IFC's New Guidelines: What Circular Economy Businesses Need to Know
Issue No. 19
2025 is an Olympic runner on steroids because how are we in the middle of the year already? Q2 has been busy on my end, working on projects and things that truly make me happy and fulfilled. If you are feeling like the year went by without warning, here’s your sign to start now. The race is not always for the swift…
The World Circular Economy Forum (WCEF 2025)
WCEF 2025 emphasised the crucial role of the production sector in driving the transition toward a circular economy. Several sessions focused on this theme, including:
Accelerating the just energy transition with a responsible critical minerals lifecycle
Circular innovations for the global mobility value chain
Connecting global and regional efforts for circular trade systems
Collaborative success: Building symbiotic relationships in industry
Financing the shift to circular value chains
On the topic of finance, the International Finance Corporation (IFC) unveiled a Harmonised Circular Economy Finance Guidelines at the just-ended World Circular Economy Forum to help investors, financial institutions, and private companies identify and quantify opportunities to channel financing to projects that support a circular economy. But what implications does this hold for circular economy ventures, and how can they prepare themselves to attract investment?
5 Things Circular Economy Startups and Ventures Need to Know
Based on the Harmonised Circular Economy Finance Guidelines, businesses aiming to position themselves for investment can focus on the following five key areas:
1. Alignment with Core Circular Economy Categories
Businesses should ensure their projects, economic activities, or business models clearly align with one or more of the main circular economy activity categories outlined in the guidelines, namely: Circular Design and Production, Circular Use, or Value Recovery. Projects, services, business models, platforms, and tools that enhance these core areas qualify as Circularity Enablers. By demonstrating a clear link to these categories, businesses can establish the fundamental eligibility of their activities for circular economy finance.
2. Demonstrating Substantial Contribution to Circularity
It is crucial for businesses to show that their primary activities provide evidence of substantial contribution to circular economy objectives within the local market context. What this means is that businesses must go beyond standard practices and clearly illustrate how their activities minimise resource use, maintain the value of products and materials, or design out waste generation. Prioritising activities that design out waste, extend product life, or improve recycling and recovery can help demonstrate this substantial contribution.
3. Prove Clear Goals and Measurable Contributions
Eligible projects must clearly outline how they will achieve circular economy goals and how their contributions will be measured. Businesses should use both qualitative descriptions and quantitative indicators where possible. While standardised metrics are still developing, using indicators linked to the activity categories and tracking performance relative to benchmarks and baselines is recommended. Aligning with relevant reporting standards, such as ESRS E5 indicators on resource use and circular economy, can also support this.
4. Comply with the "Do No Significant Harm" principle and other Safeguards
A critical principle is to demonstrate that the project or activity has been designed to reasonably manage the risk of significant harm to other environmental or social objectives. This includes ensuring the activity does not negatively impact climate change mitigation or adaptation, conservation of natural capital and biodiversity, pollution prevention, or sustainable use of marine resources. Compliance with environmental, social, and governance safeguards and standards is also necessary.
5. Understand and Structure Financing for Eligibility
Businesses should understand how eligibility for circular economy finance is assessed for different financial instruments, whether it's through general-purpose corporate finance, defined use of funds, or sustainability-linked instruments. Circular economy finance instruments may include debt and equity, blended finance, investment guarantees, insurance, and financial leasing, as well as dedicated funds to finance the circular economy. Research into these structures underpins the eligibility of circular businesses to access financing.
Source: International Finance Corporation. (2025). Harmonized circular economy finance guidelines. International Finance Corporation
P.S. You made it all the way to the end of Issue 19. Here are your flowers:
