Visualized: The Circular Economy 101 – Visual Capitalist

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The following content is sponsored by MSCI
The principles of a circular economy trace back as far as 3,000 years.
Archeological evidence shows that Romans recycled trash following the eruption of Mount Vesuvius in 79 AD. Roughly 200 years later, people recycled glass during the Byzantine Empire. Fast-forward to today and circular economy strategies are projected to generate trillions in economic output by 2030.
But how does the circular economy work? This infographic from MSCI provides a guide to circular economies—from circular business models to circular technologies.
First, let’s start at the root of the problem, our current consumption trends:
To change consumption patterns and reduce waste, consumer behaviors, business models, and policies will need to change. But the big question is how?
To answer this problem, the concept of a circular economy is gaining traction.
A circular economy is centered on the idea of resources being kept as long as possible within the economic system, where materials that have undergone an entire lifecycle, from production to end stage, are returned to the economic system as an input.
Above all else, a circular economy is based on sustainable life cycles.
In 2019, BlackRock launched an inaugural Circular Economy fund. Since then, it has attracted $2.1 billion in investment. A number of the world’s largest asset managers have followed suit.
Policy-driven agendas are also focused on the circular economy shift:
Given the steep cost of linear economic models, governments are beginning to pay attention to the merits of a circular economy.
Circular economy principles aligned with sustainability offer the following advantages:
Importantly, circular strategies, technologies, and transition companies are looking beyond traditional economic models.
From alternative energy to bio-based and recyclable materials, the most effective circular business models are ones that create obvious value.
Let’s consider five circular economy business models and where they can be applied in the supply chain. Additionally, some of the models can be adapted to any part of the supply chain.

Business Model Supply Chain Example
1. Circular supplies/Circular design Product design/R&D

Procurement/raw materials acquisition

2. Resource recovery
(Recycle, Waste as a resource)
Reverse logistics

Material & product manufacturing

3. Product life extension
(Remanufacture, Resell, Upgrade)
End-of-life

Sales & marketing

Product use

4. Share Product use

Material & product manufacturing

5. Product as a service Logistics

Product design/R&D


Today, circular models present opportunities in fashion, food systems, mining and metals, among others.
A circular economy theme is built on two key dimensions:
1. Smarter technologies: Providing circular technologies
2. Resource efficient processes: Maximizing materials and minimizing impacts (e.g. emissions)
Then, MSCI identifies areas of innovation that support a circular model. Consider the following circular technologies, which are produced by companies that contribute to a circular economy theme “end-state” through their products and services.

7 Circular Technologies Example
1. Renewables & energy efficiency Replacing oil-based plastic with compostable materials
2. Sharing economy Peer-to-peer accommodation
3. Future mobility Electric vehicles
4. Internet economy Online markets
5. Water sustainability Wastewater treatment systems
6. Plastic sustainability Companies using only one type of polymer for packaging
7. Biodiversity Phytotechnologies


It also looks at circular transitions, which are companies that enable the shift to a circular economy through their management of related issues.

3 Circular Transitions Example
1. Natural resources management Deforestation
2. Water resources management Smart metering devices
3. Plastic transition Biodegradable plastics


As a result MSCI has created a range of Circular Economy related indexes:
It’s worth noting that what is measurable today will likely only expand, considering the evolving regulatory frameworks and thinking around a circular economy,
Through looking at circular economy innovation, we yield three important insights:
For a growing number of investors, companies, and researchers, a circular economy provides a wide scope of opportunities ranging from single-use plastics alternatives to water sustainability.
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Like alcohol in the past, cannabis is entering a new era away from prohibition. How do they compare and what can cannabis learn from alcohol?
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As cannabis continues to build legalization momentum in the U.S., it also finds itself entering a new chapter, and one that steps away from its prohibition past.
The industry is now on a path similar to that of the alcohol industry during the 20th century. So what can we learn by comparing the two industries?
This infographic from Tenacious Labs looks at similarities and differences between alcohol and cannabis in relation to market maturity, legality, and cultural acceptance. It’s the second in a series that explores the future of the cannabis industry. Let’s dive in.
We are entering what looks like the beginning of the end for cannabis prohibition in the U.S. which dates all the way back to 1937.
During this time, cannabis has faced extreme hurdles that have hampered its ability to flourish. But despite this bumpy past, the future of cannabis looks bright. In 2020, combined legal and illicit cannabis sales in the U.S. grew to be worth a combined $85 billion.
While this only represents 33% of total U.S. alcohol sales, consumption habits are changing quickly. For instance, the share of college students who drink daily fell from 6.5% in 1980 to 2.2% in 2017, and Americans overall are drinking far less these days compared to the 1980s.
On the other hand, cannabis holds a larger and growing influence amongst Americans old and young. In fact, the number of Americans who say they consume cannabis doubled from 28 million in 2009 to 48 million just a decade later.
And since younger people nowadays are opting for cannabis over alcohol, the growth in their purchasing power in the years to come will likely have substantial influence on the alcohol and cannabis markets of tomorrow.
Cannabis’ prohibition period length stands at over 6x the prohibition period compared to alcohol. Not to mention, there are still some 30 states that have yet to legalize recreational cannabis, also known as adult use.
Despite this, the progress recently has been significant. While 70% of Americans opposed cannabis use in the 1970s, the same amount of the population now supports legalization today.
Global views on cannabis and alcohol are changing, and in very different ways. Nowadays, alcohol is seen as more dangerous than what was initially perceived in the past, while cannabis is shattering old stigmas as 74% of Americans believe cannabis to be safer than alcohol.
According to Our World in Data, alcohol use is responsible for 2.8 million deaths worldwide, while no such statistic exists for cannabis.
It is perhaps unsurprising given the case against alcohol use that 57% of Americans would choose cannabis over alcohol if only one could be legal.
Alcohol has become a near quarter-trillion-dollar revenue generating industry in part because of its functioning regulations. The standardization of alcoholic drinks is fairly widespread, and as a result people can safely and conveniently convert units of alcohol from a pint of beer to a glass of wine in order to drink responsibly.
Similarly, an effective regulatory framework from the National Cannabis Industry Association also has the potential to propel the cannabis industry to new heights by categorizing cannabis products into four policy lanes:
It should be noted that regulatory frameworks for cannabis are still in their introductory stage, and amendments as well as changes in legislation are needed for further progress.
It’s an exciting time to be a cannabis investor. The era of cannabis prohibition could be coming to a close. Even after lasting over 80 years, cannabis remains a robust and popular product within American culture.
And rather than competing head on with alcohol, it’s likely the two industries can co-exist. In fact, most industry insiders are betting on it. After all, alcohol companies have already made a flurry of corporate investments in the cannabis space worth billions of dollars.
If cannabis’s recent momentum and growth is any indication, it’s one that may hold plenty of upside.
In the next part of the Future of Cannabis Series, we will explore the 5 Signs of Maturity From the Cannabis Industry.
Fixed income ETFs are a go-to tool for institutional investors. Find out why professionals use them in this graphic.
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Download the ETF Snapshot for free.
When market volatility surges, fixed income investors encounter multiple pressure points. For example, they may face difficulties with liquidity, price discovery, and transaction costs.
In this infographic from iShares, we show how fixed income ETFs help address these challenges. It’s the second in a five-part series covering key insights from the ETF Snapshot, a comprehensive report on how institutional investors manage volatility.
To assess the role that ETFs play, Institutional Investor published a report in 2021 based on a survey of 766 decision makers. Respondents were from various types of organizations, firm sizes, and regions.
For instance, here is how responses broke down by location:
Here’s what the survey found.
During 2020 market volatility, the vast majority of institutional investors said they had difficulty sourcing (95%) and/or transacting (92%) in individual bonds.
Smaller firms faced these roadblock more often than larger institutions.
How did institutional investors overcome these liquidity challenges?
More than half of institutions increased their use of ETFs as they looked to source, price, and transact bonds. In fact, in the first three months of 2020, fixed income ETF trading volume reached $1.3 trillion—half of 2019’s total.
ETFs also became more popular relative to their underlying basket of securities. During extreme volatility in April 2020, ETF trading volume relative to the underlying securities was three times higher than the 2019-2020 average.
With their higher liquidity, ETFs also helped institutional investors with price discovery.
“When there was no trading activity in certain corporate bonds, you can use the ETFs as a pretty good proxy for what people are willing to pay and what the appetite is.”
—Senior Analyst, Asset Management firm
However, the usefulness of fixed income ETFs goes far beyond liquidity.


Want more institutional insights into ETFs?
ETF Snapshot
Download The ETF Snapshot for free.

Institutional investors said fixed income ETFs were a good replacement for individual bonds for a number of reasons.
The difference in transaction costs is particularly evident in the fixed income landscape. During extreme market volatility in March 2020, the bid-ask spread* for the iShares High Yield Corporate Bond ETF was 48 times smaller than the underlying securities.
* A bid-ask spread measures the difference between what an investor is willing to buy a fund for (the bid price) and the price an investor is willing to sell for (the ask price). A smaller bid-ask spread indicates greater cost efficiency.
In light of these attributes, fixed income ETFs are a go-to tool for institutional investors. In fact, they were top-rated for a number of use cases.
One senior analyst at an asset management firm noted that it was easy to get granular with asset allocation because there are so many ETFs with plenty of liquidity.
As of May 2021, fixed income ETFs made up 18% of all ETF assets under management. It’s likely that their role could become more prominent in the future.
For instance, 34% of institutional investors are likely to increase their use of fixed income ETFs going forward. One thing is evident: fixed income ETFs have proven to be flexible tools, especially during heightened market volatility.
​​Download the ETF snapshot for free.
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