Report on

Sustainable Finance
for a Circular Economy

Japan/EU Joint Workshop

G20 Resource Efficiency Dialogue 2019
10 October 2019, Tokyo (Japan)

Government of Japan
Acknowledgment: This report was prepared by Ms Annica Cochu and Mr Magnus Bengtsson (EU Contractors)
on behalf of the Environment Directorate-General of the European Commission, with acknowledgements to the
workshop’s co-chairs and speakers for their comments and contributions.

Disclaimer: The information and views set out in this report are those of the authors and do not necessarily
reflect the official opinion of the European Commission and the Ministry of Environment of Japan. The
European Commission and the Ministry of Environment of Japan do not guarantee the accuracy of the data
included in this report. Neither the European Commission, the Ministry of Environment of Japan nor any
person acting on their behalf is responsible for the use that might be made of the information contained
therein.

Luxembourg: Publications Office of the European Union, 2019

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 Report on
Sustainable Finance
for a Circular Economy

Japan/EU Joint Workshop

at the G20 Resource Efficiency Dialogue 2019
10 October 2019, 09:30-12:00, Tokyo (Japan)

Organised by
the Directorate-General for Environment of the European Commission
and
the Ministry of Environment of Japan

1
1. Introduction

Background

The G20 Resource Efficiency Dialogue 2019 and Follow up of the G20 Implementation Framework for
Actions on Marine Plastic Litter took place in Tokyo (Japan) on 8-10 October 2019.
As a contribution to the Dialogue, the Directorate-General for Environment of the European Commis-
sion and the Japanese Ministry of the Environment organised a workshop on 10 October 2019 to raise
awareness on the linkages between the circular economy and sustainable finance – two mutually
enabling policies supporting the required global transformation, as envisioned in the 2030 Agenda for
Sustainable Development and the Paris Agreement. The workshop agenda is enclosed in Annex I and
short biographies of the speakers in Annex II.
The specific aim of the workshop was to inspire circular economy practitioners to engage in the
enhancement of frameworks for sustainable finance, and to motivate sustainable finance actors to
integrate circular economy issues into the sustainable finance agenda.
In particular, the workshop addressed the following topics:
- Specific characteristics and challenges for financing circular economy activities
- Options for financial institutions to help make circular economy “investable” or “bankable”
- Existing programmes and instruments for financing circular economy activities
Speakers included representatives from governments, international organisations, the financial sector
and academia. Around 150 people attended the event, including many from the private sector.
The workshop built on results of a side event on “Sustainable finance for a circular economy” organ-
ised by the European Union and the United Nations Environment Programme Finance Initiative at the
United Nations Environment Assembly in Nairobi (Kenya) on 13 March 2019.

2
Key messages

- A shift to a circular economy is not an option but an inevitable response to a growing world popu-
lation, increasing prosperity, and limited availability of natural resources. Transitioning to a circular
economy involves great business chances and can create new employment opportunities.
- However, considerable barriers exist to a widespread adoption of more circular practices, includ-
ing economic incentives, accounting rules, and regulation that often favour conventional linear
solutions and business models.
- Governments have a crucial role to play in lowering the hurdles for a circular economy and creat-
ing a playing field that favours solutions, products, and business models that are more sustaina-
ble.
- The finance industry also has key roles to play in facilitating a shift to a circular economy. It can,
for example, provide resources for circular investments, offer insurance products suitable for cir-
cular practices, such as leasing and sharing, and develop rating systems and information disclo-
sure requirements that can help improve transparency around sustainability-related business
risks.
- Banks and other lenders and investors can also raise awareness through dialogue with clients.
They can help client companies identify various kinds of risks associated with linear models and
make them aware of the opportunities of transitioning to more circular solutions.
- Many circular economy business models have risk profiles that are hard to assess and generate
low short-term return on investment. In addition, securities are often in the form of contracts, which
banks consider riskier than physical assets. New models for risk assessment are called for.
- The finance industry has done significant work on how to assess and communicate risks related to
climate change. As a result, the industry has developed knowledge and scenario analysis tools,
and gained experience in working with natural science data. This will make it easier to address al-
so other sustainability issues, including circularity and resource-related risks, in a more holistic
manner. There are strong linkages between climate change mitigation and circular economy,
which can help to stimulate investments in circularity.
- Some, generally large companies, use green bonds to raise funding for sustainability-related
investments. However, a large share of the companies in the waste management and recycling
sector are SMEs and lack the capacity and size to issue their own bonds. The recycling industry
also suffers from an image problem that contributes to weak interest from investors.
- The transition to a circular economy requires the contribution of all groups in society. Business
innovation, regulatory reforms, and lifestyle changes need to go hand in hand. Widespread
awareness on the need for such a transition, and on the roles of various actors, is essential.

3
2. Summary of workshop

The meeting was co-chaired by Mr. Yasuharu Ueda, Deputy Director General, Ministry of Environ-
ment, Japan and Ms. Astrid Schomaker, Director for Global Sustainable Development, Directorate-
General for Environment, European Commission.

Introductory speeches

Mr. Yasuharu Ueda, Deputy Director General, Ministry of Environment, Japan

- The Ministry of Environment of Japan (MOEJ) gives high priority
to circular economy, or sound material cycle society and the 3Rs
(reduce, reuse, recycle) because it can create new opportunities for
both employment and business.
- Japan, as a resource scarce country, has developed advanced
systems for waste reduction and management, source separation,
energy recovery, and material recycling. Japan’s resource intensity
has improved by 60% since the year 2000 and the volume of landfill
disposal has decreased by 80% over the same period. This has
been possible through cooperation between citizen, local govern-
ments, businesses, and the national government.
- While innovation by the private sector plays an essential role for
a transition to a circular economy, the government can facilitate this shift. For example, the MOEJ
is providing subsidies to the equivalent of almost 93 million USD to support companies in plastic
recycling.
- ESG (environment, social and governance) investments are increasing in Japan, including
through the investments of the Japan Pension Fund - the world’s largest institutional investor. Sim-
ilarly, the green bond market has grown by a factor 7 over the past two years. The government of
Japan seeks to stimulate this trend further through a number of initiatives.
o In 2019, the MOEJ and the finance industry established an ESG finance high-level panel.
o A report on integrated sustainability assessment of companies was recently developed.
o The summit meeting of the Task Force on Climate-related Financial Disclosures (TCFD)
took place recently in Japan. Currently, 199 Japanese companies support the TCFD guide-
lines. The MOEJ has issued guidance for companies on scenario assessment, which are
aligned with the TCFD recommendations. An information disclosure platform is under devel-
opment.
o MOEJ offers support for the issuance of green bonds, including through guidelines.
o In an effort to promote the concept of Regional Circular and Ecological Sphere 1, MOEJ sup-
ports regional finance institutions in providing ESG-related services and finance to regions
that make use of decentralised, local resources.

1
See, e.g., Japan Ministry of the Environment (2019): Creation of a Regional Circular and Ecological Sphere (Regional CES) to
Address Local Challenges. Annual Report on the Environment in Japan 2018.
https://www.env.go.jp/en/wpaper/2018/pdf/04.pdf

4
- To summarise, there are large business opportunities in circular economy, and funding such
activities should be attractive to the financial sector. The government of Japan will continue to
support the finance industry in mainstreaming ESG in investments and in making the most of
these opportunities, including through public-private partnerships.
- Japan will also continue to play an active role in promoting international cooperation in this area.

Ms. Astrid Schomaker, Director for Global Sustainable Development,

Directorate-General for Environment, European Commission
- For the European Union (EU), transitioning to a circular economy
is not optional - it is unavoidable. The limit of the planet’s ecologi-
cal capacity has been reached and ecosystems are under severe
pressure. A radical shift from the dominant linear economic
model is needed.
- Transitioning to a circular economy can bring great opportunities
for investments, growth, and employment. This transition has al-
ready started but much more needs to be done to reach the scale
and pace necessary. Enabling policies and factors need to be
identified and put in place.
- Sustainable finance is a major enabler - perhaps the major ena-
bler of a circular economy. It can help entrepreneurs develop inno-
vative circular business models and build capacities to expand such models for a wide range of
economic activities.
- In Europe, the need for circular economy investments clearly exceeds the financial capacity of the
public sector. The private sector can contribute in many ways, e.g. by providing tailor-made fi-
nancial products and by making long-term risks of linear business models clearer to investors.
- There are many hurdles to be overcome, including the low immediate cash flows of circular busi-
ness models that are based on product use rather than sales. Here the public sector has a role
to create an enabling environment for private finance.
- The EU sees three main roles for the public sector and is taking steps in this direction:
o Develop and implement policies and regulations to level the playing field: Current frame-
works often favour a “throughput economy” and conceal the risks of business-as-usual. The
Circular Economy Action Plan is an important start as it promotes a systemic approach to
circularity. The public sector is also an important consumer that can send signals to the mar-
ket through its procurement decisions. To strengthen this influence, the EU has adopted new
green public procurement criteria, which include circular economy aspects. The EU is also
collaborating with industry, academia, and civil society to develop better tools, including both
mandatory and voluntary ones. The EU is also developing a “taxonomy” for circular econ-
omy to provide guidance on what economic activities contribute to the six environmental ob-
jectives.
o Public funding and de-risking can support the shift to innovative finance mechanisms.
Around €10 million has been mobilised for this transition, through various mechanisms. Circu-
lar economy is also included in the EU’s funding criteria for international cooperation, especial-
ly with Africa and the EU neighbouring countries.
o Finally, outreach, capacity building, and awareness raising remain critically important.
Similar to what Japan has done, the EU has set up an informal expert group to support circu-
lar economy finance, which published a set of recommendations in 2019 (see Annex III).

5
Key note speeches

Mr. Shigemoto Kajihara, President, Japan Waste Research Foundation

- Identifying the actions that will lead to a circular economy system is challenging. It requires efforts
by a wide range of actors at different stages of products’ value chains.
- Japan has a comprehensive legal system for establishing a sound material cycle society, includ-
ing broad basic acts (vision, set of principles, actions, hierarchy of circular options) and specific
acts targeting individual product groups or waste streams (e.g. including financing arrangements).
- The concept of Regional and Ecological Sphere, which the government currently promotes,
seeks to realise local, regional, national, or international scale resource circulation, based on the
nature of each resource. It emphasises innovation to better utilise local resources for local needs.
- Japan uses three types of headline indicators to track progress towards a circular economy: (1)
GDP divided by total resource use, 2) use of circular resources divided by total resource use and
recycled wastes divided by waste generated, and 3) landfill disposal amount), all of which have
improved significantly since the year 2000.
- The headline indicators have proven quite useful for evaluating the overall effectiveness of poli-
cies, but they are less suitable for supporting individual business decision making.
- Circular economy is a very broad and comprehensive concept. The shift to a circular economy
needs to happen as the result of an enormous number of independent actions at different
stages of value chains. Finance for circular economy thus needs to be designed to support such
specific individual actions.
- Finance for a circular economy will need to come mainly from the private sector, including com-
mercial banks and stock markets. But governments also have roles to play, for example by
providing subsidies and tax breaks, by supporting technological development, and by adopting
green purchasing standards. All such policies are currently used in Japan.
- There is now in Japan a policy on the mainstreaming of ESG/SDG financing. Under this policy,
which covers not only circular economy but also climate change, a number of guidelines have
been developed, for example on company assessment and information disclosure. A platform for
peer-to-peer learning and accumulation of experiences has also been set up, as well as a high-
level panel on ESG finance consisting of top business leaders.
- Clear vision and targets are a powerful tool but need to be widely understood and shared by
various stakeholders, including by citizens. This requires simple action-based yardsticks as well as
shared understanding and common language.
- Information gathering and sharing is essential for deepening our understanding. Standardisa-
tion and certification can also be important.
- More success stories are needed as inspiration.
- Policy dialogues among governments can improve our learning and accelerate the transition to a
circular economy.

6
Mr. Hein Brekelmans, Head of Sustainable Finance Desk, ABN AMRO Bank
- The circular economy is about retaining the value of materials by constantly reusing them. Current
financial and fiscal systems are not aligned with this purpose - governments and banks need
to change the rules of the game in order to align these systems with a circular business model.
- ABN AMRO has shifted from looking at sustainability as a reputation management issue to view-
ing it as a strategic business opportunity. By 2020, ABN AMRO wants to have 100 circular
deals amounting to €1 billion in total. Currently, 44 such deals have been made with a cumulative
amount of €508 million.
- ABN AMRO’s Sustainable Finance Desk provides inspiration and support to relationship manag-
ers and financing specialists on how to execute as many sustainable transactions as possible, and
to change risk models within ABN AMRO. Furthermore, together with the bank’s relationship man-
agers the Sustainable Finance Desk offers the two-day Business Innovation Workshop on cir-
cularity for clients, in order to activate them to make their business model more circular. Over 150
clients have participated so far. As a result, ABN AMRO is building a community of activated en-
trepreneurs, to support them in their transition. Lastly, a network of 55 intrinsically motivated
employees (“the green 40”) from across the bank are allowed to work one day per week on ac-
celerating the sustainable shift together with the Sustainable Finance Desk.
- The three largest banks in the Netherlands have developed shared definitions on circularity and
joint guidelines that identify seven types of circular economy business models (going far beyond
waste management; pointing to the need for manufacturers to embrace extended ownership and
responsibility – something that creates incentives for circular design).
- Yet, from the perspective of commercial banks, a circular economy comes with many challenges:
o It is still an immature market; risks are perceived as high and difficult to assess since circular
companies are innovative to a large extent. Innovation and straightforward bank finances are
not a “happy marriage”. Traditional financial assessment methods and tools are not equipped
to accurately validate circular economy business models. For example, Product-as-a-Service
is based on contracts instead of assets, which makes them riskier for banks to finance. Banks
often prefer hard assets as security for their lending.
o Relatively high transaction costs make financing for circular economy models expensive.
Since there are many legal challenges, replication and standardisation of contracts is needed
to lower the transaction costs.
o Many circular solutions require collaboration across value chains. Ideally, banks should fi-
nance the value chain, where they normally finance single companies. A holistic approach is
desirable. Risks and profits are unevenly divided within the value chain and, therefore, this ho-
listic approach is hard to accomplish.
o Currently, shareholders look mainly at financial gains based on conventional indicators. It is
important to move towards more integrated reporting that accounts for different kinds of val-
ue for society, beyond financial value. In other words, circular economy adds value that is
not taken into account when investment decisions are made.
- The Dutch government has formulated ambitious targets for shifting to a circular economy. By
2030, the country’s economy should be 50% circular; in 2050 the goal is to have a 100% circular
economy. Moving towards this goal requires action from policy makers.
o Currently, the fiscal system tends to favour conventional linear business models because
taxes are levied on labour rather than on virgin resources. Of taxes in Europe, 51% comes
from labour and only 6% from resources. Taxes should be levied on resources instead of la-
bour (“Ex’Tax”).

7
 o Accounting methods also tend to put circular businesses at a disadvantage due to the rules
for depreciation of physical capital. Companies are fiscally incentivised to depreciate as quick-
ly as possible. This conflicts with the idea of a circular economy in which value preservation is
key.
o Value added taxes (VAT) do not currently differentiate between new products and materials,
and circular ones. VAT also create high upfront costs for companies that purchase products to
be leased to customers.
o The Dutch waste legislation has very strict rules for how waste can be used. This hampers
innovation and efforts to recover resource value from the waste stream.
o Governments have easy access to low-cost funding and should act as a role model for a circu-
lar economy through their investments, purchasing, and service provision.
In its circular pavilion, Circl, ABN AMRO has a striking example of a circular success: the M-Use ele-
vator. The elevator is financed in a 20-year leasing facility, structured via a tripartite credit agreement.
End-users pay approximately €0.18 per ride. Since Mitsubishi covers the whole value chain, many
hurdles are coped with. An independent study of the elevator market in the Netherlands by KPMG
Sustainability shows that M-Use elevator installations are more than €15,000 cheaper over a period of
30 years in comparison to an average Dutch elevator. This demonstrates that the M-Use concept is a
positive business case.

8
Panel discussion

Initial round of questions

At the beginning of the panel discussion, moderator Ms. Astrid Schomaker posed individual questions
to each one of the five panellists.

Ms. Yuki Yasui, what is your perspective on worldwide efforts for financing the circular economy?
What are ongoing public and private efforts on sustainability reporting, in Asia but also beyond, and
how can they help to increase investments in the circular economy?
Ms. Yuki Yasui, Asia Pacific Region Co-ordination Manager, UN Envi-
ronment Finance Initiative
- The UN Environment Finance Initiative (UNEP FI, launched in 1992 to
advance sustainable finance and integrate environment and social is-
sues into business decision making) is just starting to work on a new
annual report on the role of the finance industry in a transition to a cir-
cular economy. Existing guidance in this area is still scarce. The guide-
lines recently developed by Dutch banks are the best that currently ex-
ist.
- The Task Force on Climate-Related Financial Disclosures (TCFD)
has been instrumental in making the finance industry recognise climate
change impacts as a substantial risk to the stability of the financial system. Analysing forward-
looking information and scientific data, including geospatial information, to identify future risks to
their assets has equipped the industry with skills and methods that will make it easier to assess
resource-related risks.
- Circular economy goes hand in hand with topics such climate change. In order to reach scale an
integrated approach is required. In recent years, the UN Environment has promoted “Positive
Impact Financing” as a holistic approach that considers both positives and negative impacts, in-
cluding in environmental as well as social dimensions, of finance related decisions.

9
Mr. Minoru Matsubara, how can the finance industry support companies in strengthening their circular
economy business models? What are best practice examples of successful circular economy financ-
ing? How can regulators and other actors, such as rating and research agencies, help the financial
industry expand its role?
Mr. Minoru Matsubara, Chief Manager of Responsible Investment Group, Asset Management
Division at Resona Bank, Limited
- Resona Bank, as an institutional investor with a long-term perspective,
needs to consider changes in the social structure. It works together
with its clients to reviews trends, anticipate how changes affect future
value, and envisage desirable societies and economic system. It also
engages with its clients in dialogue about environmental issues and
helps them develop and adopt circular economy practices, responding
to expected concerns over resource issues.
- Resona Bank particularly focuses on climate-related risks, food supply
chains and plastic marine debris. It currently tries to support compa-
nies that find solutions for cold chains that do not require stable supply
of electricity. This is important for reducing food waste and improving food security, and for ensur-
ing access to medicines. These are serious sustainability challenges in developing countries, es-
pecially in Southeast Asia.
- Resona Bank is supportive of the TCFD and its recommendations.

Mr. Daniel Houska, what are your practical experiences on raising funding for waste and recycling
companies? How is financing for this sector different from for other sectors and what can we learn
from experiences made in this sector?
Mr. Daniel Houska, Board Member, European Recycling Industries’ Confederation (EuRIC)
- The recycling industry is at the centre of a circular economy. Yet, deal-
ing with end-of-life products and the substances they contain can be
risky from an investor’s perspective since secondary raw material prices
depend on commodity markets. This can make investors unwilling to
provide funding.
- While public funding and subsidies have helped build up the recycling
industry, private funding through equity and debt is important for scal-
ing up. Public de-risking (e.g. via catalytic first-loss capital) can in-
crease private investors’ confidence. Better tools for risk assessment
can also be helpful as well as integration of the public good (i.e., proper
consideration of both positive and negative externalities levelling the playing field between circular
and linear business models).
- On an example of debt investments, some of EuRIC’s larger members have secured funding
through green bonds. These are attractive for investors because they yield fixed income. Howev-
er, many companies in the recycling industry (a sector that is dominated by SMEs, as are many
others) do not have the capacity to issue bonds or their projects are not scalable beyond a €5 mil-
lion threshold (which is important for a mainstream investor, e.g. when decarbonising her portfo-
lio).

10
Ms. Mariko Kawaguchi, where does Japan stand with regard to financing the circular economy and
why is this topic important for Japan? How can circular economy finance be strengthened in Japan
and what can other countries learn from your country?
Ms. Mariko Kawaguchi, Senior Principal, Daiwa Institute of Research
- In general, the preconditions for a transition to a circular economy are
good in Japan. There is a comprehensive legal framework for circular
economy in place and many companies are working with environmental
issues in a systematic manner, using tools like ISO 14000. There is po-
tentially great interest from the finance industry in circular economy
opportunities.
- However, many people in the private sector are not convinced about the
opportunities to make money from circular solutions. There is also con-
fusion on whether to focus on downstream solutions, such as recycling,
or more upstream circular options. Many circular economy solutions are
currently small scale and the opportunities for upscaling may not be obvious since it is difficult to
build business models which cover the whole circular chain. There is also an image issue – waste
is a “dirty” businesses that investors hesitate to be associated with.
- Inspiring examples could help popularise circular business models. Normally, circular business
models do not generate good revenues. On the other hand, there is a company, named RICOH,
which has successfully operated leasing models for office equipment since the 1990s. The point of
this company’s business model, named ‘Comet circle,’ is creating a closed loop not only in a lim-
ited but also in an entire business field. The financing aspects of such cases could be studied in
more detail to draw lessons.
- The public sector can play a critical role in removing existing hurdles in the not-profitable area
which the private sector is not able to play. Good laws and policies can revive circular solutions
and encourage innovation. High awareness among general citizens is also an essential precondi-
tion.

Mr. Hein Brekelmans, what are best practices and investors’ insights for Circular Economy finance?
How and why did you personally shift from corporate banking to fostering circular economy finance?
What is the motivation behind your bank’s sustainability efforts?
Mr. Hein Brekelmans, Head of Sustainable Finance Desk, ABN AMRO Bank
- Sustainability is an extremely meaningful topic as it is about the long-
term survival of humanity. Circular economy can contribute to protect-
ing the climate, as saving resources can also often reduce energy
consumption and emissions. This can be one way to expand the fi-
nance industry’s sustainability interest beyond its current focus on cli-
mate.
- ABN AMRO’s board members are concerned about the future the
generations to come and agreed to place sustainability at the heart of
their strategy. The bank’s staff members (on all levels) are also very
enthusiastic about working on sustainability, including on circularity, be-
cause it is engaging and motivating. Recruiting and retaining staff also becomes easier because
young talented people want to work with building a better society. Overall, good support from the
top and enthusiasm from the bottom are key to a successful transition.

11
- Yet, many different perspectives have to be reconciled in a bank to finance circular economy
business models: The CEO of ABN AMRO is very much in favour of investing in sustainable busi-
nesses and solutions. The Chief Finance Officer (CFO), who feels a stronger pressure to show
short-term results to shareholders, is usually in favour as long as there is a decent financial re-
turn. The Chief Risk Officer (CRO) demands that the investment has a reasonable risk profile.
- ABN AMRO has agreed that circular economy finance is not required to comply with exactly the
same risk assessment routines and financial return rates as its normal business. This higher
risk taking is agreed to since the amount of money allocated is rather limited compared to the total
balance sheet of ABN AMRO.
- The circular economy investments that ABN AMRO finances are much smaller than its regular
investments but allow the bank to gather experiences with financing the circular economy.

Open discussion / comments

The initial round of questions was followed by an open discussion on various topics (not presented in
order of discussion):

Regulation
- Mariko Kawaguchi: Regulation can create obstacles. In Japan, consumers pay a fee for the col-
lection and recycling of used home appliances; recycling plants should not make any profits. How-
ever, some companies have made progress on recycling even though there is no incentive.
- Daniel Houska: Regulatory measures and/or public funding are necessary to ensure that recycling
makes sense from a business perspective. For example, governments could help to reward recy-
cling environmental benefits in terms of CO 2 and energy savings which, in turn, would in-
crease the competitiveness of recycled material prices on commodity markets. Policy-makers
could also help stabilise prices for secondary raw materials that follow a price development of vir-
gin materials (e.g. recycled high-density polyethylene (rHDPE) and crude oil). The “sustainable
finance taxonomy” (i.e. list of sustainable business activities), which the EU currently develops,
can also have great influence by increasing transparency and confidence around circular economy
as an approach to sustainable development.
Risk and opportunity management
- Minoru Matsubara: Many circular economy models are difficult to evaluate from a risk perspec-
tive. For example, some circular models involve long chains of actors that all depend upon each
other. It can be difficult for investors to assess whether such value chains are functioning well.
- Hein Brekelmans: Linear business models are risky. Depending on rare resources, for example, is
a significant supply risk that can be reduced by shifting to systems that are more circular.
- Daniel Houska: Finance companies that are now taking the lead, such as ABN AMRO, are likely to
gain benefits when green investing goes mainstream.
- Mariko Kawaguchi: Building trust by being honest and transparent is important for consumers’
willingness to pay premium prices for more circular products.

12
Questions from the audience
Following the open discussion, Astrid Schomaker invited questions from the audience.

The price difference between virgin materials and recycled ones is an obstacle to a circular economy
and a great challenge. Secondary materials are often at a disadvantage. What can the finance indus-
try do to address this challenge?
- Yuki Yasui: Over time, increasing awareness on resource constraints could influence the pricing
of virgin and secondary materials. The TCFD has helped the finance industry understand natural
science information. Some companies in the industry are developing “science based targets”
and methods for scenarios and pathway analysis. The industry’s work on sustainability will likely
broaden beyond climate to consider also biodiversity impacts and resource issues.
- Mariko Kawaguchi: Products made from recycled materials usually do not have a positive image.
But there are signs that consumer perceptions are changing (e.g. towards “upcycling”). For ex-
ample, second hand clothing is becoming popular. Ways need to be found to make consumers of
other products with high content of recycled materials or reused parts, such as air conditioners,
pay extra for such products.

Recycling (of plastics) may not be the only solution. How could the finance industry stimulate reduced
use and consumption of plastics?
- Mariko Kawaguchi: Funders can support entrepreneurs with new solutions that reduce the need
for plastics. Larger companies can perhaps issue green bonds to raise necessary funds while
SMEs may need to turn to local banks and credit unions.
- Minoru Matsubara: At the current stage, awareness raising is important and to broaden sustain-
ability concerns beyond climate change.

How can we move from de-risking to scaling up?

- Daniel Houska: Current methods for financial risk assessment ignore many future risks asso-
ciated with linear business models; for example, market, technological (stranded assets), opera-
tional, regulatory and reputational risk are often not factored in. Better instruments for assessing
and managing such risks are needed.

It is usually difficult for banks to evaluate the return on investment for novel circular economy ideas
and resource efficient technology. Meeting requirements for pay-back times of three years is challeng-
ing since revenues are often spread out over time. What new indicators can banks develop to enable
lending to this kind of businesses?
- Minoru Matsubara: Sustainable funding is complex. It is easier for individual banks to build exper-
tise through specialisation. Bank groups can have different arms focusing on separate sustaina-
bility issues. Yet, an overall framework and capacity building for the whole banking sector are
needed.

13
- Yuki Yasui: The Principles for Responsible Banking 2 were launched on 22 September 2019,
and has been signed by 130 banks from around the world. The signatories of this new framework
represent 33% of total banking value.
- Hein Brekelmans: It is challenging to evaluate the potential of new technologies. ABN AMRO is
building up internal expertise and sometimes engages external consultants.

Reused parts and recycled materials often have lower carbon footprints than new parts and materials.
How do you see the issue of stranded assets in this context?
- Minoru Matsubara: Carbon footprints are currently not considered enough by investors. It is desir-
able to develop holistic sustainability assessment methods since “piecemeal” approaches with
different tools looking at individual aspects of sustainability are not effective enough. In the ab-
sence of quantitative tools, it is important to engage clients in dialogues about these issues.
- Hein Brekelmans: Large / important companies in the value chains can play an important role in
requesting disclosure of carbon footprint information.

When trying to reduce the use of plastics we risk running into trade-offs and we can create other prob-
lems. For example, plastic packaging is often used to protect food from turning bad and with reduced
use of plastics we risk increasing the amount of food waste. How can we deal with such complex is-
sues?
- Mariko Kawaguchi: It can be hard for the large-scale food industry to shift away from plastics un-
der the current system. Other players may have solutions, such as more local production and con-
sumption systems with the use of fresh produce that may require less packaging or that can use
other materials than plastics. A shift to such systems requires changes in awareness and atti-
tude.
- Yuki Yasui: There are many opportunities for using less material, shifting to other materials than
plastics, and selling services instead of products. These are areas with great potential for innova-
tion.

2
UNEP FI: Principles for Responsible Banking. https://www.unepfi.org/banking/bankingprinciples/

14
Closing remarks

Astrid Schomaker
- There are many new opportunities but also many hurdles related to circular economy finance.
- The finance industry has a very important role to play in promoting sustainability and is already
showing significant leadership. Prices and accounting rules that create adverse incentives need
to be addressed. Improved tools and procedures that help investors and lenders evaluate risks
associated with linear and circular business practices are required.
- A more holistic approach to sustainable finance beyond climate is needed. There are strong link-
ages between climate change mitigation and circular economy and biodiversity protection. This
can help stimulate investments in circularity.
- The shift to a circular economy needs to be widely supported. Innovation, lifestyle changes and
demand by both companies and consumers are required. International collaboration and experi-
ence sharing can be helpful. There is room for continued exchange between the EU and Japan.

Yasuharu Ueda
- Risk assessment related to the circular economy is complex. Some good practices exist, but
mainstreaming is not yet happening at the required scale or pace.
- Circular economy financing can learn from progress made on finance for the climate.
- Many actors, including citizens and governments, will need to contribute to the transformation.
Much work is needed to convince and engage those who are still not active. To address these is-
sues globally, developing countries also need to be involved.

15
Annex I: Agenda

Date: Thursday 10th October 2019

Japan/EU Joint Workshop on Circular Economy and Finance
Co-organised by the Ministry of the Environment, Japan and EU
U Thant International Conference Hall (3rd Floor) , United National University Headquarters
9:30-9:40 Welcome speech by Yasuharu Ueda, Deputy Director General, Ministry of
Environment, Japan
9:40-9:50 Welcome speech by Astrid Schomaker, Director for Global Sustainable Devel-
opment, Directorate-General for Environment, European Commission

9:50-10:05 Presentation by Shigemoto Kajihara, President, Japan Waste Research Foun-

dation
10:05-10:20 Presentation by Hein Brekelmans, Head of Sustainable Finance Desk, ABN
AMRO Bank

10:20-11:20 Panel Discussion

Moderator: Astrid Schomaker, Director for Global Sustainable Development,
Directorate-General for Environment, European Commission
 Yuki Yasui, Asia Pacific Region Co-ordination Manager, UNEP Finance
Initiative
 Minoru Matsubara, Chief Manager of Responsible Investment Group,
Asset Management Division at Resona Bank, Limited
 Daniel Houska, Board Member and Vice-President EFR, European Recy-
cling Industries’ Confederation
 Mariko Kawaguchi, Senior Principal, Daiwa Institute of Research
 Hein Brekelmans, Head of Sustainable Finance Desk, ABN AMRO Bank

11:20-11:50 Questions and Answers

11:50-12:00 Summary & Closing by Yasuharu Ueda, Deputy Director General,

Ministry of Environment, Japan, and Astrid Schomaker, Director for
Global Sustainable Development, Directorate-General for Environ-
ment, European Commission

16
Annex II: Speakers’ biographies
Hein Brekelmans, Head of
Sustainable Finance Desk, ABN
AMRO Bank
Daniel Houska, Board Member and
Vice-President EFR, European Re-
cycling Industries’ Confederation
Shigemoto Kajihara, President,
Japan Waste Research Foundation
Mariko Kawaguchi, Senior Princi-
pal, Daiwa Institute of Research
Hein Brekelmans is Head of the Sustainable Finance Desk at the ABN
AMRO Bank in the Netherlands, after having worked in the financial
sector for about 14 years; his previous positions include Senior Rela-
tionship Manager and Financing Specialist at ABN AMRO as well as
Credit Analyst at various financial institutions. He holds a Master’s
degree in Financial Economics from Tilburg University and a Bache-
lor’s degree in Psychology.
In the context of his work with ABN AMRO, Hein Brekelmans con-
tributed in the production of the “Circular Economy Finance Guide-
lines”, which is the outcome of a joint project with ING and Rabobank
and which has been picked up by the European Commission in their
“Accelerating the transition to the circular economy” report of March
2019.
Daniel Houska is Project Lead and In-House Consultant at Kovosrot
Group CZ, a recycling business located in the Czech Republic, and has
been appointed Board Member and Treasurer at EuRIC (European
Recycling Industries' Confederation). Daniel Houska is engaged mostly
in mergers and acquisitions (M&A) and operational projects. He also
advises on cross-disciplinary topics regarding environment/recycling
and financing to a local recycling association and chamber of com-
merce. He holds Master’s Degrees in Law and Business Management.
Between 2011-2015, Daniel Houska worked for clients in various in-
dustries at EY and PwC.
Shigemoto Kajihara is President of Japan Waste Research Foundation
(JWRF), since July 2018, which has organised wide range of waste
management and 3R research activities.
Before joining JWRF, he worked for the Ministry of the Environment,
Japan (MOEJ) for 38 years, particularly in the field of waste manage-
ment and global environmental issues such as climate change, as Direc-
tor-General for Waste Management and Recycling, Director-General
for Global Environment Bureau and finally as Vice Minister for Inter-
national Affairs.
Mariko Kawaguchi is involved in research related to sustainability at
Daiwa Institute of Research. Before starting as the Chief Researcher in
the Research Department at Daiwa Institute of Research in April 2012,
she served as head of the CSR group and general manager in charge of
CSR in the Corporate Communication Department at the headquarters
of Daiwa Securities Group since 2010. Her responsibilities include all
areas of sustainability, including CSR and ESG investment.
She is a Chartered Member of the Securities Analysts Association of
Japan, Guest Assistant Professor at Waseda University, Director of the
UN Global Compact Network Japan, Joint Representative Director of
Japan Sustainable Investment Forum, extraordinary member of the
Central Environment Council, Ministry of the Environment (since
2018).
17
Minoru Matsubara, Chief Manager
of Responsible Investment Group,
Asset Management Division at
Resona Bank, Limited.
Astrid Schomaker, Director for
Global Sustainable Development,
Directorate-General for Environ-
ment, European Commission
Yasuharu Ueda, Councillor (for
Environmental Policy and Global
Environmental Affairs), Ministry of
the Environment, Japan
Yuki Yasui, Asia Pacific Region
Co-ordination Manager, UNEP Fi-
nance Initiative
Minoru Matsubara has been Chief Manager at Responsible Investment
Group, Asset Management Division, since April 2017. Prior to his
current position, he was Group Lead at Trust Fund Management Divi-
sion. Planning and Monitoring Group at Resona since April, 2009. He
began his carrier at Daiwa Bank (current Resona Bank) in April 1991.
Minoru Matsubara’s membership role at government agencies includes
Chairman of the Working Group of Principles for Financial Action for
the 21st Century (PFA21) at Ministry of Environment (MOE), and
TCFD Working Group member for Ministry of Economy, Trade and
Industry (METI). He is currently a member of ESG working group at
MOE, Committee Member of Japan Sustainability Investment Forum
(JSIF); and Chairman of the Corporate Working Group of PRI Japan
Network. He is a chartered member of the Securities Analysts Associ-
ation of Japan (SAAJ). He also used to be a Steering Committee mem-
ber for Investor Forum until July 2016. He is a member of the Nippon
Finance Association.
A lawyer by training, Astrid Schomaker is Director for Global Sustain-
able Development in the European Commission's Directorate General
for Environment.
Since joining the Commission in 1992, she has held a variety of posts
in the areas of international relations and environment policy, amongst
them leading the work on chemical policy, marine issues and the EU's
environment policy strategy to 2020.
Yasuharu Ueda is Councillor (for Environmental Policy and Global
Environmental Affairs), Ministry of the Environment of Japan.
Prior to assuming his current position in July 2019, Mr. Ueda served
key positions in the Ministry including Councillor (for Environmental
Management Affairs) (2018) and Director, Personnel Division, Minis-
ter’s Secretariat (2017). He has extensive knowledge and experience
regarding environmental issues, having held several positions after he
joined the Ministry in 1989.
Yuki Yasui has been working on sustainable finance since 2002 when
she joined the UNEP Finance Initiative in Geneva, Switzerland. She
has recently moved to the UN Environment Asia Pacific Office to ex-
pand UNEP Finance Initiative’s activities in the region. Yuki has man-
aged various UNEP FI projects such as the setting up the online Cli-
mate Change Training Course, organizing of the first UNEP FI Global
Roundtable in Asia in 2003 in Tokyo and leading the UNEP FI partici-
pation in Rio+20 in 2012.
She is a chartered accountant (ACA) qualifying with Pricewaterhouse-
Coopers in London and has a BSc honours degree in Economics from
the London School of Economics and an MSc in Environmental
Change and Management from the University of Oxford.
18
Annex III: Recommendations by the Informal European
Commission Expert Group on Support to Circular Economy
Financing

The transition to a circular economy in the EU is at an early stage. Regulations, markets, investment
tools and practices, including financial risk assessment, are adjusted to linear models, and externali-
ties linked to linear business models are largely not taken into account. This poses a problem for the
emerging circular models, which have to contend with the challenge of accessing finance, as the fi-
nancial sector sees circular projects as highly risky and often not bankable.
To improve the conditions for financing circular economy projects, the European Commission estab-
lished an Expert Group on Circular Economy Financing to analyse barriers and identify the main areas
where incentives need to be provided. Based on this, recommendations for three stakeholders groups
were developed and published in 2019 3:

1. Recommendations to the financial sector

1.1. Develop definitions, taxonomy and tools to measure the ‘circularity’ of projects by setting up a multidisciplinary working
group of recognised experts with a clear mandate and working plan.
1.2. Analyse the risk of linear business models and adjust credit risk assessment methods to take into account linear risks.
1.3. Establish risk-sharing financial instruments and create a pool of experts available for financial institutions to assess the
technological risk of innovative circular technologies.
1.4. Clearly label financial instruments fit for financing circular economy projects and increase awareness and knowledge of
the circular economy within the financial sector.

2. Recommendations to project promoters

2.1. Identify circular sources of revenue and update the organisation’s strategy through a series of actions such as scanning
existing processes, developing new business models, assessing risk, etc.
2.2. Take part in collaborative communities of circular economy practices to identify opportunities and form business part-
nerships to implement circular economy business models or projects.
2.3. Disclose the project’s environmental and social benefits through credible, standardised methods.
2.4. Increase the organisation’s internal capacity to design and implement circular economy projects by training staff and
using external advisory services.
3.1. Recommendations to financial policy makers
3.1.1 Develop reporting standards for the linear risks of investments and companies and incorporate them into standard
accounting practices. Ensure that linear risks are sufficiently evaluated and disclosed.
3.1.2 Develop a definition of circular economy finance for use within the EU by classifying circular economy activities (devel-
oping a taxonomy) and setting criteria and benchmarks for the environmental performance of circular economic activi-
ties (linked to recommendations provided under Section 1.1).
3.1.3 Establish technical and financial advisory services to support the development of business models for circular economy
businesses or projects seeking finance.
3.1.4 Prioritise the financing of circular economy projects and businesses within the InvestEU Fund.

3.2 Recommendations to non-financial policy makers

3.2.1 Create favourable framework conditions for circular economy projects through specific policy actions, e.g. development
of metrics and indicators for national, regional and corporate level.
3.2.2 Make public authorities act as facilitators of a circular economy, e.g. by performing an analysis of the potential of having
a circular economy at different geographical scales and by developing national and regional strategies for the circular
economy and linking them with regional development strategies.

3
European Commission (2019): Accelerating the Transition to the Circular Economy - Improving access to finance for circular
economy projects.

19