The sustainable finance market is expanding, with banks increasingly offering green financial instruments to support ESG-related investments by businesses and institutions. These include green bonds and sustainability-linked loans (SLLs) tied to specific climate-related goals. One of the most promising areas companies are investing in through ESG frameworks is the circular economy—guided by the principles of reduce, reuse, and recycle.
“The circular economy is a key part of sustainable development and ESG. As a bank, we’d like to see this factor featured in more transactions,” says Armand Ferreira, Head of the Sustainable Solutions Group at ING Wholesale Banking. “We’re seeing more deals in the circular economy space. When we talk to companies about financing their initiatives, we always weigh the risks and benefits. Sometimes it’s a bit early—some technologies are still emerging—but we explore how we can support circular economy projects. It’s crucial for us to finance these types of transactions. Our goal is to direct more capital toward sustainable and circular projects, rather than traditional transactions tied to fossil fuels or outdated economic models.”
Circular Economy Attracts Broad Interest
Ferreira highlights that many sectors are becoming increasingly interested in circular economy financing. Companies of all sizes and across industries are exploring circular solutions, but some sectors are further ahead in implementation.
“Retail is a good example, where issues around plastics, textiles—like cotton and various fibers—are being addressed. While the idea of recycling seems straightforward, it requires infrastructure: collection, processing, and repurposing into new raw materials. This presents several challenges, but the retail sector is making progress,” Ferreira explains. “We’re also seeing opportunities in construction. For example, during building demolitions, there’s growing focus on reusing as much material as possible. This is already being implemented in some countries.”
In Poland, as of January 1, 2025, construction companies are required to sort waste into six separate categories: wood, metal, glass, plastics, gypsum, and mineral waste (such as concrete, bricks, and ceramics). The goal is to boost recycling rates and reduce landfill use.
Green Finance Powers More than Just Energy
The circular economy is just one—but an increasingly important—area where ESG considerations are being embedded in business strategies. According to ING THINK, the market for green debt instruments is growing fast. In 2024, global issuance exceeded $1.65 trillion, up from just under $1.5 trillion the year before. The most popular instruments include green bonds and sustainability-linked loans. These funds are used not only for circular initiatives but also for renewable energy and climate adaptation projects.
“ING is deeply committed to this effort. We’ve developed sustainable financial products specifically for projects aligned with the circular economy. Many of our financial offerings now have a sustainable version,” says Ferreira. “Our sustainability-linked loan, for example, ties interest rates to achieving predefined ESG goals—particularly circular economy KPIs. If a company meets its targets, it benefits from reduced interest rates. If it fails, it pays a penalty.”
Policy and Regulation Are Driving the Shift
The 2024 report Green Finance in Poland, edited by Ludwik Kotecki, outlines several important market trends. Governments and regulators around the world are introducing legal and policy frameworks to promote sustainable finance. In the EU, efforts to standardize ESG reporting aim to help investors better assess and compare sustainable investments.
ESG factors are becoming mainstream in investment strategies. Asset managers and institutional investors increasingly recognize that sustainable investments can offer competitive returns while mitigating environmental and social risks. Investor and consumer pressure is pushing financial institutions and corporations to integrate sustainability goals into their business models.
