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Brookfield Asset Management Inc.’s BAM-A-T renewables affiliate is placing its first bet on recycled materials as a way to help cut global carbon emissions with an investment of up to US$700-million in a newly formed U.S. recycling business.

Brookfield Renewable Partners LP BEP-UN-T has invested an initial US$200-million through preferred equity notes in Circular Services, a new company that is majority owned and managed by New York-based investment firm Closed Loop Partners. Brookfield Renewable is also committing to invest as much as an additional US$500-million to help Circular Services grow.

Recycling is a new sector for Brookfield, and the investment is being made through the US$15-billion Brookfield Global Transition Fund, which is co-led by vice chair and former Bank of Canada governor Mark Carney and Brookfield Renewable chief executive officer Connor Teskey. It is Brookfield’s first fund focused on investments intended to help speed the transition to a net-zero economy, and so far about half of the money has been deployed or committed.

Circular Services was formed by merging five of Closed Loop’s portfolio companies, the most prominent of which was Sims Municipal Recycling, which provides recycling services for New York City. Circular Services owns and operates a dozen municipal recycling facilities in the United States and has large municipal and commercial contracts to recycle paper, metal, glass, plastic, organics, textiles and electronics in seven states, from New York to Texas.

In targeting the U.S. recycling sector, Brookfield saw a chance to move the needle on both financial and environmental terms, said Natalie Adomait, chief investment officer for the Brookfield Global Transition Fund.

“What was really exciting but also terrifying is that in the U.S., the recycling rates are around 20 to 30 per cent [of waste], compared to in Europe it’s 50-per-cent plus,” Ms. Adomait said in an interview. “So there’s a massive opportunity to really scale materials recovery facilities, or MRFs, across the United States.”

Circular Services processes about one million tonnes of material annually, and Brookfield predicts that could increase to five million tonnes over the life of its investment. In a statement, Closed Loop and Brookfield said Circular Services “will be the largest privately held recycling company in North America.”

With technology to improve sorting, processing and reuse of materials such as consumer packaging and electronics, the company’s aim is to reduce the amount of waste municipalities send to landfill and boost the use of recycled goods.

The formation of Circular Services is also a pitch to cities and businesses looking for help meeting sustainability goals – in particular consumer goods companies, that have targets to reduce the environmental impact of their packaging and products, as well as industrial companies that need recycled metals as they shift to new technologies.

“Today there is a huge amount of demand that outpaces supply in terms of getting access to those recycled materials, and that can be recycled plastic, paper, metals, you name it,” Ms. Adomait said.

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