Going full circle on critical resources

Growth across sectors including energy, infrastructure and defence is putting pressure on critical minerals, metals and other resources. Compounding this challenge, tariff rises and supply chain shocks are further imperilling access to these essential resources. 

Export restrictions on critical resources have risen fivefold since 2009,¹ and commodity volatility is pushing governments and corporates to prioritise recycling and recovery, especially for metals used in batteries, renewables and defence. While circular solutions (see Exhibit 1) have largely been associated with promoting the recycling, repair or reuse of consumer products, the concept is now expanding further.

From a linear economy to circular solutions

Source: Allianz Global Investors Going round in circles – the value of waste, January 2024

Consider the 417kg of rare earth minerals² required to build each F-35 fighter jet. Critical minerals – also integral to electric cars and smart phones – are increasingly affected by geopolitical tensions, illustrating how rising protectionism and resource nationalism have heightened the cost of waste. Introducing circular strategies like recycling and recovery in resource-intensive sectors can reduce dependence on fragile, high-risk supply chains. 

Circularity also supports greater energy efficiency. Recycled aluminium, for instance, uses 95% less energy than virgin aluminium according to International Aluminium. Europe and the US are investing heavily in expanding their domestic recycling capacities for aluminium and for copper – which is in high demand for clean energy technologies.

Moreover, significant economic benefits and opportunities are expected from the use of circular strategies. The ILO estimates 7-8 million new jobs could be created globally by 2030 with 700,000 of these in Europe alone,³ while Accenture expects USD 4 .5 trillion in economic output to be unlocked by circular models.

Momentum is building for better use of resources: the EU’s Circular Economy Action Plan, new US executive orders to scale up critical materials production, and China’s focus on vehicle remanufacturing show how circularity is tied to industrial competitiveness and national security. 

We see an emerging shift in thinking about circularity as a strategy for resilience. Investors are starting to address the materiality of circular strategies and circularity goals are referenced in 5% of thematic bonds as noted by Mainstreet Partners. It’s also an important theme linked to Sustainable Development Goal 12 – ensuring sustainable consumption – and is closely aligned with resilience of the defence, renewables, and technology sectors. 

We believe this marks the beginning of an era of resource efficiency where a strong circular strategy will be a competitive advantage in generating long-term value.

¹ OECD, Export restrictions on industrial raw materials, 2025.
² Congressional Research Service, Rare earth elements in national defense, 2013
³ European Parliament, European Parliament resolution of 10 February 2021 on the New Circular Economy Action Plan, 2021 and Ellen MacArthur Foundation, Growth within: A circular economy vision for a competitive Europe, 2015