Investors Enter Recycling Arena

Private-Equity Firms See Potential for Circular Economy

Investors Enter Recycling Arena

Private investors want to turn one of the largest curbside recy­clers in the U.S. into a test bed for building up infrastructure that will be vital to the success of the circular economy.

Earlier this year, a group of investors led by the Closed Loop Leadership Fund, a private investment fund managed by New York-based Closed Loop Partners, bought a majority stake in Sims Municipal Recycling. Known as SMR, the company processes roughly 600,000 tons per year of plastic, glass, metal, and paper deposited in recycling bins throughout the greater New York City area. The com­pany also collects recyclables in Florida.

The new funding is expected to help SMR expand geographically, explore new technologies in recycling, and broaden the kinds of mate­rial the company can process. Investors within Closed Loop Partners’ managed funds include major consumer brands and flexible packaging companies. Terms of the investment were not disclosed.

“It’s critical that we grow recycling infrastructure so that we can recover more materials and loop them back into packaging supply chains,” says Sergio Pupkin, chief growth and strategy officer at Sealed Air Corp., a packaging company based in Charlotte, North Carolina. “At Sealed Air, we understand that the circularity of packaging is critical for our sustainability purpose, and we are excited about the potential of this investment in partnership with Closed Loop Partners and its managed funds.”

The broad goals of a circular economy include the following: to capture packaging for recycling before it goes to an incinerator, is landfilled, or enters the environment; to expand the kinds of plastic that are recycled; to use the recycled material as feedstock for new packaging; and to explore new designs for pack­aging. Demand from consumer brands is pushing for all packaging to be recyclable and made from recycled materials over the next few years.

“The recycling landscape in America continues to be challenging,” says Jason Blake, chief sustainability officer at PepsiCo Beverages North America, one of the investors in the Closed Loop Partners’ Leadership Fund. PepsiCo con­tinues to set ambitious goals to use more recycled content in its packaging, and that requires partnerships.

“Advanced recycling technologies are a game changing-component of enabling a circular economy and achieving zero plastic waste in the environment.”

—Greg DeKunder, vice president of polyethylene marketing, NOVA Chemicals

One key to meeting those goals is an expansion of the recycling infrastructure, according to a March 2022 report co-sponsored by search giant Google and consulting firm AFARA. Total plastic production world­wide was 300 million metric tons in 2019, according to the report Closing the Plastics Circularity Gap. However, the production of recycled resins totaled 21 million metric tons from mechanical processes and 1.4 million metric tons from chemical processes. More capacity is needed for both processes, as well as for the collection and sorting of recyclable materials, the report noted.

Ideally, SMR could be a model for how innovations and investments in the right technology and capabilities can help drive an increased supply of post-consumer resin, according to NOVA Chemicals, Inc., which is based in Calgary, Alberta, and is a materials supplier to the flexible packaging industry. NOVA is among those investing in SMR.

The investment’s potential benefits included upgrad­ing plastic bales and improved recycling outcomes, says Julianne Trichtinger, industry affairs manager for NOVA Chemicals. “This stake provides the opportunity to test out new technologies and innovations that would allow better processing of currently hard-to-recycle plastics.”

The company does not expect to take any materials directly from SMR. But it hopes that lessons from SMR can help fuel the growth of high-quality post-consumer resin (PCR) more broadly, Trichtinger says. NOVA currently sells both virgin and recycled polyethylenes as separate product lines, with the recycled business grow­ing rapidly. “As the plastics circular economy grows and matures, we expect that the learnings from SMR and recycling infrastructure advancements more broadly will enable concurrent growth of high-quality PCR supply,” Trichtinger says.

Plans for Growth

With the recent capital infusion, SMR plans to develop its curbside recycling business, expand into new munic­ipalities, and delve into new materials for recycling, particularly textiles and food waste.

“Today, both organics and textiles make up a signif­icant component of materials going to landfills, and we want to change that,” says Jessica Long, managing director of Closed Loop Partners, which manages the Closed Loop Leadership Fund. She also has been named chair of the board at SMR.

New technologies, meanwhile, could boost the quality and quantity of operations at SMR’s four recy­cling facilities across the New York-New Jersey metro region and in Florida. The company employs about 300 people overall. The technologies could include artificial intelligence and robotics, which could improve sortation and reduce contamination, helping to improve the overall creation of quality bales. “We now have an exciting opportunity to combine our strong operating history with Closed Loop Partners’ extensive resources to strengthen circularity for the post-consumer municipal waste stream,” says Tom Outerbridge, president of SMR.

On the plastics front, SMR produces sorted plastics resins in the following grades: PET, HDPE-N, HDPE-C, PP, bulky plastics, and MRF film.

Another goal for Closed Loop is to develop local­ized circular supply chains. “This need is especially heightened since we’ve witnessed global supply chain disruptions in the last two years,” Long says.

Broader Efforts

The investment in SMR is part of a wider effort by Closed Loop Partners to accelerate the circular econ­omy. Closed Loop Partners, for example, also invested

in Balcones Resources, a recycling company in the southwestern U.S., as well as in specialized companies such as Retrievr. It focuses on improving the collection and recycling of electronics and textiles. HomeBiogas sells anaerobic digester units that convert food and yard waste into renewable energy and liquid fertilizer.

“We are dedicated to building a waste-free circu­lar economy, which means reducing virgin resource extraction to begin with, and avoiding landfilling materials after use,” Long says. “Ultimately, we want to keep materials in play.”

Other investors also are focusing on the circular economy. “There are many investment opportunities,” says April Crow, vice president of investor relations and external affairs for Circulate Capital, an investment firm based in Singapore.

Geographically, Circulate Capital is highly focused on opportunities in South and Southeast Asia regions with high levels of plastic waste leaking into the environ­ment, Crow says.

As for the solutions, Circulate Capital identified four promising areas with the potential to make an impact both in reducing plastic waste and in generating investor returns, Crow says. These areas of future potential include inno­vation that ensures products are designed to use recycled plastic or are made from innovative materials and are made to be recycled; increased collection and sorting to eliminate leakage into the environment, and ensuring plastic waste is cleanly sorted and processed to enable recycling; deploy­ment of upcycling technologies to increase the value of recycled products; and the application of digital tools like big data, deep tech, and artificial intelligence to drive effi­ciency, transparency, and traceability across the supply chain.

Flexible packaging is an important part of the effort to manage plastic waste, Crow says. “Currently, flexible packaging is the fastest-growing plastic packaging category, but because it is almost entirely single-use, it is one of the most difficult markets to address in the circular economy.”

In emerging markets, the challenge is compounded by a perception that flexible packaging does not have much recycling value, Crow says. “On top of this,” she says, “the ability to recycle flexible packaging without losing the material’s property is an incredibly difficult and expensive process. However, there are efforts under­way to transform this process.”

As an example, Crow cited Lucro Plastecycle Private Limited, an Indian manufacturer backed by Circulate Capital. The company specializes in recycling flexible plastics in a bid to convert them into high-quality end products, Crow says.

Helsinki, Finland-based Taaleri is another investment firm focused on the circular economy. The firm sees opportunities primarily in Europe and North America, according to director Tero Saarno. The challenge lies in identifying the right technologies that can scale up in size, he says.

On the packaging side, Taaleri targets to invest in biobased products, Saarno says. That could include food packaging made of cardboard without any plastic bar­rier film, or using bioplastics made of cellulose fibers.

A potential obstacle arises when companies try to mix traditional resins with recycled or biobased resins/plastics coming from the circular economy, Saarno says. The mixes raise aesthetic, technical, and environmental concerns. “That is one of the reasons why we want to focus only on 100% biobased production,” he says.

Flexible packaging companies also are diversifying their investments in the circular economy. NOVA Chemicals has invested in several initiatives.

Since 2020, for example, the company has been partnering with renewable fuels company Enerkem Inc. to develop technology for converting non-recyclable and non-compostable municipal waste into ethylene, a basic building block of plastics. This year, the two companies announced they are planning to build a pilot-scale reactor system to advance the commercialization of the technology.

“Advanced recycling technologies are a game changing-component of enabling a circular economy and achieving zero plastic waste in the environment,” says Greg DeKunder, vice president of polyethylene marketing at NOVA Chemicals. “This joint initiative with Enerkem further demonstrates that industry collaboration will be key to providing economically viable solutions for sustainable, circular plastic production.”

Joel Berg is a freelance writer and editor based in York, Pennsylvania.