The circular economy as an investment opportunity

The circular economy has established itself as one of the most relevant growth vectors in the European investment landscape. At Blue Mountain, we have witnessed first-hand how this paradigm is transforming entire sectors, creating investment opportunities that combine financial returns with positive environmental impact. This is not a passing trend nor a marginal niche: the circular economy represents a structural shift in how we produce, consume, and manage resources, and the companies that position themselves now in this transition will capture value for decades.

Why the circular economy matters for investors

The linear economic model — extract, produce, use, dispose — is reaching its limits. Raw material scarcity, rising disposal costs, and increasingly stringent regulations are creating economic incentives that favour circular business models. For investors, this transition creates a dual opportunity: companies that adopt circular practices can reduce costs and improve margins, while the growing market for circular products and services offers significant growth potential.

The European Union’s Circular Economy Action Plan, with its ambitious targets for waste reduction, recycled content, and extended producer responsibility, is accelerating this transition. Spain, as the fourth-largest eurozone economy, represents a particularly attractive market given its significant industrial base, its dependence on imported raw materials, and the early stage of circular adoption in many sectors.

Investment thesis

Our circular economy investment thesis rests on three pillars:

Cost advantage. Companies that recover, refurbish, and recirculate materials and products operate with structurally lower input costs than their linear competitors. As virgin material prices rise and disposal costs increase, this cost advantage compounds.

Regulatory tailwinds. European and Spanish regulations are moving decisively toward circularity, creating compliance-driven demand for circular solutions. Companies that are ahead of the regulatory curve will benefit from first-mover advantages.

Consumer demand. Both B2B and B2C customers are increasingly willing to choose circular alternatives, driven by sustainability commitments, cost considerations, and genuine environmental concern.

Attractive segments

Technology refurbishment and remarketing. The market for refurbished technology — smartphones, laptops, servers, networking equipment — is growing at 15-20% annually in Europe. Our portfolio company Certus operates in this space, demonstrating that circular technology businesses can combine strong growth with attractive margins.

Industrial waste valorisation. Converting industrial waste streams into valuable inputs for other industries. Spain generates over 100 million tonnes of industrial waste annually, and the valorisation rate remains well below European averages.

Packaging and materials. The shift from single-use to reusable packaging, and from virgin to recycled materials, is creating investable opportunities across the value chain.

Construction and demolition. The construction sector generates approximately 40% of total waste in the EU. Circular practices in construction — material recovery, modular design, building-as-a-service — represent a vast untapped opportunity.

Valuation considerations

Circular economy companies in the middle market typically trade at 6-10x EBITDA, depending on growth rates, market position, and the maturity of the circular business model. Companies with proprietary technology, long-term contracts, and demonstrated unit economics command premiums.

The key valuation driver is the sustainability and predictability of the circular advantage. Companies that have built genuine circular capabilities — collection networks, processing infrastructure, quality certification — have defensible competitive positions that justify premium multiples.

Conclusion

The circular economy is no longer a theoretical concept — it is an investable reality. For patient capital investors like Blue Mountain, it offers the combination of characteristics we seek: structural growth drivers, defensible competitive positions, positive societal impact, and valuations that reflect the market’s early stage rather than its potential. We expect circular economy investments to represent an increasing share of our portfolio in the coming decade.