A socially responsible plastic waste investment firm backed by global resin suppliers and consumer brands is making its first investments in Asian plastics recycling companies.
But the fund, Circulate Capital, has had to shift gears as the coronavirus has upended its business plans.
The Singapore-based investment group said April 28 that it is putting $6 million into India's Lucro Plastecycle Private Ltd. and Indonesia's PT Tridi Oasis Group to help those companies scale up.
Circulate Capital, which has $106 million under management, plans more investments later this year. It targets companies in Asia addressing plastic waste and pollution but that may lack access to capital.
Lucro, in Mumbai, specializes in difficult-to-recycle flexible plastics such as film, while Tridi Oasis is a PET bottle recycler in Jakarta, making materials for packaging and textile applications.
"Lucro and Tridi Oasis are best-in-class operators working at the forefront of plastic recycling in India and Indonesia," said Circulate CEO Rob Kaplan. "Investment in the waste and recycling sector is needed now more than ever."
The UN Environment Program, for example, has urged governments to treat waste management as an essential service to help beat COVID-19, he said.
For its part, the pandemic has forced Circulate to put more emphasis on short-term needs among Asian recycling companies, Kaplan said.
"Our focus is on deploying capital as rapidly as possible and helping companies like Tridi Oasis and Lucro to not just grow and scale, but to weather COVID-19 and grow strong businesses as we come out of the crisis," he said. "Currently our strategy is really on that short-term health."
He said Circulate is working with about 10 other companies in the due diligence phase of potential funding, after looking at more than 200 firms, and hopes to have four or five investments by the end of the year.
It aims to invest about 20-25 percent of its $106 million in its first year, even as the pandemic has elevated shorter-term emergency needs alongside capital injections for growth, Kaplan said.
"We can't invest in a pre-COVID-19 business plan, based on pre-COVID-19 assumptions," he said. "So, we are redoubling our efforts to support our portfolio and pipeline by exploring options for short-term debt to cover working capital needs and also offering leadership coaching and support.
"These companies are the best in the region and we need them to survive and thrive if we want to achieve our goals," Kaplan said.
The fund is watching how consumer behavior and purchasing patterns change and expects a surge in single-use plastics from food delivery and medical waste.
"We know this will likely result in more pollution and we also know this can be a resource for local communities," Kaplan said.
Circulate calls its funding "catalytic capital" that aims to show other, potentially larger investors that funding plastics recycling companies in Asia "can generate competitive returns, while moving to solve the ocean plastic crisis."