Circular economy: Societe Generale takes a stake in Polestar Capital Circular Debt Fund.
This stake and the resulting business partnership will support innovation and help scale up circular economy projects and solutions in the Netherlands.
Launched in 2022, the Polestar Capital Circular Debt Fund (PCDF) is the only private debt fund in Europe dedicated to circular economy. It supports innovative Dutch mid-sized enterprises (MSEs) in building their first plants to recover organic, plastic, chemical, textile, metal, and other waste. Polestar Capital aims to fill a gap in debt finance for these companies when they start to have significant needs and new injections of capital are no longer appropriate.
Polestar Capital's initiative focuses on projects based in the Netherlands. In this country, circular economy is a priority in order to reduce its dependence on foreign natural resources and the environmental impact of its economic activity. The Dutch government has set itself the objective of being a fully circular local economy by 2050, with a first step of halving the consumption of primary raw materials by 2030. A concrete illustration is the set-up of five regional circular clusters to accelerate this transition (including the Port of Amsterdam and the Port of Rotterdam). These clusters are home to many projects, all of which represent opportunities for Polestar Capital.
Companies financed by Polestar are contributing to the development of circular economy, which offers a positive vision of economic development, presenting new opportunities for growth while helping to combat climate change and biodiversity loss. This model also provides a response to the problems posed by demographic pressure and the increasing scarcity of resources.
Supporting circular economy, while necessary, remains a major challenge for large financial institutions such as Societe Generale. Facing regulatory constraints associated with financing innovative companies, they must also master these new business models, while the often-small size of transactions requires long origination and execution durations.
The strategic partnership agreement executed in parallel with the stake in PCDF will enable Societe Generale teams to acquire greater agility in the circular economy field. It will also partly outsource the selection and due diligence costs specific to building a new client base. A number of these future champions of the circular economy - Gidara Energy, SkyNRG, Furec, Biondoil, Fuenix - have already established a solid relationship with PCDF. Societe Generale will therefore be able to integrate these clients more easily and offer them products and financial solutions that PCDF cannot provide (hedging, cash management, advice, private placements, IPOs, etc.). Societe Generale will also have the possibility, if the opportunity arises, of joint project and corporate financing with PCDF.
PCDF is aiming for a final closing by the end of the year with a target of EUR 250m and already counts among its participants the pension funds Pensionfonds Detailhandel, Onderlinge LM, LM De Hoop as well as InvestNL. Societe Generale is the only participating bank, demonstrating the spirit of innovation anchored in the Group.
The fund finances innovative circular breakthrough technologies that require relatively large sums of capital and that take time to realise positive cashflows. Financing such companies is complex within the context of traditional credit processes and banking regulations. In the meantime, we don’t have the luxury to be patient in scaling sustainable circular technologies, as we need to reduce our emissions and pollution rather sooner than later. We are therefore very pleased with the combined investment of Societe Generale in the fund, as well our partnership for the mutual financing of the further upscaling of circular innovators. This combination allows us to already support circular companies in a phase not yet suitable for traditional bank financing, but also connects the borrowers of the fund with a partner that may finance the roll-out of their circular technology. We believe the partnership is an important step for the further acceleration of the transition to a circular economy, in the Netherlands and beyond.
Supporting the circular economy is crucial in the fight against climate change and biodiversity loss. It also builds long term resilience and cost-effectiveness into our clients’ business models and across their value chains. We’re very happy to partner with Polestar Capital whose expertise will accelerate our involvement in this new market segment and support our clients in their positive impact transformation.