• Polestar Capital Circular Debt Fund receives €30 million commitment from EIF to support SMEs in circular economy, with a further €13 million provided by Realdania Oost NL and Polestar Capital.
• The EIF’s stake is backed under the InvestEU initiative of the European Commission and by Invest-NL’s Dutch Alternative Credit Instrument.
• The fund aims to support up to 30 companies in the demonstration phase of their product or technology.

Polestar Capital’s Circular debt fund (PCDF) has landed €43 million in support of its mission to bridge the finance gap for Dutch circular SMEs. A €30 million commitment comes from the European Investment Fund (EIF), backed by InvestEU and the Dutch Alternative Credit Instrument in which the EIF participates together with Dutch national promotional institution Invest-NL.  A further €13 million has been committed by Realdania, Oost NL and Polestar Capital itself. Regional Development Agency Oost NL invested in PCDF from Participatiefonds Oost NL and Perspectieffonds Gelderland, a fund from the province of Gelderland managed by Oost NL.

To bridge the funding gap for Dutch circular SMEs, the fund addresses the mismatch between demand and supply of capital for sustainable technology companies. The fund specifically targets circular innovators that want to realise a first-of-a-kind commercial production facility, a phase usually too innovative for banks and too capital intense for venture capital and subsidies alone. By bridging the funding gap for these sustainable production companies, the fund enables the further upscaling of their circular technologies and business models, and the disruption and replacement of traditional value chains with more sustainable ones.

The fund has now reached €240 million, that it will use to finance 20 to 30 companies in the demonstration phase of their business, who will use the financing to establish their technologically innovative manufacturing facilities so that production cycles become circular. The fund has set clear impact objectives for its investments, such as the reduction of waste and CO2-emissions, and increasing the use of circular and more sustainable materials and products.

“Circularity is still an underfunded area when it comes to innovation.” says Marjut Falkstedt, Chief Executive of the EIF. “We can achieve a lot by better managing resources and products, and integrating circular thinking in our production processes. We’re happy to partner with Polestar Capital and build on their network in this particular field of expertise."

"We are thrilled to contribute to the Polestar Capital Circular Debt Fund, which aligns perfectly with our commitment to fostering sustainable innovation. By solving the funding gap for innovative circular production companies, Polestar Capital finances innovation and accelerates the transition to a circular economy, creating both positive environmental impact and economic benefits," says Ulrike Kostense, senior investment manager at Invest-NL.

Wendy de Jong, CEO of Oost NL, added: “Scaling circular start-ups is key to transition to a sustainable society. We need to invest in our ability to reduce waste, conserve resources, and promote sustainable economic growth reusing materials and products. This requires capital, also in the form of debt, which is scarce in the current funding environment. Polestar Capital is a knowledgeable partner and PCDF will be a natural co-investor in circular scale-up companies in Gelderland and Overijssel.”

“Our mission-related investments have a dual purpose, both to ensure a philanthropic impact and an economic return. This approach harmonizes incredibly well with circular thinking. It is not only good for the climate that companies in, for example, the construction industry become better at recycling resources. It can also improve their competitiveness, because circular companies can reduce their costs by using fewer materials, increasing recycling, and reducing their waste,” says Chief Investment Officer Kenneth Lillelund Winther of Realdania.

Daan van Kassel, Fund Director of PCDF: “The expansion of the fund comes at a perfect timing. It can take quite some time to make innovative circular production projects financeable for the fund, and we are now concluding transactions with the companies that we first engaged with in or before 2022. This expansion enables us to start new financing processes with another 3-6 circular innovators in order to bridge their funding gap when they develop a first production facility at commercial scale”

Background information

The European Investment Fund is part of the European Investment Bank Group. Its central mission is to support Europe's micro, small and medium-sized enterprises (SMEs) by helping them to access finance. The EIF designs and develops venture and growth capital, guarantees and microfinance instruments which specifically target this market segment. In this role, the EIF fosters EU objectives in support of innovation, research and development, entrepreneurship, growth, and employment.

The InvestEU programme provides the European Union with crucial long-term funding by leveraging substantial private and public funds in support of a sustainable recovery. It also helps mobilise private investment for EU policy priorities, such as the European Green Deal and the digital transition. InvestEU brings together under one roof the multitude of EU financial instruments previously available to support investment in the European Union, making funding for investment projects in Europe simpler, more efficient and more flexible. The programme consists of three components: the InvestEU Fund, the InvestEU Advisory Hub and the InvestEU Portal. The InvestEU Fund is deployed through implementing partners who will invest in projects using the EU budget guarantee of €26.2 billion. The entire budget guarantee will back the investment projects of the implementing partners, increase their risk-bearing capacity and thus mobilise at least €372 billion in additional investment.

Founded in 2009, Polestar Capital is a Dutch impact investor that has the mission to bridge the funding gap for climate action, by redesigning and stretching the ways in which societal funding needs can be aligned to meet investor demands. Polestar Capital is currently investing ca. €2 Bln via 3 thematic investment vehicles that all in different ways contribute to environmental sustainability.