Industrial waste - Circular economy
Industrial waste - Circular economy
Business Model Description
Private Equity Fund for the financing of circular economy companies in Uruguay based on the generation of several projects from the Biovalor Program and the existing guarantee and incentive instruments for the sector.
Expected Impact
Development of industrial processes with circular economy will reduce the environmental footprint of production material contributing to a sustainable matrix.
How is this information gathered?
Investment opportunities with potential to contribute to sustainable development are based on country-level SDG Investor Maps.
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Country & Regions
- Uruguay: Countrywide
Sector Classification
Infrastructure
Development need
National growth requires diversification of its productive matrix to ensure its long-term stability. The case of the national industrial sector shows little dynamism and low technological incorporation as it is strongly linked to primary base production.
Policy priority
From the recently created Ministry of the Environment and further back from the Ministry of Livestock, Agriculture and Fisheries, the Uruguayan state has built a regulatory framework that incorporates environmental policies from: climate policy, energy policy of sustainable agricultural production and waste policy (Law 19,829).
Gender inequalities and marginalization issues
Industry is a sector with a low participation of female employment in general terms, although there is heterogeneity in figures depending on the subgroups. As an example, the construction industry (9%) and clothing (62%).
Investment opportunities
Goals of waste reduction, added to the 2025 goals of the NDC and in a broader sense, the policies of sustainable agricultural production and energy policies, constitute a propitious framework of action and ensure a market for the development of circular economy companies. These companies require significant investments to increase their productivity and efficiency.
Key bottlenecks introduction
New companies have limited access to credit and especially start up or ventures with high levels of innovation.
Waste Management
Development need
Uruguay has very low recycling rates (4%), a very low figure compared to countries in the region. A starting point that requires a significant effort to reach the goal of 30% recycling rates by 2025.
Policy priority
There is a National Climate Change Plan. Commitments in the NDC to reduce CO2 emissions with respect to GDP: sustainable agricultural production policies, policy to encourage renewable energy and an ambitious waste policy.
Investment opportunities introduction
the background of the Biovalor Project, added to the PAGE Program and more recently to the Circular Opportunities Program demonstrates the significant increase and weight of these activities as a way of consolidating the sustainable objectives defined for the various sectors of the country in the medium term.
Key bottlenecks introduction
Profitability conditions, lack of control and policies aimed at setting incentives aligned with the development of circular economy activities.
Waste Management
Pipeline Opportunity
Industrial waste - Circular economy
Private Equity Fund for the financing of circular economy companies in Uruguay based on the generation of several projects from the Biovalor Program and the existing guarantee and incentive instruments for the sector.
Business Case
Market Size and Environment
< USD 50 million
It is feasible to estimate an investment market of at least 10 times that of Biovalor's demonstration projects (USD 25. mill). An amount that also makes viable public investment structures in the capital market.
Indicative Return
10% - 15%
The returns in the case of a fund are associated with the possibilities of capturing increases in the value of the shares and a conservative scenario is assumed regarding the profitability of the companies. Based on the balance sheet study of companies such as Compost, ROE of 18% is recorded. Industrial companies present average returns of around 10% - 15%.
Investment Timeframe
Medium Term (5–10 years)
Acceptable term for the development of capitalization strategies in equity funds.
Ticket Size
USD 1 million - USD 10 million
Market Risks & Scale Obstacles
Business - Business Model Unproven
Impact Case
Sustainable Development Need
The Uruguayan industry must enter into circular productive dynamics as the axis for the reduction of CO2 emissions in the material production processes (it is estimated that circular processes allow a potential reduction of 40%).
Uruguay has a very low recycling rate together with a low circularity of waste. Losing the ability to revalue waste and re-enters nutrients into the soil.
It is possible as necessary to reconvert recycling workers through the creation of green jobs, new jobs from the creation of new companies.
In particular, in the case of agricultural activities, they have a very low rate of waste reuse (dairy, forestry, sawmills) and a great capacity to adapt their business models.
Gender & Marginalisation
Especially the action on waste treatment has an impact on a group of the marginalized population that is associated with related activities.
Circularity in production processes ends up impacting the improvement of river and stream basins, as well as the health of many of the territories in which the lowest-income inhabitants live and where the largest number of boys and girls also live.
Work for rural populations.
Expected Development Outcome
Reduction in the emission of CO2 in key industries.
Decrease in the amount of agroindustrial waste generated
Creation of new jobs and fall in unemployment levels.
Incorporation of waste reuse processes in production chains of the agricultural sector.
Gender & Marginalisation
Improvement in the sanitary conditions of the inhabited river basins and streams.
Improvement in the living conditions of vulnerable populations in activities related to urban recycling.
Improvement in the living conditions of rural populations linked to polluting agricultural activities.
Primary SDGs addressed
12.2.1 Material footprint, material footprint per capita, and material footprint per GDP
12.5.1 National recycling rate, tons of material recycled
Material Footprint (2016) = 867 kg per USD of GDP, according to OECD. Currently the recycling rate is 5% according to DINAMA.
Reduce approximately 5% per year. Recycling rate increase to 20% in the next 3 years.
9.2.2 Manufacturing employment as a proportion of total employment
Jobs held in the water collection, treatment and supply industry. Collection, treatment and disposal of waste, recovery of materials (7,931 in 2019).
Annual increase of 10%.
8.4.1 Material footprint, material footprint per capita, and material footprint per GDP
Material Footprint (2016) = 867 kg per USD of GDP. This indicator is not broken down by sector of activity.
Secondary SDGs addressed
Directly impacted stakeholders
People
Gender inequality and/or marginalization
Planet
Corporates
Public sector
Indirectly impacted stakeholders
People
Planet
Public sector
Outcome Risks
Changes in market conditions that make it possible to advance in the decarbonization agenda, such as the elimination of state subsidies or disincentives to innovation. Probability Null Case Events.
Lack of control and incentives that promote recycling or reward circular processes in companies
Crisis at national and regional level.
Impact Risks
Economic conditions that do not enable profitability in waste reuse processes.
Impact Classification
What
Financing of industrial waste reuse processes or investment in circular economy companies.
Who
Companies and projects in logic industries with the circular economy.
Risk
Non-existence of profitability conditions or business viability
Impact Thesis
Development of industrial processes with circular economy will reduce the environmental footprint of production material contributing to a sustainable matrix.
Enabling Environment
Policy Environment
National Climate Change Policy. National Waste Management Plan. Action Plan for the Protection of the Environmental Quality of the Santa Lucía River Basin. National Bioeconomy Strategy. Circular Economy Action Plan
Demanding NDC with a 49% reduction goal in GHG emissions.
Livestock and climate project.
Biovalue Project.
PAGE: Alliance for Action towards a Green Economy.
Financial Environment
Financial Incentives: interest on the part of investors in Private Equity as well as in credits in participating actively in the development of this activity.
Tax: exemptions for investments in circular economy.
Others: Biovalor Project, studied feasibility conditions of some projects and generated investment pipeline that needs financing.
Regulatory Environment
Law of Plastic Bags (Law 19,655).
Comprehensive Waste Management Law (Law 19,829). Resolution of ma 271/021 (of May 3, 2021), regarding the management of packaging. Resolution of ma 272/021 (of May 3, 2021), regarding single-use plastics.
Marketplace Participants
Private Sector
New or existing companies and industries that incorporate new projects.
Government
Linked with tax incentives and state guarantee systems for up to 70% of the capital.
Multilaterals
Participate in the financing of the fund and even provide guarantees. UN with technical assistance through the UNIDO agency. GEF Funds or Green Fund for Climate may complement assistance
Target Locations
Uruguay: Countrywide
References
- (1) Ministry of Industry, Energy and Mining; Circular Economy and Climate Change. Contribution from Uruguay through the recovery of waste. The Biovalor project; (2020). MIEM-MA-MGAP-UNIDO-GEF. Uruguay
- (2) Law 18,597 on the Efficient Use of Energy: https://www.impo.com.uy/bases/leyes/18597-2009
- (3) Set of laws and decrees regarding sustainable agricultural production policies: https://www.gub.uy/ministerio-ganaderia-agricultura-pesca/sostenibilidad-ambiental-social
- (4) Comprehensive Waste Management Law: https://www.impo.com.uy/bases/leyes/19829-2019
- (5) https://uruguaycircular.org/previous-editions/
- (6) https://www.un-page.org/Uruguay%20country
- (7) https://uruguaycircular.org/previous-editions/
- (8) http://oportunidadescirculares.org/edition-2020/