There is no generally accepted definition of what counts as circular, and the financing consequences of that absence are specific rather than rhetorical.
Marvin Nusseck, head of the Finance Programme at
Circle Economy: “Es wird niemals eine
wasserdichte Definition dafür geben, was zirkulär ist und was nicht”
(sources/roechling/2026-08-01-polyproblem-08-wechsel-geld.md, p. 28). Is
circularity about recycling, resource efficiency, product-as-a-service,
circular design, or secondary raw materials? The report leaves the question
open because the field does.
What the absence costs
Without a shared definition it becomes difficult to (p. 28):
| Blocked capability | Consequence |
|---|---|
| Erfassen von Investitionsströmen | Nobody can say how much capital actually flows to CE |
| Vergleichen von Investitionsmöglichkeiten | No comparability across deals |
| Entwickeln von Benchmarks | No reference against which a deal is good or bad |
| Auflegen spezifischer Finanzprodukte | No circular asset class |
The second-order effect runs through the whole report: the headline figure “2% of global commercial investment went to the circular economy 2018–2023” (Circle Economy 2025, cited p. 5) is itself only as solid as the boundary being drawn. ⟨Inference: a definition problem makes its own evidence base unstable — the gap statistics used to argue for action are computed over the category whose absence is being diagnosed.⟩
Marcela Betancourt Munoz (IDB Invest) states the same need in the vocabulary of her institution: “Taxonomie ist eines der wichtigsten Themen … Das würde allen helfen, dieselbe Sprache zu sprechen” (p. 35). And she adds why a single label is hard to attach: most circular solutions are embedded in conventional sectors rather than forming a category of their own — an electric bus becomes circular only once battery reuse enters the picture (p. 34).
Independent confirmation (EEA, 2026)
Until 2026-11-05 this page rested entirely on interested parties: Circle Economy sells circularity assessment, IDB Invest and DKB are lenders describing their own product gaps. The EEA’s financing report states the same finding as a European agency with a statutory reporting mandate, and makes it concrete instrument by instrument (§3.1.1, titled “Inadequacy of financial definitions for the circular economy”):
| Instrument | EEA finding (verbatim) |
|---|---|
| EU Taxonomy | ”the criteria still only partially cover circular activities and make little reference to performance aspects — in particular, those designed to improve resource efficiency and to prevent waste” |
| Financial ecolabels | ”they are not currently designed in a way that allows investments linked to circular economy strategies to be mapped” |
| SFDR | ”do not fully allow the benefits of circular businesses to be quantified. Consequently, the benefits cannot be factored into financing decisions” |
| CSRD | reporting on circular economy and resource use is “still immature”; it is “hard to disaggregate circular businesses in bonds and funds and in banking data” |
Each of the four instruments is one that a financier could in principle use instead of a definition; the EEA finds all four insufficient for that purpose. It also corroborates Stremlau’s verdict on the taxonomy from the agency side rather than from a critic’s.
The EEA adds a dimension the Wechselgeld report does not have: the definition problem is also jurisdictional. “The fragmentation of the single market across 27 divergent national regimes (e.g. with varying definitions for ′recyclability′, ′repairability′ and ′end-of-waste′) creates additional complexity for financing instruments” (§3.1.3). So there is not one missing definition but twenty-seven competing ones, which is a different problem and a harder one.
⟨Inference: the EEA’s own remedy list (ch. 4) stays inside the classification paradigm — extend the taxonomy, expand ecolabel coverage, tighten CSRD. It does not consider reading 2 below. That the agency diagnosing the problem reaches only for more classification is the clearest statement available of where the measurement argument is unoccupied.⟩
The existing candidate answers, and why none has settled it
- EU taxonomy. Silke Stremlau’s verdict: too complex, describes the gold standard — “also einen kleinen Teil der Wirtschaft, aber nicht die breite Masse. Dadurch hat sie keine echte Steuerungsfunktion. Banken erheben die Daten, nutzen sie aber kaum aktiv” (p. 10). Her counter-proposal is to define what is not sustainable and weight that regulatorily, forcing more equity against it.
- ISO 59000 family. The wiki already carries ISO 59000; the report never mentions it. ⟨Inference: an interview-driven European finance report not mentioning the ISO family at all is itself evidence of how little the standard has penetrated the financing conversation.⟩
- Hitachi/AIST CE indicators and CVP. A Japanese attempt to derive economic performance from circularity measurement rather than define circularity first. ⟨Inference: this is the sharpest available response to Nusseck. CVP does not try to classify activities as circular or not; it measures value-added per unit of resource throughput, which sidesteps the boundary question that the taxonomy approach cannot escape. Whether financiers accept such a derived metric is unresolved — Martin’s question 5.⟩
Two readings of “there will never be a watertight definition”
- Fatal. No category, no asset class, no financial products — the financing gap persists by construction.
- Liberating. If no classification will ever be watertight, the useful move is to stop classifying and start measuring: asset-level, verifiable material and flow data, from which any party can compute the indicator its own mandate requires.
The report takes neither explicitly; its own closing formulation leans to the second — the challenge is “Definitionen, Bewertungsmethoden und Risikomodelle weiterzuentwickeln, die den tatsächlichen Wert der Kreislaufwirtschaft für den Finanzsektor sichtbar machen” (p. 28).
⟨Inference: reading 2 is SINE’s position in everything else this wiki records — data commons and product passports produce primary records; indicators are derived downstream. The definition problem is therefore an argument for the infrastructure rather than a precondition that must be met before it.⟩
Open questions
- Does any lender today use a self-defined circularity methodology in credit decisions at scale? Intesa Sanpaolo’s own CE methodology, developed with the Ellen MacArthur Foundation and applied to €11.7bn in 2023, is the report’s one instance (p. 6) — not independently verified here. ⟨2026-11-05: a targeted search found no bank, supervisor or agency anywhere naming a digital product passport, materials passport or ISO 59000 conformity as a precondition or input for a credit assessment. The EEA report, 32 pages on exactly this subject, contains none of those terms.⟩
- Would a “define what is not circular” rule (Stremlau) be workable where a positive definition is not?
Cross-references
- Circularity valuation gap
- Circular Value-added Productivity
- ISO 59000
- Digital product passport
- Ecosystem financing
- Arbitrary CE segmentation — open task 18 makes the same observation from the Hitachi side.
- Unlocking the circular economy (EEA, 2026) — §3.1.1, the instrument-level confirmation.
Sources
sources/roechling/2026-08-01-polyproblem-08-wechsel-geld.md, p. 28 (Nusseck), p. 10 (Stremlau), pp. 34–35 (Betancourt Munoz). Summary: Wechsel-Geld.sources/circular-finance/2026-11-05-eea-unlocking-the-circular-economy/2026-11-05-eea-unlocking-the-circular-economy.md, §3.1.1 and §3.1.3. EEA Report 02/2026, doi:10.2800/5422329. Summary: Unlocking the circular economy.