Key Takeaways
Investors price uncertainty. MARU’s analysis of 42 listed companies shows that even long-established circular businesses can trade at a discount to traditional peers: investors pay less for their earnings and, across the sample, expect higher returns. While size, growth and geography may explain part of this, the findings raise a question: if established circular businesses face this challenge, what does it mean for younger innovators?
MARU compared 20 circularity veterans – businesses with more than 20 years of commercial operation – with 22 traditional peers across four sectors: plastics & packaging, metals & batteries, waste management, and food & bio-based materials.
We looked at two measures:
Cost of equity – the return investors expect for holding the shares
EV/EBITDA – how much the market values a company for each dollar of operating earnings
The result is clear: established circular businesses are valued at a discount. Investors pay less for their earnings than they do for traditional peers in every sector, and ask more of them overall.
Across the sample, investors typically expected a return of about 13.2% from circular veterans, 1.7 percentage points above traditional companies at 11.5%. The market valued circular veterans at about 9.6 times operating earnings, compared with 11.4 times for traditional peers.
The pattern held across sectors: circular veterans traded at lower valuation multiples in all four areas examined. Waste management stood out most clearly, with circular companies facing both lower valuations and a higher required return than traditional peers – 12.3% versus 8.5%. Elsewhere, circular businesses faced similar or lower required returns: the difference was marginal in metals & batteries (14.1% versus 13.9%), and veterans faced a lower required return in plastics & packaging (12.7% versus 13.4%) and food & bio-based materials (10.9% versus 13.1%).
In short, a long track record does not close the gap on its own. Our data can’t tell us whether circularity itself causes the discount, as company size and other factors may also play a role – the veterans are generally smaller than their benchmarks. But if businesses with decades of commercial history face this hurdle, younger innovators without established customer bases may find it even harder to win investors’ confidence.
Source: Bloomberg, company data. The sample covers 42 listed companies with a market capitalization above US$500 million: 20 circularity veterans and 22 linear benchmarks, grouped into four segments — plastics & packaging, metals & batteries, waste management, and food & bio-based materials. Circularity veterans are companies whose core business is circular, such as recycling, resource recovery or reuse, and that have over 20 years of commercial operation. Cost of equity is Bloomberg’s CAPM-based estimate. EV/EBITDA is enterprise value divided by trailing 12-month EBITDA. All figures are medians, which limits the influence of outliers. Sector comparisons set each segment’s veteran median against its linear benchmark median. Veterans are generally smaller than their benchmarks, so a size effect may explain part of the gap, alongside differences in growth, geography and business model. The sample covers established listed companies only; it does not measure younger businesses directly.
The challenge is that younger businesses have the least evidence to offer. A report from the Circular Finance Coalition identifies lack of track record, unsuitable tools for assessing financial returns and poorly understood risks as continuing barriers to finance. This creates a self-reinforcing loop: investors want proof before providing capital, while innovators often need customers and capital before they can generate that proof.
At MARU, we believe the loop can start to break when a company actually buys a circular solution. Research can show where a credible solution meets a buyer who is willing and able to buy. Getting the right people to agree to move turns that match into customer commitments and measurable results – the proof investors need to weigh risk and reward. Structured pilots then turn that proof into lasting contracts, and the right capital becomes available.
That is the gap MARU is built to close: helping circular solutions go from promising to proven – so companies buy them, investors can back them with greater confidence, and they have a better chance to scale.
As a demand-led circularity accelerator, MARU aims to mainstream circularity across Asia Pacific by making circular solutions commercially adoptable and financeable. Our research identifies where corporate demand, credible circular solutions and the right capital can meet. Our accelerator work turns those opportunities into pilots, proof and routes to scale. Our convening gets the right people together to agree to move opportunities forward and shares lessons across the ecosystem.
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