Between 2018 and 2023, USD 164 billion were invested globally in companies committed to circularity. During the period 2021–2023, investment in circular business models increased by 87% compared to 2018–2020. These figures, although promising, show that most capital still goes to conventional solutions that have existed for decades — such as rental and repair services — while “just 4.7% of total investment went to Design and Production models,” despite their potential to drive systemic change.

These are the key findings of the Circularity Gap Report Finance, the first global empirical study to quantify and analyse capital flows into circular business models and assess the funding gap for a circular economy. It was published by Circle Economy in collaboration with KPMG International and with the support of the International Finance Corporation (IFC).

The report reveals that circular economy investments account for only 2% of total tracked capital, showing that there is still significant untapped potential. According to the authors, the circular economy “emerges as a key strategy for the financial sector to manage resource-related risks—such as supply chain disruptions and material scarcity,” challenges that are becoming increasingly relevant in today’s context of trade wars and geopolitical instability.

Rethinking how we assess risk and value in circular business models

The authors suggest that investors re-evaluate how they assess risk and value in circular models to better reflect the benefits of the circular economy. This includes accounting for the retained value of durable, repairable, leased or reusable products, as well as the reduced dependency on volatile global supply chains.

Scaling up and shifting focus

The three business models receiving the most funding are vehicle repair, rental and resale, online marketplaces for used electronics, and organic and agricultural waste recovery — all relatively mature and established circular strategies. In contrast, higher-impact models remain significantly underfunded, which the authors say “represents an untapped potential and a missed opportunity to build a more resilient financial sector.”

To realise this potential, the report calls for “targeted policies, updated financial frameworks and a collective effort to redirect capital towards circular solutions.” As the authors conclude: “Our report shows that progress is being made—but much more scale and focus is needed. This can only be achieved through international collective action to channel more financial resources into the circular economy.”