In recent years, companies in the “circular economy” sector—which includes waste and recycling services companies—have exhibited resilient cash flow growth. Investors in these companies have benefited in the era of elevated inflation. Expanding pricing power and operating efficiencies have helped drive investment returns, validating the argument that this sector can serve as an effective inflation hedge. 

The investment teams at Public Securities Group believe that listed companies operating assets at the forefront of upgrading the world’s waste infrastructure to promote a cleaner and more efficient circular economy are well positioned for continued upside. Structural changes in their business models and new markets position the sector well to compound cash flow growth, in our view.