The transition to net zero is underway and will see a seismic shift in how capital is deployed, how businesses operate and how customers consume, across all industries. A key part of this transition is that of alternative materials. From bioplastics and plant-based fibres to recycled composites and innovative new alloys, the market for sustainable materials is expanding at an unprecedented rate.
As global industries seek to reduce their carbon footprint and comply with increasingly stringent environmental regulations, the demand for these materials is poised to skyrocket. For investors, this represents a unique opportunity to be at the forefront of a transformative shift towards a more sustainable and profitable future.
We sat down with Pinar Ademoglu, Senior Investment Director at Sagana who leads investment opportunities globally in Sustainable Fashion and Synthetic Biology verticals, to get her insights on the materials transition.
Interviewer: What is the “Materials Transition”?
Pinar: The “materials transition” refers to the shift from using traditional, often non-renewable, and environmentally harmful materials, such as petrochemicals, to more sustainable, eco-friendly alternatives, such as seaweed-based packaging material.
Currently, we predominantly live in a linear economy, sometimes referred to as ‘take-make-waste economy’. We buy takeout food and throw away the packaging, thinking that most food packaging is recyclable since it’s paper or plastic. However, 80% of food packaging examined is unsuitable for recycling, so a large volume of food packaging ends up in landfills. [1]
What about the materials we don’t handle at a consumer level? For example, I see many buildings in my neighborhood being demolished so that companies can build large residential blocks. Yet, globally, the recycling rates for construction and demolition waste are relatively low, with only about 8% of the waste being recycled. A large portion, around 85%, is often used for backfilling, while the remaining waste is either disposed of or sent to landfills, and cement alone is responsible for 8% of the greenhouse gas emissions.[2] [3][4]
The linear economy operates by extracting virgin materials and generating waste after its use. This has a devastating impact on the environment. The result? Overflowing landfills, filled with non-biodegradable waste, leaving our cities, green spaces and oceans polluted. At our current pace, waste generation will almost double in the next 25 years, putting strain on already stretched systems and resources in place to handle waste. The impact on global emissions is significant, McKinsey estimates that the production, use, and disposal of industrial materials, including steel, plastics, aluminium, and cement, account for nearly 25% of global CO2 emissions. We must embrace the materials transition in order to bring down these emissions and global warming.
Interviewer: What are some misconceptions investors have about the materials transition?
Pinar: The biggest misconception is about the alternative materials. Many investors believe that alternative materials will not be able to replace traditional products because sustainable materials do not perform as well as conventional materials and, therefore, present a higher financial risk and uncertain return should the product fail to compete. The shortcoming in the demand, driven by the misconception, inhibits these technologies to reach the scale necessary for cost parity with the conventional materials.
Luckily, technological advances have shown that sustainable materials can meet or even exceed the performance of conventional ones. For example, there is a plant-based alternative to PET. It is called PEF (Polyethylene furanoate). It is derived from fructose. It has superior barrier properties compared to PET. It has better gas barrier qualities, especially for oxygen and carbon dioxide, which means it can better preserve the contents of food and beverage packaging by extending shelf life. This can extend the shelf life of beverages, reducing waste and potentially lowering costs associated with product spoilage and returns.
Interviewer: What excites you about working in this space?
Pinar: Environmental impact is the most exciting part of the materials transition and is a significant motivator for me and our team. Working in this space allows us to contribute directly to reducing global emissions, accelerate towards net zero and tackle the climate crisis.
The evidence for emissions reduction is clear. For example, bio-based PET, which partially replaces petroleum with plant-based materials, can reduce greenhouse gas emissions by up to 20% compared to traditional PET (per kg). [5]
Second, solutions supporting the materials transition result in significant waste reduction. For example, mycelium packaging can replace single-use plastics and decompose in compost within 30–90 days, diverting waste from landfills and reducing plastic pollution.
All of this is possible through innovation. The materials transition space is filled with innovation, from developing new sustainable materials to creating circular economy models. Personally, I am passionate about innovation and driven by the desire to explore and implement new ideas. Interacting with scientific and technical founders, understating what is beyond possible to solve real world problems has been an exciting part of my journey.
Interviewer: Which emerging trends or technologies do you believe will have the most significant impact on the materials transition
Pinar: At Sagana, we screen >500 companies per year in the materials space and where we see the most opportunity for impact, but also scalable growth of solutions is advance material innovation.
Scientists are working on new bio-based materials that can improve the performance and longevity of products while being biodegradable and recyclable. For example, Earthodic develops lignin-based coatings for paper. This technology replaces plastic paper coatings (e.g., imagine the takeaway food box) and lignin-based coatings, which are biodegradable in any environment.
Similarly, Arzeda has developed a cheaper way to produce PEF as an alternative to PET. As we mentioned before, PEF is plant-based, so no petrochemicals are used. It has better barrier properties than PET and is recyclable. Estimates suggest that using PEF instead of PET can reduce carbon emissions by approximately 20-30%. Colorifix is another exciting company tackling material innovation in textile dyeing. It generates dyes using microorganisms, reducing the dyeing process’s carbon footprint by 60% and reducing waste. Finally, Algenesis makes bio-based TPU (a type of plastic found in shoe soles and styrofoams), reduces greenhouse gas emissions by ~70% and creates no microplastics.
The future is bright for the materials transition and holds the potential to tip the scales and accelerate the race to net zero. At Sagana we’re excited to be working with pioneering companies and investors at the forefront of this transition.
[1] https://earth.org/sustainable-food-packaging/
[2] https://www.mdpi.com/2071-1050/15/21/15407
[3] https://www.globenewswire.com/news-release/2024/05/13/2880644/28124/en/Global-Construction-and-Demolition-Waste-Management-Industry-Report-2024-Market-to-Reach-344-8-Billion-by-2032-Driven-by-Sustainable-Construction-Practices-and-Urban-Developments.html
[4] https://www.grandviewresearch.com/industry-analysis/construction-demolition-waste-management-market-report
[5] https://worldsteel.org/steel-topics/sustainability/