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Circular Innovation Fund launches with €50m investment from L’Oréal

Published on: May 3 2022

L’Oréal is backing the Circular Innovation Fund, managed by investment managers Demeter and Cycle Capital. The fund invests in circular economy growth-stage SMEs and funds across Europe, North America and Asia

The Circular Innovation Fund invests in areas such as new materials, circular solutions for packaging, recycling and waste innovation, logistics and eco-efficient processes | Photo by Oonal on iStock

L’Oréal has announced the launch of a circular economy fund in which the company is investing €50m as anchor investor. 

The Circular Innovation Fund, will be managed by investment managers Demeter and Cycle Capital and will invest in circular economy funds and companies focused on the circular economy, in areas such as the development of new materials, circular solutions for packaging, recycling and waste innovations, logistics and eco-efficient processes, across America, Europe and Asia. 

Rachel Barre, L’Oréal’s environmental leadership director for corporate responsibility, explained the fund is part of L’Oréal’s For the Future programme, which saw the launch of its first impact fund, the L’Oréal Fund for Nature Regeneration, in 2020.  

Commenting on the firm’s decision to spearhead the Circular Innovation Fund, she said: “We decided to act on two levels through the L’Oréal For the Future programme. The first is about an internal transformation to reduce our direct impacts on climate, biodiversity and water usage, with targets for 2025 and 2030” 

“The second is about going beyond our value chain and contributing directly to important environmental challenges, biodiversity regeneration and the acceleration of the circular economy, and this is where our two impact funds come in.”  

She added that l’Oréal decided to open the vehicle to other investors in recognition of the need to accelerate the development of technologies and companies in the circular economy. “We don’t have the capacity to do that alone. We need to be transformative together if we want to accelerate the circular economy at a global level.”  

Investment managers 

Andrée-Lise Méthot, founder and managing partner for Montreal-based Cycle Capital, told Impact Investor that the company responded to a private tender from L’Oréal to manage a circular innovation fund and joined forces with Paris-based Demeter to propose a joint approach to managing the fund and sourcing the companies.  

“L’Oréal wanted a VC approach, something very entrepreneurial, to find new ways to accelerate the move towards a circular economy. Given the global mandate, Cycle decided to join hands with Demeter to put together the Circular Innovation Fund and we have since been working on raising an additional €100m following L’Oréal’s initial investment,” Méthot explained. 

Méthot said that the fund is targeting growth stage companies that positively contribute to both climate change mitigation and the circular use of resources.  “The thesis for the fund is to enable the scaling-up of innovative technologies that accelerate the transition of big industrial players towards circularity,” she noted. 

Early investments include US-based zero waste fashion brand For Days, and Belgian agri-tech start-up Aphea.Bio. The fund has already invested in two circular economy investment funds, the Closed Loop Venture Fund II and the European Circular Bioeconomy fund

“Many technological innovations can seem very appealing, but when you scratch beneath the surface and take a look at the real impact and conduct a life-cycle analysis of the technology you will often find the negative impact outweighs any positive gains.

She added: “With this fund we aim to take a complete 360 degree view of the technology, beyond the classic clean tech definition and try to also understand its long-term impact on workers, women et cetera.”

The fund’s managers are aiming to attract institutional investors, family offices, and corporates. They already have commitments from family offices Haltra and Claridge, as well as French company Axens, among others, and are close to reaching the fundraising target of €150m.