In sustainability private equity, especially in the private infrastructure world, renewable energy and the electrification of transportation have gotten most of the headlines for years now. For good reason: These have been some of the fastest-growing, already-large infrastructure categories in the world, with no signs of slowing down. Here in the U.S., these categories have also been getting more recent headlines because of politics and policy shifts. Either way, renewables and electric vehicles are quite often the focus of press and investor attention.

From my vantage point as a sustainability investor, however, I've been seeing an emerging trend: That "waste-to-value" is increasingly getting quiet attention from private equity and infrastructure investors.

--> Note that I'm using the phrase "waste-to-value" and not "waste treatment" or "circular economy". That's on purpose. "Waste treatment" often doesn't result in any use of the waste for anything subsequently valuable. As an example, in soil remediation at contaminated Superfund sites the removed soil is treated and discarded, not used for anything else. "Waste-to-value", as the phrase says, means using a waste stream to produce something of value. On the other hand "circular economy" is a subset of "waste-to-value" but not all of these solutions are truly circular; for example, methane capture at a wastewater treatment plant can produce a valuable fuel, but it's not like that circles back around into wastewater to complete a cycle. From here forward, for simplicity, I'll just refer to "waste" but read that as meaning "waste-to-value".

The list of waste categories is long and diverse. Over just the past 12 months my firm has diligenced and/or invested into platforms such as fabric recycling, waste gasification, anaerobic digestion of animal waste, carbon capture with useful byproducts, metals recycling, municipal solid waste sorting, battery recycling, landfill gas capture for sustainable aviation fuel, and many others. This is not a simple category with universal success factors. That said, the opportunity is huge overall.

A 2024 report by the UN Environment Programme stated:

Municipal solid waste generation is predicted to grow from 2.1 billion tonnes in 2023 to 3.8 billion tonnes by 2050. In 2020, the global direct cost of waste management was an estimated USD 252 billion. When factoring in the hidden costs of pollution, poor health and climate change from poor waste disposal practices, the cost rises to USD 361 billion. Without urgent action on waste management, by 2050 this global annual cost could almost double to a staggering USD 640.3 billion.

The report's modelling shows that getting waste under control by taking waste prevention and management measures could limit net annual costs by 2050 to USD 270.2 billion. However, projections show that a circular economy model, where waste generation and economic growth are decoupled by adopting waste avoidance, sustainable business practices, and full waste management, could in fact lead to a full net gain of USD 108.5 billion per year.

In other words, the implementation of waste-to-value methods for municipal solid waste alone could become a greater than $300B per year opportunity by 2050. And then, of course, there are many other additional industrial waste categories as well.

So given this high level take, it's perhaps not surprising that many infrastructure and private equity firms have been getting more interested in waste opportunities recently. And there are some more specific reasons as well:

1. It's relatively politics-agnostic. Waste is a problem across many geographies, and landfill capacity shortages happen across red, purple and blue states. Waste also simply represents a lost opportunity for efficiency and cost reduction, and everyone wants to improve their bottom line. Diverting waste from landfills, and finding ways to use waste as an input, should therefore be less prone to the vicissitudes of party politics. As an example, see this tracker of state-level PFAS legislation (PFAS is now a major issue across multiple waste streams such as water and biosolids), and notice how little it correlates with your expectations around red vs blue state policy dynamics.

2. There are opportunities to generate multiple revenue streams. For some waste solutions, the operator can both get paid to take waste in, and then get paid to sell the resulting products. These can often be tied to long term, price- and volume-stable contracts, which infrastructure and private equity investors love. And often the outputs can themselves yield multiple revenue streams; in anaerobic digestion of animal waste, for example, products can include both renewable natural gas and fertilizer. That provides even more predictability around revenue.

3. Waste opportunities can often be localized, with the treatment / production system being located close to where the waste is produced, or close to where the output products have demand. This not only can mean savings on transportation costs versus status quo waste disposal methods, it also can mean captive or at least sticky customer relationships. Again, good for predictability.

4. The solutions are often relatively simple, technically. We're not talking about building fusion reactors here. Even some of the more advanced carbon-capture-and-reuse platforms I've seen are, at their basic level, simply about exposing carbon dioxide to certain materials and then reversing the process in another part of the process. I don't want to overstate the simplicity, because especially from an engineering standpoint the successful implementation of these solutions can still be quite complex. But in waste opportunities it's relatively rare for an investor to have to ask themselves "but will the underlying technology work". Industrial composting of organic waste, for example, is just tarmac, some industrial equipment, some air flow, and a lot of know-how. And yet can be quite lucrative nonetheless. Successful efforts in waste are quite often more about engineering capability, commercial / sales execution, and project development skills, rather than some whiz-bang magic patent.

For these reasons, infrastructure and private equity investors seem to be increasingly liking waste to value opportunities. However, there are also some watch-outs:

1. Waste streams are heterogenous, variable and scattered. In solar project development, sunshine is sunshine. While you do have to worry about site-specific issues, for the most part the input is pretty easily understood and relatively universal. Contrast this with municipal solid waste, which pre-sorted will contain everything from paper to metal to used batteries to discarded cleaning supplies, etc etc etc. Moisture levels vary. Carbon content varies. Toxicity levels vary. Industrial waste streams can be more consistent, but the facilities that generate them are rarely geographically concentrated. Over the years I have seen multiple examples of smart waste solutions that nevertheless failed in real-world implementation simply because the "garbage" input was too hard to sort to sufficient consistency before ever even entering the proprietary treatment part of the system. The bigger the processing facility, the more difficult it can be to source the right kind of waste from within a reasonable distance away, and keep the facility running.

2. The facilities tend to be smaller than utility-scale renewables projects or similarly large projects of other types. Infrastructure investors naturally prefer fewer, bigger projects where they can get their arms around all of the details while also being efficient on transaction and operating costs. Smaller, distributed projects each face localized cost and delay complications from permitting, planning, engineering, and all the many other details necessary for a successful project. So to truly scale up a waste solution, it either needs to involve very big scale projects (and then see the preceding point about scattered facilities), or be very cookie cutter and modular.

3. For venture capital investors in particular, all this variability and the resultant lack of any "winner take all" solutions is a bug, not a feature. Waste overall is a massive market opportunity. But the specific addressable market for a particular solution is often just a small fraction of that market. VCs most often aren't looking for small solutions with limited market application. There's a reason why in both the waste and water markets, you rarely see startups acquired early on the basis of some "secret sauce". Instead, the rule of thumb I have heard often is "grow to a $100m revenue top line and then someone will start to think about acquiring you."

So investing into waste to value isn't a slam dunk for investors, there are trade-offs and many variables to consider. Furthermore, not all opportunities require the same type of capital and financing models.

Nevertheless, as renewables project finance becomes increasingly commoditized, I am seeing more and more infrastructure and private equity firms eyeing waste market opportunities, and buying their way into these markets when they see the right platforms for deploying lots of capital. The volumes pale in comparison to energy project finance activity today.

But the potential and early interest is there for waste to be the next "hot" sector for private equity.