Alternative and Sustainable Financial Instruments for a Circular Economy. An Overview of Innovative Models

In financial sector operators are implementing innovative financial intermediation models that redefine the current attitude toward environment, person and society, and they fuel investment decisions increasingly linked to sustainability issues. Finance becomes an important driver capable of supporting the development of sustainable business models and accelerating the transition toward a circular economy model, which can become a key driver of value creation for investors. Alternative financial instruments are defined to support sustainable and circular business models by promoting the creation of long-term value for businesses and society as a whole. They can be distinguished into sustainable financing instruments, such as sustainable and green loans, circular crowdfunding, circular leasing, carbon credits and impact investment instruments such as green bond, social impact bond and impact fund. At European level, various financial experiences are implemented by European Commission to finance sustainable growth and to support the circular economy. This chapter starts from the description of the role that sustainable finance for the development of a circular economy to then identify the alternative financial instruments for a circular economy and frame the financial policies and experiences of circular finance.