The circular economy is not just an environmental trend. It is an investment sector with solid fundamentals, regulatory tailwinds, and attractive returns for the patient investor.
There is a sector where the alignment between social impact and financial returns is particularly clear: the circular economy. Companies that recycle, reuse, recover materials, and manage waste efficiently — companies that literally make money from what others discard.
At Blue Mountain, we have invested in circular economy companies for years. Our conclusion is emphatic: this is not “impact investing” in the sense of sacrificing returns for principles. It is investing with exceptional fundamentals that also generates positive impact.
European regulation is pushing the entire economy towards circular models with unprecedented force. The European Green Deal, the Circular Economy Action Plan, the Packaging Directive, the Batteries Regulation, the EU sustainable finance taxonomy — this regulation is not a passing trend. It is a structural transformation spanning decades. Every new regulation creates demand for the companies that facilitate compliance.
Industrial waste management. Collection, transport, treatment, and valorisation. A regulated sector with barriers to entry, recurring revenues, and stable margins.
Materials recycling. Recovery of metals, plastics, paper, and glass. Profitability rises with secondary raw material prices, which trend upward with regulation.
Circular technology. Companies developing technologies for recycling optimisation, environmental footprint measurement, and product recyclability design. High growth potential.
Reuse and remanufacturing. Companies extending product lifespans through repair and refurbishment, from consumer electronics to industrial machinery.
Spain’s recycling rates sit below the European average in several categories — meaning a long road ahead and therefore a large market to develop. The sector is fragmented, with hundreds of local waste managers operating with outdated technology and artisanal management. Consolidation can create companies with sufficient scale to compete at the European level.
Well-managed circular economy companies generate EBITDA margins of 15-25%. Multiples of 6x-9x EBITDA reflect a justified premium for regulatory-driven growth. For the patient investor, the circular economy offers something rare: predictable growth with a regulatory base, defensive margins, and a market that can only grow.
Investing well and doing good are not contradictory objectives. In the circular economy, they are the same objective.
Dirk Manuel Martens Jimenez Founder, Blue Mountain Capital
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