Shaping a global playbook for circular finance
How the International Finance Corporation (IFC), a member of the World Bank Group, designed shared guidelines to help financiers spot, measure, and fund circular deals with confidence.
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Shaping a global playbook for circular finance
Institutional Profile
International Finance Corporation (IFC)
Founded
1956
Headquarters
Washington, D.C., United States
Footprint
A member of the World Bank Group and the largest global development institution focused exclusively on the private sector in emerging markets, with a full spectrum of instruments, loans, equity, blended finance, investment guarantees, insurance, and financial leasing.
The problem of invisible circular deals
Financiers around the world face a common problem when trying to fund the circular economy: they do not know what actually counts as a circular deal. Because there has been a lot of confusion and a lack of clear rules, some financial institutions are already lending money to circular businesses without realizing it. They might fund a factory that reuses materials or a company that repairs equipment to extend its lifespan.
Without clear rules, financiers cannot strategically identify circular economy opportunities within their portfolio and identify new opportunities for clients, to create a pipeline of circular investments or design scalable financial products.
This lack of clarity does not only affect financial institutions. Corporations also struggle to identify which of their own projects and activities would qualify as circular, missing out on opportunities to access circular economy labeled finance and attract new investors. Investors, for their part, lack the common understanding needed to confidently identify and evaluate circular opportunities, creating a hurdle to capital flows.
Financial institutions, corporations, and investors are each navigating the circular economy on different paths, a fragmentation driven in part by the absence of clear definitions and criteria. Establishing common rules would address one of the key barriers inhibiting the circular economy from reaching its full investment potential.
Creating a universal language for the capital lifecycle
To clear up this confusion, the IFC stepped in to build a global framework that gives financiers a practical blueprint to identify, categorize, measure and fund circular opportunities. Released in May 2025, the Harmonized Circular Economy Finance Guidelines is a sector-agnostic framework that can be used globally to drive market convergence to a common understanding of what qualifies as circular economy finance. It provides guidance for financial institutions to identify qualifying assets within existing portfolios, identify new opportunities for circular economy finance labeled products, and promote circular investments in their client base. It can help corporations adapt projects and activities to meet circular economy criteria, and help build confidence in investors around labeled circular finance products to help unlock large-scale investor capital.
The IFC led a core working group to create these guidelines, collaborating with Circle Economy, the Ellen MacArthur Foundation, Intesa Sanpaolo, and The Circulate Initiative. The strategy focuses on the entire lifecycle of materials, strictly on organic and non-organic materials circularity. The framework uses three main categories, plus a transversal one that cuts across all of them:
- Circular Design & Production. Designing products, assets, or services to cut out waste and use fewer raw-material inputs from the start, using regenerative inputs, and making items easier to repair or recycle. Production processes that use less virgin raw material and increase production effectiveness.
- Circular Use. Extending the lifetime of products and assets through reuse, repair, refurbishment, retrofitting, and remanufacturing.
- Value Recovery. Minimizing waste by collecting, sorting, and recycling materials back into the production stream.
- +Circularity Enablers (transversal). This category cuts straight across the entire value chain. It includes digital tools, virtual marketplaces, supply-chain tracking technologies, and service-based business models (like product-as-a-service or sharing platforms) that specifically connect and boost the performance of circular design and production, circular use, and value recovery activities.
By using this lifecycle approach, the guidelines give financiers the clear definitions they need to build their own circular finance frameworks with confidence.
Harmonized Circular Economy Finance Guidelines · May 2025
A 3 + 1 framework for the entire material lifecycle
Circular Design & Production
Design out waste, use regenerative inputs, reduce virgin raw materials
- 1ACircular DesignFewer inputs · regenerative resources · repair- and recycle-ready
- 1BCircular ProductionReduce virgin raw materials · increase production effectiveness
Circular Use
Extend product and asset lifetimes
- 2Circular UseReuse · repair · refurbishment · retrofitting · remanufacturing
Value Recovery
Materials back into production
- 3ACollection & SortingEnd-of-life products and materials
- 3BMaterial RecirculationOrganic & non-organic recycling, recovery, upcycling
Transversal layer
+Circularity Enablers
Cut across all three categories, connect and boost the whole chain.
- Digital tools
- Virtual marketplaces
- Supply-chain tracking
- Product-as-a-Service
- Sharing platforms
Turning guidelines into practical financing tools
The IFC is not just publishing theory, it has supported companies across the full circular ecosystem as well as financial institutions to embed these standards into daily corporate banking and capital markets. The guidelines serve as a practical toolkit across different financial departments. Treasury officers can use them to identify existing qualifying assets, while loan officers can design new labeled financial products. IFC is also helping support taxonomy development at the country level, helping governments define and qualify circular economy activities within their own national frameworks.
To make the guidelines easy to understand, the IFC included real-world examples across 6 core sectors: electronics and appliances, packaging, textiles, construction and built environment, automotive and transportation, and agribusiness.
To complement these guidelines and give the market clear visibility, the IFC also established a global Circular Economy Investment Tracker. This interactive digital tool maps out private capital flows across the globe in material-intensive industries like packaging, electronics and appliances, and textiles, providing the data evidence needed to prove the commercial viability of circular business models to the wider investment community.
The IFC also serves as the secretariat for an informal working group of multilateral development banks. The group has recently published a note, Circular Jobs: How MDBs Are Supporting Job Creation through a Circular Economy, which explores how MDBs are supporting job creation through circular economy approaches. It is the first in a planned series of publications on the circular economy prepared collaboratively by the group.
How a deal qualifies
Decision tree for circular economy finance eligibility
- 1
Does the project or economic activity align with at least one of the three circular economy activity categories?
No · excludeYes ↓ - 2
Does the project or economic activity substantially contribute to a circular economy in the local market context?
No · excludeYes ↓ - 3
Can one or more quantitative reporting indicators or a qualitative assessment measure the contribution to a circular economy?
No · excludeYes ↓ - 4
Has the project been designed to reasonably manage the risk of significant harm to other environmental or social objectives?
No · excludeYes ↓ - 5
Can the entire project be attributed to circular economy objectives?
No · prorate, see belowYes · 100% included
When only part of a deal is circular, prorate by instrument
General purpose corporate finance
CE volume prorated on the portion of the revenue or expenditure stream contributing to CE.
Defined use of proceeds
CE volume based on the investment amount that contributes to CE.
Sustainability-linked bonds and loans
CE volume based on the use of proceeds or the expected share of business contributing to CE.
The groundwork has been laid. Circular deals are already crossing your desk, and with shared guidelines to qualify them, you can move from circular intent to circular action starting with your next investment decision.
Adopt the lifecycle framework
Use Circular Design & Production, Circular Use, Value Recovery and +Circularity Enablers as your starting journey. It is sector-agnostic, globally usable with a few adjustments to account for local specificities.
Financial institutions: audit your portfolio
Like the IFC did, look back, you are already financing circular deals. Surfacing them, and identifying new opportunities within your current client base, gives investment officers a track record to underwrite the next wave with confidence.
Train your investment officers
Reach out to the IFC. Use the decision trees, KPIs and case studies as a baseline curriculum so loan and treasury teams can spot, qualify and report on circular deals from day one.
While the market continues to evolve, these guidelines offer an excellent, practical starting point for financial institutions and capital managers looking to enter circular finance. Rather than trying to build a framework from scratch, this is an open invitation to discover a tool designed to specifically build investor confidence and identify circular economy opportunities across portfolios.
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