New research shows that the circular economy has a risk-mitigating effect and achieves superior risk-adjusted returns
Today, in collaboration with Bocconi University and Intesa Sanpaolo, we published a whitepaper that provides new insights that demonstrate how circular economy strategies can reduce risk and generate above-average risk-adjusted returns for investors and financial institutions.
Bocconi University’s analysis of more than 200 European listed companies from 14 industries shows that the higher the circularity of a company, the lower the risk of default and the higher the risk-adjusted returns on its stocks.
The paper shows how circular economy strategies can reduce investment risk by decoupling economic growth from resource consumption, diversifying business models, and enabling companies to better anticipate stricter regulations and changing customer preferences. Embedding the principles of the circular economy also reduces the risk of supply chain disruptions and the volatility of resource prices.
The circular economy is increasingly recognized by the financial sector as an opportunity to create value that achieves goals related to the climate and other global challenges. The paper represents a case study of a European bank and a strategic partner of the Intesa Sanpaolo Foundation, which aims to achieve better growth through:
- Setting the circular economy as a strategic priority;
- Innovate in financial products and adopt proactive credit policies and strategies for the circular economy;
- active support for the development of the circular economy market; and
- Investigation of the integration of the circular economy in risk models.
Read more about our work to finance the circular economy here.