(April 1): Singapore-based investor Circulate Capital, which invests in and finances firms that recycle plastics and create eco-friendly packaging, has raised US$220 million ($282.11 million) for a second Asia fund despite a global downturn in demand for environmental, social and governance (ESG) funds.
The first close of Circulate Capital Asia Fund II brings the firm’s total assets under management to US$480 million, said chief executive officer Rob Kaplan. The new fund is backed by Builders Vision, the family office set up by the grandson of Walmart Inc founder Sam Walton, existing corporate funders like The Coca-Cola Co and new institutional investors including the Emerging Markets Climate Action Fund, co-managed by Allianz Global Investors.
The successful raise comes after a torrid year for funds that aim to advance ESG goals, with Morningstar Inc reporting US$84 billion in net outflows from sustainable mutual funds and exchange-traded funds last year. Even so-called impact funds, which aim to do good while also generating commercial rates of return, saw US$5.7 billion in outflows last year, according to Bloomberg Intelligence.
“Financial performance and impact aren’t trade-offs and they can and should go hand-in-hand,” said Chris Wu, a vice-president of Builders Vision. “With Circulate we saw an opportunity to drive really strong risk-adjusted market rate returns and we weren’t really trying to underwrite anything less than that.”
Circulate Capital Asia Fund II will aim to raise a total of US$300 million by the end of 2026 with around 20% net internal rates of return, according to a person familiar who declined to be named, citing confidential documents. The average ticket size will be around US$15 million to US$25 million and the fund will target companies in South and Southeast Asia.
While plastics will be its main focus, it will also broaden to targets in other circular economy areas like fabrics recycling and sustainable packaging.
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When Circulate launched a more-than US$100 million fund in 2019, backed by some of the world’s biggest producers and users of plastics including Dow Inc and Chevron Phillips Chemical Co, it was riding the crest of an ESG wave. Since then, it has raised US$86 million in a parallel Asia fund from family offices around the world and US$76 million for a fund aimed at Latin America.
Circulate has leaned into its connections with companies that arguably drive much of the plastic pollution it’s trying to recycle. While some might see it as greenwashing, Kaplan insists it’s crucial for alleviating a problem that is only getting worse.
“I don’t think anyone is going to forgive a major corporation of their obligations on this topic because they invested in our fund,” said Kaplan.
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Several of the businesses it backed in its first fund aggregate and process plastic waste, gathered through informal channels like street collectors. Circulate helps fund their expansion and connection to potential buyers of recycled goods. Investees include the likes of Srichakra Polyplast Pvt Ltd and Thailand’s Union J Plus.
Uploaded by Tham Yek Lee
