closed Loop Partners has worked with an array of municipalities and private companies to accelerate the transition to a profitable and more sustainable system. 10 years in, we have seen the ability of this financing to catalyze the market, in more ways than one.  

• Catalyzing More Capital: rPlanet Earth was founded to provide high-quality recycled PET (rPET) packaging and containers to food, beverage and other CPG companies. Operating under a single roof, it is the world’s first completely vertically integrated manufacturer of multiple high rPET content products (up to 100% rPET), creating a much-needed market for the PET packaging collected from curbside recycling programs across California. rPlanet Earth is committed to providing the lowest carbon footprint packaging and products in the marketplace. In 2018, Closed Loop Partners identified the opportunity to bridge a near term capital gap and send a market signal. Our catalytic group provided a $1.5 million loan. Grants and loans from California’s Department of Resources Recycling and Recovery (CalRecycle), CAEATFA and private debt financing sources also provided alternative financing solutions. Also, one of the four largest banks in the U.S. provided a multi-million-dollar loan to finance the construction of their first facility. Together, this capital, along with substantial equity investments from two prominent funds financed rPlanet Earth’s first plant in Vernon, CA. 

• Catalyzing Growth: By 2019, Phoenix, Arizona had risen to the fifth largest metropolis in the United States, resulting in a higher volume of recyclable materials. With a $3 million investment from the Closed Loop Infrastructure Group, the City of Phoenix upgraded its North Gateway materials recovery facility (MRF) to enable greater diversion of plastics from landfill and to improve the quality of baled paper produced. The upgrade also helped to increase the overall tonnage of residential recycled materials processed and recovered by the City’s MRF by over 25% within the two years after investment. The city has established a strong reputation for its commitment to the circular economy and its zero waste plan.  
  

• Catalyzing Scale: In 2022, the Closed Loop Infrastructure Group invested in Greyparrot, a leading AI waste analytics platform for the circular economy. Their AI Waste Recognition System is deployed on moving conveyor belts in sorting facilities globally, with the mission of using AI to significantly improve recycling efficiency and increase resource recovery. Supported by funding, Greyparrot has grown to now identify over 25 billion waste objects each year, with 100+ of its Greyparrot Analyzer Units spread across more than 17 countries, and is working with three of the top eight global waste management companies.  

Our future requires an increase in material circularity and urgent climate action. Our work at Closed Loop Partners advances efficient materials management and optimized supply chains in a more profitable, more resilient circular system. There is significant opportunity to transition the over $100 trillion global economy from the incumbent linear economic system characterized by wasted resources and profit leakage, to a more efficient circular economy. The Circularity Gap Report estimates that as of 2023, just 7% of the global economy was circular. There is over 90% of the economy yet to transition across materials including paper, metal, plastic, organics, water, critical minerals and carbon itself, and across industries from CPG to fashion, from technology to transportation, energy to real estate.   

The transition to circularity presents trillions of dollars of opportunity. Catalytic capital can spark capital flows and accelerate scale, making the innovations, businesses, municipal projects and infrastructure that are critical to a profitable circular system move faster than they otherwise would. For potential collaborators––corporate, foundation, municipal finance or other institutional capital––that would like to learn more, please get in touch with our team. Join us in accelerating the transition to a market-driven circular economy and, in doing so, build a climate-positive future. 

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*This publication is for informational purposes only, and nothing contained herein constitutes an offer to sell or a solicitation of an offer to buy any interest in any investment vehicle managed by Closed Loop Partners or any company in which Closed Loop Partners or its affiliates have invested. An offer or solicitation will be made only through a final private placement memorandum, subscription agreement and other related documents with respect to a particular investment opportunity and will be subject to the terms and conditions contained in such documents, including the qualifications necessary to become an investor. Information provided reflects Closed Loop Partners’ views as of a particular time and are subject to change without notice. You should obtain relevant and specific professional advice before making any investment decision.