What claims to be the first equity fund designed specifically for companies in the recycling sector is set to launch in the United Kingdom in June this year, following clearance from the European Commission and HM Treasury.
The Recycling Fund, established by the publicly funded Waste & Resources Action Programme(WRAP) and managed by Green fund managers Impax Asset Management, is thought by its creators to be the first of its kind in Europe. It aims to boost recycling by addressing the gap between the availability of investment capital and the demands of small and medium-sized enterprises (SMEs) in the UK’s recycling sector.
Studies conducted by WRAP have indicated that recycling SMEs will require 1.5 billion in funding between 2003 and 2018, including significant levels of equity investment that the market is currently failing to supply.
“This pioneering, profit-driven fund is meeting a genuine need in the market,” says Jennie Price, WRAP’s chief executive. “There are currently no funds focused on recycling but we believe that this is because of a lack of technological and market understanding among investors rather than a lack of good investment opportunities. After wide consultation with institutional investors and small businesses, it was decided that a dedicated pilot equity fund would provide badly needed leadership to commercial investors and would help establish the merits of a larger, commercially-sized fund in the future.”
The Recycling Fund Ltd, a wholly owned subsidiary of WRAP, has committed 4m to the new fund, with a further 1m being provided by the private sector. Following closure of the fund-raising phase in late May 2003, the Fund will be launched in June for a term of 8 to 10 years – with investments being made during an initial three-year period.
WRAP and Impax say they are already reviewing potential investments. It is envisaged that investments will be made in 10 to 15 recycling or waste management SMEs that would otherwise face difficulty in raising commercial equity finance. The Fund will seek co-investment wherever possible – to act as a catalyst for engaging other investors – but will not require matched funding.
“The Recycling Fund offers investors an opportunity for early sight of a high-growth sector in which we have terrific confidence,” adds Price. “Already worth 12 billion a year, the sector’s turnover – driven by major policy and regulatory drivers – is expected to grow to between 20bn and 30bn within 15 years.”
WRAP appointed Impax Asset Management, following a competitive tender process, because of the company’s strong environmental focus and its experience in SME and private equity deals. Ian Simm, Managing Director of Impax Asset Management, commented: “Impax is delighted to have the opportunity to partner with WRAP in this initiative. The Recycling Fund is well positioned to fund rapidly growing businesses in the sector; equally, we’re confident that recycling offers many attractive opportunities for investors today.”
WRAP is programme established to promote sustainable waste management in the UK. A not-for-profit company limited by guarantee, WRAP is funded by DEFRA, the DTI, the National Assembly for Wales, the Scottish Executive and the Northern Ireland Assembly.
Impax Asset Management Ltd is a fund manager operating exclusively in the environmental infrastructure and technology sector. It has more than 50 million under management, mainly in venture capital and emerging environmental industries.