L’Oréal’s New €150 Million Circular Innovation Fund Aims to Close the Loop for Luxury Beauty

L'Oréal's New €150 Million Circular Innovation Fund Aims to Close the Loop for Luxury Beauty
L'Oréal Global Ambassador H.E.R. | Courtesy

L’Oréal launches the Circular Innovation Fund to bring closed-loop innovators into its orbit as it increases its sustainability commitments.

Since announcing last year that it’s aiming to use renewable ingredients across 95 percent of its offerings by 2030, L’Oréal has continued its efforts to bring circularity to its product range. The cosmetics giant’s latest effort, the Circular Innovation Fund, aims to do just that.

L’Oréal is an anchor investor in the new fund, contributing 50M€ to the new 150M€ effort operated by Demeter and Cycle Capital. They’re both leaders in clean-tech capital managers firms. The fund will also include Axens, Haltra and Claridge, and private investors.

The Circular Innovation Fund

“As organizations and individuals are feeling the pressure of climate change, sustainable investing strategies will continue to soar,” Andrée-Lise Méthot, Founder & Managing Partner of Cycle Capital and Stéphane Villecroze, Co-Founder and Managing Partner of Demeter, said in a joint statement.

“This strategic collaboration between impact investors and established institutions comes at a pivotal point as we need to re-think how we consume goods globally. The Circular Innovation Fund has the potential to drastically re-design how we extract, manufacture, consume and dispose of goods and materials. Together, we can deliver value to the market with returns and, most importantly, deliver purpose and new innovation-driven technologies developed by talented entrepreneurs that have the potential to mitigate the environmental crisis humanity faces,” they added.

L'Oréal green science
Courtesy L’Oréal

The fund’s goal is to support and help scale start-ups working on circular resources across key sectors including packaging, recycling and waste, logistics, and processes in key markets: North America, Europe, and Asia.

“I am convinced that finance can play a decisive role in mitigating the impacts of climate change and can be a vehicle for progress,” says Christophe Babule, Executive Vice-President, Chief Financial Officer of L’Oréal.

Sustainable beauty

The luxury brand’s subsidiary YSL Beauty announced last week that it had partnered with Leonardo DiCaprio’s Re:wild organization on rewilding projects across the globe, starting with regions where it sources ingredients.

“The beauty industry has seen a marked shift towards eco-conscious and eco-conceived brands in recent years, and our consumers are driving this behavior change — not only through their purchasing habits, but also through a demand for transparency at the brand level to make serious commitments related to climate change,” Caroline Nègre, YSL Beauty’s International Sustainability & Scientific Director, told The Zoe Report. “The wild is in decline, and brands can no longer ignore the impact they have on natural resources and nature itself.”

ysl dicaprio biodiversity
Courtesy YSL

L’Oréal has already invested $1 billion into sustainability strategies. It’s implementing “green science” to help reduce its carbon footprint by prioritizing biomaterials and lower-impact processes.

“The latest IPCC report confirmed that ‘it is now or never’ that we can act to stave off the worst impacts of global warming,” said Alexandra Palt, Chief Corporate Responsibility Officer and CEO of the Fondation L’Oréal. “As a leader, we want to act in two complementary and strategic ways: on one hand, reduce the impact of our business—by sourcing our ingredients in a sustainable way, using more materials from recycled origin,” she added.

“On the other hand, contribute to addressing some of the most pressing environmental challenges, such as waste management, plastic pollution and also biodiversity loss,” Palt said.

Nature Regeneration Fund

In 2020, part of its sustainability efforts included the L’Oréal Fund for Nature Regeneration. It dedicated 50M€ to an effort with asset management firm Mirova, which focuses on scalable carbon credit models, among other decarbonization efforts. It works to restore forests, mangroves, marine areas, and degraded land, the company says.

The Regeneration fund has targeted regenerating efforts to retore more than 2.5 million hectares of agricultural land, sequestering more than 4 million tons of CO2, and supporting more than 75,000 farmers across Europe.

l'oreal green science
Courtesy L’Oréal

“We believe impact investment is one of the ways we can contribute to spur innovation in the circular economy space as part of the L’Oréal For the Future program,” Babule says. “Impact investing is a perfect illustration of sustainable finance, that is to say, the ability to combine financial value creation with environmental and social value creation.”

Consumers seem to be responding to the brand’s shift without hesitation. On an earnings call last week, L’Oréal chief executive officer Nicolas Hieronimus told analysts that the company had beaten its first-quarter sales expectations. Sales across its Active Cosmetics division saw spikes of 18 percent for brands including Vichy and CeraVe, and L’Oréal Luxe, its largest division, which includes Giorgio Armani and Lancôme, was up 17.5 percent.

“We are not even close to experiencing a luxury down-turn, we see many people that are affluent and even the middle classes want to indulge,” Hieronimus said.

“The overall demand for luxury products and premiumized products is very high – the market is premiumizing overall,” he added.

Also last week, the company launched a Target exclusive range, the EverPure Simply Clean Collection. The launch marks the beauty giant’s first sulfate-free shampoo and conditioner. The vegan products are also free of salts, parabens, and synthetic fragrances.

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