Visualized: The Circular Economy 101
The principles of a circular economy trace back as far as 3,000 years.
Archeological evidence shows that Romans recycled trash following the eruption of Mount Vesuvius in 79 AD. Roughly 200 years later, people recycled glass during the Byzantine Empire. Fast-forward to today and circular economy strategies are projected to generate trillions in economic output by 2030.
But how does the circular economy work? This infographic from MSCI provides a guide to circular economies—from circular business models to circular technologies.
No Time to Waste
First, let’s start at the root of the problem, our current consumption trends:
- Raw Materials: Global extraction is projected to double by 2060.
- Textiles: 85% of clothing and textiles are discarded.
- Waste: Global waste is projected to rise 70% by 2050.
- Water: 80% of global wastewater is untreated or reused before returning back to the ecosystem.
To change consumption patterns and reduce waste, consumer behaviors, business models, and policies will need to change. But the big question is how?
To answer this problem, the concept of a circular economy is gaining traction.
What Is a Circular Economy?
A circular economy is centered on the idea of resources being kept as long as possible within the economic system, where materials that have undergone an entire lifecycle, from production to end stage, are returned to the economic system as an input.
Above all else, a circular economy is based on sustainable life cycles.
Circular Economy Growth
In 2019, BlackRock launched an inaugural Circular Economy fund. Since then, it has attracted $2.1 billion in investment. A number of the world’s largest asset managers have followed suit.
Policy-driven agendas are also focused on the circular economy shift:
- Paris Climate Agreement
- UN Sustainable Development Goals (SDG 12, 11, 9, 13)
- European Green Deal Circular Economy Action Plan
- 2019 African Durban Declaration
- China’s 5-Year Circular Economy Plan
- Circular economy strategies across Latin American countries
Given the steep cost of linear economic models, governments are beginning to pay attention to the merits of a circular economy.
The Upside of a Circular Economy
Circular economy principles aligned with sustainability offer the following advantages:
- Reducing GHG emissions: 9.3 billion tonnes of CO₂e could be prevented by 2050 if circular economy strategies are applied across the steel, aluminum, cement, food, and plastic sectors.
- Preserving long-term biodiversity: ~50% decrease in harmful effects on farm-level biodiversity through applying circular strategies.
- Improving ocean health & water quality: 80% reduction in plastics entering the ocean globally by using reclamation, recycling, and reduction strategies, among others.
- Economic growth & job creation: $4.5 trillion global economic opportunity by 2030 through spurring innovation in waste reduction.
Importantly, circular strategies, technologies, and transition companies are looking beyond traditional economic models.
5 Business Models in a Circular Economy
From alternative energy to bio-based and recyclable materials, the most effective circular business models are ones that create obvious value.
Let’s consider five circular economy business models and where they can be applied in the supply chain. Additionally, some of the models can be adapted to any part of the supply chain.
|Business Model||Supply Chain Example|
|1. Circular supplies/Circular design||Product design/R&D
Procurement/raw materials acquisition
|2. Resource recovery|
(Recycle, Waste as a resource)
Material & product manufacturing
|3. Product life extension |
(Remanufacture, Resell, Upgrade)
Sales & marketing
|4. Share||Product use
Material & product manufacturing
|5. Product as a service||Logistics
Today, circular models present opportunities in fashion, food systems, mining and metals, among others.
How are Circular Economy Indexes Created?
A circular economy theme is built on two key dimensions:
1. Smarter technologies: Providing circular technologies
- Single-use plastics alternatives
- Digital technologies that replace resource-intensive products
2. Resource efficient processes: Maximizing materials and minimizing impacts (e.g. emissions)
- Improved package materials
- Efficient processes that reduce land degradation and promote diversity
Then, MSCI identifies areas of innovation that support a circular model. Consider the following circular technologies, which are produced by companies that contribute to a circular economy theme “end-state” through their products and services.
|7 Circular Technologies||Example|
|1. Renewables & energy efficiency||Replacing oil-based plastic with compostable materials
|2. Sharing economy||Peer-to-peer accommodation
|3. Future mobility||Electric vehicles
|4. Internet economy||Online markets|
|5. Water sustainability||Wastewater treatment systems|
|6. Plastic sustainability||Companies using only one type of polymer for packaging|
It also looks at circular transitions, which are companies that enable the shift to a circular economy through their management of related issues.
|3 Circular Transitions||Example|
|1. Natural resources management||Deforestation
|2. Water resources management||Smart metering devices|
|3. Plastic transition||Biodegradable plastics|
As a result MSCI has created a range of Circular Economy related indexes:
- Natural Resources Stewardship
- Sustainable Water Transition
- Plastics Transition
- Renewables & Energy Efficiency
- Sharing Economy
It’s worth noting that what is measurable today will likely only expand, considering the evolving regulatory frameworks and thinking around a circular economy,
The Value of a Circular Economy
Through looking at circular economy innovation, we yield three important insights:
- Competitive earnings
- New economic models
- Sustainable solutions
For a growing number of investors, companies, and researchers, a circular economy provides a wide scope of opportunities ranging from single-use plastics alternatives to water sustainability.
Visualizing America’s Electric Vehicle Future
The U.S. is accelerating its transition to electric vehicles but obtaining the minerals and metals required for EVs remains a challenge. In this infographic, we explore America’s transportation future.
Visualizing America’s Electric Vehicle Future
The U.S. is accelerating its transition to electric vehicles (EV) to address climate change. However, obtaining the minerals and metals required for EV batteries remains a challenge.
Then, we look at how this strategy could be fueled by domestic mining and battery recycling.
The All-Electric America
Gasoline-powered cars are one of the biggest sources of carbon pollution driving the climate crisis. As a result, the Biden Administration has set a target for EVs to make up 50% of all new car sales in the U.S. by 2030. Today, fewer than 1% of the country’s 250 million vehicles are electric.
In November 2021, Congress passed the Bipartisan Infrastructure Deal, which includes:
- Replacing the government’s 650,000 vehicle motor pool with EVs.
- Electrifying 20% of the country’s 500,000 school buses.
- Investing $7.5 billion to build out a network of 500,000 electric vehicle chargers across the country.
The idea also has popular support. According to a poll, 55% of voters in the U.S. support requiring all new cars sold in their state to be electric starting in 2030.
However, rising EV sales are already driving demand for battery metals such as nickel, lithium, and copper, threatening to trigger a shortage of these key raw materials. So, does the U.S. have the raw materials needed to meet this rising demand?
Currently, the U.S. is import-dependent with large parts of the battery supply chain captured by China. Likewise, some essential metals for EVs are currently extracted from countries that have poor labor standards and high CO2 footprints.
Nickel in the Land of Opportunity
The Biden Administration’s 100-day review of critical supply chains recommended the government should prioritize investing in nickel processing capability.
Today, the only operating nickel mine in the U.S., the Eagle Mine in Michigan, ships its concentrates abroad for refining and is scheduled to close in 2025.
To fill the supply gap, Talon Metals is developing the Tamarack Nickel Project in Minnesota, the only high-grade development-stage nickel mine in the country. Tesla has recently signed an agreement to purchase 75,000 metric tonnes of nickel in concentrate from Tamarack.
Since the development and construction of a mine can take many years, recycling is considered an essential source of raw material for EVs.
The Role of Battery Recycling
Battery recycling could meet up to 30% of nickel and 80% of cobalt usage in electric vehicles by the end of the decade.
The bipartisan $1.2 trillion infrastructure bill already sets aside $6 billion for developing battery materials processing capacity in the United States.
By 2030, the U.S. alone is projected to have more than 218,000 tonnes of EV battery manufacturing scrap and 313,000 tonnes of end-of-life EV batteries per year, presenting a massive opportunity for recycling. Currently, Li-Cycle, a leading lithium-ion battery recycler in North America, can process up to 10,000 tonnes of battery material per year—and this capacity is set to grow to up to 30,000 tonnes by the end of 2022.
Li-Cycle also has a hydrometallurgy refinement hub under construction in Rochester, New York, which will process up to the equivalent of 225,000 EV batteries annually into battery-grade lithium, nickel, and cobalt when it is operational in 2023.
America’s Electric Vehicle Future
The auto industry’s future “is electric, and there’s no turning back,” according to President Biden. It’s expected that EV sales in the U.S. will grow from around 500,000 vehicles in 2021 to over 4 million in 2030.
With rising government support and consumers embracing electric vehicles, securing the supply of the materials necessary for the EV revolution will remain a top priority for the country.
Retirement Spending: How Much Do Americans Plan to Spend Annually?
Retirement expenses can vary significantly from person to person. In this graphic, we show the range of expected retirement spending.
Americans’ Expected Annual Retirement Spending
Planning for retirement can be a daunting task. How much money will you need? What will your retirement spending look like?
It varies from person to person, based on factors like your health, outstanding expenses, and desired lifestyle. One helpful trick is to break it down into how much you estimate you’ll spend each year.
In this graphic from Personal Capital, we show the expected annual retirement spending of Americans. It’s the last in a three-part series that explores Americans’ spending and savings.
The Range of Retirement Spending
To determine how much people expect to spend, we used anonymized data from users of Personal Capital’s retirement planning tool. It’s worth noting that these users are proactive regarding financial planning. They also have a median net worth of $829,000 compared to the $122,000 median net worth of the U.S. population overall.
Here is the range of expected annual retirement spending.
|Expected Annual Retirement Spending||Percent of People|
Users are a mix of single individuals and people in a relationship. In all cases, expected retirement spending is what the household expects to spend annually.
The most commonly-cited expected spending amount is $60,000. Interestingly, this is roughly in line with what Americans spend annually on their credit cards. This suggests that people may be using their current bills to help gauge their future retirement spending.
Median spending, or the middle value when spending is ordered from lowest to highest, falls at $70,000. However, average spending is a fair amount higher at $100,000. This is because the average is calculated by adding up all the expected retirement spending amounts and dividing by the total number of users. Higher expected spending amounts, some in excess of $300,000 per year, skew the average calculation upwards.
Of course, given their higher net worth, it’s perhaps not surprising that many Personal Capital users expect to spend larger amounts in retirement. How does this compare to the general population? According to the Bureau of Labor Statistics, Americans age 65 and older spend about $48,000 per year on average.
Chances of Retirement Success
Once you’ve determined how much you’ll spend in retirement, your next step may be to wonder if your savings are on track. Based on an assessment of Personal Capital retirement planner users, here is the breakdown of people’s chance of success.
The good news: more than half of people have an 80% or better chance of meeting their retirement spending goals. This means they have sufficient financial assets and are contributing enough, regularly enough, to meet their expected spending amount. The not so good news: one in five people has a less than 50% chance of meeting their goals.
This problem is even more troublesome in the overall U.S. population. Only 50% of people have a retirement account, and the Center for Retirement Research at Boston College estimates half of today’s workers are unprepared for retirement.
Setting Your Own Retirement Spending Goals
While seeing the goals of others is a starting point, your annual retirement spending will be very specific to you. Not sure where to start?
Financial planners typically recommend that you should plan on needing 70-80% of your pre-retirement income in retirement. This is because people generally no longer have certain expenses, such as commuting or childcare costs, when they retire. However, keep in mind your expenses could be higher if you still have a mortgage, encounter unforeseen medical expenses, or want to splurge on things like travel when you retire.
It requires some upfront planning, but being realistic about your retirement spending can give you confidence in your financial future.
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