As it moves forward with its plan to invest more than $500 million in US recycling projects by 2020, the Closed Loop Fund yesterday announced its latest investment: $1.5 million in Lakeshore Recycling Systems. The investment allowed the recycling company to bring a material recovery facility to Chicago — the city’s first.
The fund has amassed millions of dollars from leading companies — including 3M, Coca-Cola, Colgate-Palmolive, Goldman Sachs, Johnson & Johnson Family of Consumer Companies, Keurig Green Mountain, PepsiCo and the PepsiCo Foundation, Procter & Gamble, Unilever, Walmart and the Walmart Foundation — and it invests in the form of low-interest loans to companies and zero-interest loans to cities. Just last month Dr. Pepper Snapple Group invested $5 million in the Closed Loop Fund.
Yesterday at the ribbon-cutting event, Lakeshore Recycling Systems hit the start button on the $8.5 million Machinex single-stream recycling system that harvests more than 110,000 tons of high-grade residential and commercial single-stream recyclables, and sorts, separates and allocates over 20 tons of waste per hour.
The facility will recycle paper, cardboard, glass, aluminum, ferrous metals such as steel and #1-#7 rigid plastics. These include things like soda bottles (#1) and milk jugs (#2), as well as the #3-#7 hard–to–recycle plastics such as plastic bags (#4), Styrofoam take-out containers (#6) and plastic baby bottles (#7).
Headquartered in Morton Grove, Illinois, Lakeshore Recycling Systems collects businesses’ and residents’ trash and recyclables, owns a fleet of collection trucks, and operates six material recovery facilities. It doesn’t own any landfills. At more than 2 million tons-per-year, Lakeshore says no other independent company in Illinois collects, diverts and recycles as much as it does.
The $1.5 million investment brings the Closed Loop Fund’s total to $6.5 million. In September the Closed Loop Fund announced its first three recycling investments, totaling $24 million.
“The Lakeshore facility will increase efficiency and capacity in Chicago. More broadly across the US, the new MRF [this is what industry insiders call material recovery facilities — it sounds like “smurf”] equipment in conjunction with Lakeshore’s other operations, will prove an innovative business model that will be more profitable than the average MRF,” says Rob Kaplan, managing director of the Closed Loop Fund.
“We believe Lakeshore’s new business model could be used as a case study for other MRFs across the US," he continues. “Their business model uniquely integrates collection of both trash and recyclables in a way that allows them to capture more material in recycling more efficiently and profitably. They can mine for materials in the trash stream and efficiently move them to the recycling stream.”
Lakeshore will also act as “testing ground” for recycling new material and packaging types such as polypropylene, which is used in just about every plastics market from car batteries to carpets and kitchen utensils, and film plastic. “As Close Loop Fund tests new ways to sort these materials, Lakeshore is eager to provide the lab for these tests,” says Closed Loop Fund spokeperson Bridget Croke. “Closed Loop Fund is excited to fund replicable business models that increase recycling that prove that recycling can be profitable even when commodity prices are low.”
Waste management companies that own a landfill and collect recyclables are conflicted, Croke explains. “This company runs two competing businesses and on average, the landfill business has higher short-term profitability, leading these types of companies to ‘trade-off’ capital and operational investment towards its landfill business, resulting in medium- to long-term degradation of its recycling business,” she says.
Lakeshore and other “pure-play recycling” operations show that recycling can be profitable and companies can grow even in the current market with low commodity prices.
“Sortation examples include Lakeshore in Chicago, Pratt across the east coast and Balcones in Texas. They are pure play collection and sortation recycling companies that are running efficient businesses,” Croke says. “On the processing side, examples include KW Plastics, a diversified plastics recycler and Momentum Glass Recycling, a vertically integrated glass collection and processing company. Both are profitable and growing.”
The Closed Loop Fund has millions of dollars to invest in recycling companies and infrastructure projects that can be replicated and is currently accepting proposals for below market loans for cities and companies.
How can organizations improve their chances? Croke and Kaplan offer these three tips for those seeking Closed Loop Fund loans. First, demonstrate that your business model is scalable and/or replicable across the US. Second, show that you have raised other capital. Third, reach out and ask. Says Kaplan: “We are happy to share our priorities and help think through investments that might be applicable.”
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