Nestlé Waters NA Invests $6M in Closed Loop Fund

Nestlé Waters North America (NWNA) is the latest major beverage corporation to back its stated commitment to sustainability with dollars, as the company announced last week it has made a $6 million investment in the Closed Loop Fund, a $100 million social impact investment fund that provides municipalities with access to capital for projects aimed at improving recycling programs.

NWNA joins fellow beverage companies PepsiCo, The Coca-Cola Company, Keurig Green Mountain and Dr Pepper Snapple Group (DPS) as an investor in the fund, which has provided about $30 million in support for 12 projects since launching in 2014. All participants in the fund have a minimum investment of $5 million over a five-year period and are repaid on their principal over 10 years.

Based in New York City, the Closed Loop Fund aims to divert more than 20 million cumulative tons of waste from landfills, eliminate more than 50 million tons of greenhouse gas, and create over 20,000 local jobs across the U.S. by 2025. As of December 2016, the Fund has diverted almost 100,000 tons of recyclable materials from landfills and reduced around 232,000 tons of greenhouse gas (GHG) emissions.

In an interview with BevNET, Nelson Switzer, Chief Sustainability Officer at NWNA, explained that Nestle initially declined a prior invitation to come onboard as an early investor in the Fund three years ago. Upon being approached a second time several months ago, he said the company recognized that the Fund was pursuing projects and objectives that aligned with its own sustainability efforts — specifically, a commitment to using as much recycled polyethylene terephthalate (rPET) in its plastic bottles as possible.

“One of the things we realized is that there isn’t sufficient infrastructure in the U.S. to collect those bottles and ensure that they can be not just recovered but processed and recycled into end products,” he said, noting that nine out of 10 bottles for NWNA products are made of at least 50 percent rPET. “We looked at that holistically and thought if we want to close the loop on the bottle, we need to make sure all these things are happening. We need to make sure the bottle gets collected, that there are facilities to process it, and that there are end markets to actually absorb that.”

Bridget Croke, who leads external affairs for the Closed Loop Fund, said that, with the exception of Keurig Green Mountain, all the beverage companies involved in the fund are primarily concerned with increasing the amount of rPET available on the market. She explained that the major challenge in meeting that demand is the dearth of streamlined recycling systems in large areas of the country.

“In a lot of the country, it’s much harder for people to recycle and the economics don’t work as well because the system’s not optimized,” she said. “We saw that as a significant gap, that people didn’t have easy enough access to recycling and the sortation wasn’t up to modern technology allows for.”

“We felt like if we could pull together the companies that have the strongest interest in making the system work and pool their capital in order to unlock that opportunity for them, it could help set up this infrastructure much faster,” she added.

Although all corporate investors in the Closed Loop Fund are part of an advisory board, they do not have final approval over how much or where the fund directs its capital.

“The way we frame it to our investors is that some of our investments are going to impact your material type, but we need to do is unlock some of the bottlenecks that are holding back the economics of the whole system,” said Croke. “So in some cases we might invest in a material type that you don’t care about, but if that helps improve the system, it will indirectly impact getting more of your material recycled. They buy into our strategy of making sure recycling makes economic sense and is acceptable to folks across the country and, if that works, it’s like the rising tide that lifts all boats.”

Croke also explained why the Fund has focused on communicating to brands the long-term economic gains to be had by investing in recycling programs, rather than taking a strictly environmental stance.

“To us, if we were going to unlock the amount of money needed to fix the system, it had to be an economic story for these companies,” Croke said. “There had to be a business case to be made to these companies, otherwise the sustainability departments [within them] only have so many dollars to disperse. We felt it would be more effective to make both the environmental and sustainability but also the business case that these two things aren’t mutually exclusive, they play together.”

Switzer said that NWNA does not have a formal budget for supporting third-party groups such as Closed Loop, but that they are frequently approached by groups pitching various investment opportunities in the recycling space.

“It’s a case-by-case basis,” he said of the company’s approval process for such requests. “We have a process and a system, and should things look like they are going to help us meet any of our strategic objectives, we don’t ignore them.”