Plastic remains as one of the biggest hurdles in the path of circular economy in Europe

As European economies have flourished and developed along the last 50 years, the use of plastic has intensified enormously. According to recent estimations, plastic production has become 50 times bigger in this time period, and it is supposed to stay on growing.

While this can make sense to a certain extent since population and consumption has also increased during this period, what remains unbearable is how little is being done to switch to a more circular approach: nowadays, only 7% of the plastic produced is recycled. Furthermore, Europe is exporting part of that recycled plastic to countries like China, because the inner demand is not high enough.

Although the image of used bottles and bags can be the more visual representation of plastic waste, truth is technology has taken this problem to a whole new level. Specifically, the existence of microplastics (tiny pieces of plastic materials of less than 5mms) makes it so that a lot of the plastic we throw away is undetectable also for us: from hygiene products to clothes, many of the products we use on daily basis include almost undetectable traces of plastic, making it really hard for the average user to know the damage he is causing by using those products.

According to studies, the highest damage by plastic waste is done in the oceans. All those microplastics slowly tear apart and go down the sink to end in the waters of all around the world. For instance, rain takes microparticles of the car tires away, which finish in the sea. We have another example in the washing machines: recent evaluation suggests that around 10% of the microplastic present in the oceans comes from its use.

And why is this so important? Well, for a start, it is much easier to tackle the problem while the waste is still on land. Even when the plastic particles are already into the sewer system, it is possible to apply different filters to capture it. In this sense, the company SUEZ has developed new technology to filtrate the microplastics that pass through different plants for water treatment.

Nonetheless, the full circle of the circular economy does not close just with the increasing capability of collection. As Jean-Marc Boursier, one of Suez’s senior executives affirms, “it does not make much sense to ask people to increase their efforts on separating their waste to facilitate the recycling process when, for instance, most of the plastic collected in Europe ends up in China because the internal demand is not high enough”. “It’s a matter of political will” he adds.

European Commission is trying to take some steps in this direction. Recently, a proposal was raised to change the relation with plastic, materialized on the goal of recycling at least 90% of disposable bottles by 2025. While on paper it may seem ambitious enough, reality keeps on pushing us to make bigger efforts: it has been forecasted that by 2025 the oceans will bear a plastic waste/fish ratio will be 1:3. The time to raise awareness is falling behind, and now is the time to take actions.

Better Finance, Better World: how to make the Sustainable Development Goals more “investable” for commercial players

Today, January 24th, the Business and Sustainable Development Commission presented a  consultation version of the paper Better Finance, Better World at the World Economic Forum in Davos.

The commission has set up a taskforce to consider how to deploy blended finance more effectively and how to encourage growth in the sector. That would make the Sustainable Development Goals set by the United Nations more “investable” for commercial players.

What is blended finance?

Blended finance is  the strategic use of development finance and philanthropic funds to mobilize private capital flows to emerging and frontier markets, resulting in positive results for both investors and communities. Blended finance offers the possibility to scale up commercial financing for developing countries and to channel such financing toward investments with development impact.

In the last 5 years, the blended finance market doubled in size but is still much fragmented. In the next 3-4 years it could double again. Investments are supposed to increase and become more innovative, bespoken and less fragmented (each one with $1-10 billion of capital). Moreover, private actors’ awareness about the positive effects of blended finance is necessary to increase its potential. Benefits will come in terms of portfolio diversification and lower credit losses.

The role of financial institutions

Multilateral Development Banks (MDBs) are institutions created by a group of countries, while Development Financial Institutions (DFIs) include microfinance institutions, community development financial institution and revolving loan funds. They both play a central role in scaling up the blended finance market, providing financing and professional advising for the purpose of development.

At the moment, for every dollar, they mobilise less than $1 of private capital. This mobilisation ratio would need to more than double over the next decade in order to get the financing target. Increasing these ratios will likely shift portfolios more toward infrastructure investment and toward more stable middle-income countries. But it could also free up additional development capital for frontier, low-income countries and high additionality projects.

Potential of blended finance for developing countries

In fact, capital will not be a constraint for developing countries anymore. Instead, performance differentiation over the next decade is more likely between those developing countries that get policy and institutional mechanisms right, versus those that are slower to adapt. Developing countries that prioritise sound policies and institutional capacity can build stable project pipelines, particularly using blended finance institutions which can link these policies to sectoral strategies, investment plans and sustainability standards.

Blended finance may reveal itself as a major opportunity for the world to increase its rate of growth, deliver the Sustainable Development Goals and strengthen long-term returns for savers.

The entire paper is available at the following link and open to consultation. The Commission will welcome every feedback and input on developing the action plan until 16 March 2018 and publish the final version of the paper at the April meetings of the World Bank and International Monetary Fund.