Singapore-based venture capital firm Circulate Capital has made the first close of its debut investment fund aimed at tackling Asia’s ocean plastic crisis at $106 million.
Called the Circulate Capital Ocean Fund (CCOF), the fund’s investors include PepsiCo, Procter & Gamble, Dow, Danone, Unilever, The Coca-Cola Company and Chevron Phillips Chemical Company. All of its limited partners (LPs) are currently from the US and Europe, primarily from the fast-moving consumer goods (FMCG) and packaging industry.
According to one source close to the deal, Circulate Capital is targeting a $150-million corpus for the fund and has been actively speaking with Asian institutional investors and family offices to raise capital. Circulate declined to comment on its fundraising efforts.
In a statement, Circulate Capital said the fund will provide both debt and equity financing to waste management, recycling, and circular economy startups and SMEs in South and Southeast Asia. It added that deal flow has been strong, with over 200 investment opportunities already identified in India, Indonesia, Vietnam, Thailand and the Philippines.
Circulate plans to invest between $2 million and $10 million in about 20-25 companies, with scope for follow-on rounds. The fund is targeting an internal rate of return (IRR) of 5 per cent.
Circulate Capital CEO Rob Kaplan said that the fund is also in the midst of developing its own financial metrics and standards for impact investing in ocean plastic. These will eventually be made publicly available as guidelines for other potential investors.
The launch of the fund comes as governments in Asia are showing greater commitment towards green investments and sustainability.
In Singapore, the Monetary Authority of Singapore (MAS) recently earmarked $2 billion worth of capital towards green and sustainable investments. The Indonesian government is committing to reduce marine plastic waste by 2025, while the Vietnamese government wants to end the use of single-use plastic by the same year.
“This is why we are here in Singapore – a strategic hub of Southeast Asia – to prove that investing in this sector is scalable for the region and can generate competitive returns while moving closer to solving the ocean plastic crisis,” said Kaplan.
A report by Ocean Conservancy shows that there is a net financing gap of $28-40 per tonne for plastic collection in China, Indonesia, the Philippines, Thailand, and Vietnam – the top five ocean polluting countries in the world. Asia is considered the biggest source of ocean plastics, accounting for 60 per cent of the world’s total.
“The good news is that we are able to reduce nearly 50 per cent of the world’s plastic leakage by investing in the waste and recycling sector in Asia, and even more if we invest in innovative materials and technologies,” added Kaplan.
Circulate Capital has also partnered with a number of non-profit organizations, including Ocean Conservancy, Partnerships in Environmental Management for the Seas of East Asia (PEMSEA), and The Circulate Initiative (TCI), a non-profit organization launched in October 2019 dedicated to ending ocean plastic pollution.
Circulate also has a tie-up with USAID, a US government-linked development agency, which will see the latter finance 50 per cent for every defaulted loan provided to Circulate’s portfolio companies. This, however, is not included in the fund corpus, and simply acts as a tool to de-risk its investments.