Interview of the Month: Peggy Lefort

This month, we spoke with Peggy Lefort who leads the UNEP Finance Initiative’s work on pollution and circular economy.  She unpacks the outcomes of the recent plastic negotiation and explains how the finance sector is showing its own leadership in addressing plastic pollution.  She also breaks down how circularity can help financial institutions to manage a range of financial, legal, and reputational risks that are arise due to pollution and capitalize on circular solutions. 

In March 2022 at the UN Environment Assembly (UNEA- 5.2), a resolution was adopted to develop an international legally binding instrument on plastic pollution, including in the marine environment. It has been a multi-year process, and the latest negotiation round (INC-5.2) just took place in Geneva. What were the outcomes of the INC 5.2 negotiation? What are the implications for the finance sector?

The second part of the fifth session of the Intergovernmental Negotiating Committee (INC 5.2) on plastic pollution took place in Geneva, Switzerland, on 5–14 August 2025. Originally intended as the final round of negotiations for a legally binding instrument to end plastic pollution, the session closed without consensus and negotiations will resume at a future date to be announced. While significant differences of views between states remain, important progress was made and a clear desire by UN Member States to continue the process was expressed.

The UNEP FI–convened Finance Leadership Group on Plastics will continue to raise awareness about the importance of transitioning away from plastic pollution for financial actors and of creating the enabling environment to scale up financing from all sources to end plastic pollution. This core group of banks and insurers, launched in 2023, also works to build readiness in the finance sector through awareness-raising, capacity-building, and guidance on actions for reducing pollution across the plastic value chain. Looking ahead, the group will publish a Plastic Pollution Action Guide for Financial Institutions, showcasing best practices and circular economy case studies to mobilize financial flows towards ending plastic pollution. Indeed, financial institutions can already drive immediate progress through their influence on value chains and capital allocation. Doing so can allow organizations to prepare for upcoming regulations on plastic pollution and create synergies to reach their climate and nature targets. 

UNEP FI’s work in this area goes beyond plastics and includes a broader program on pollution and the circular economy, how should banks and investors go about integrating considerations related to circularity and pollution in their operations and capital allocation? What are the main areas they should consider?

Banks and investors can integrate circularity and pollution impacts into their strategies and operations by embedding these topics into the seven key areas for impact identified in our Responsible Banking Blueprint, including risk management, client engagement, product innovation, and partnerships. This focus on impacts means moving beyond compliance towards proactive integration across operations and capital allocation. In practice, this can mean financing circular business models such as circular design, reuse, refill, repair, remanufacturing, product-as-a-service, and engaging clients on circular opportunities in their value chain, on sustainable production, on pollution and waste reduction and management. It also involves scaling innovative financial instruments, including sustainability-linked loans tied to circularity and pollution reduction KPIs.

Sector-specific priorities include for example promoting design-for-disassembly-and-reuse in buildings; supporting textiles products and materials with numerous use cycles and high end of life collection rates, as well as sound wastewater management; advancing regenerative agriculture and driving circularity across the mining value chain, particularly for critical energy transition minerals. These actions can redirect capital toward solutions that reduce environmental harm while creating long-term economic value. UNEP FI provides a suite of resources to inspire and support this integration.

Can circular approaches help financial institutions with their climate and nature goals? Are there co-benefits? Trade-offs?

Absolutely. Circular approaches represent a significant opportunity for financial institutions to advance both their climate and nature objectives, while simultaneously increasing economic resilience, strengthening competitiveness and promoting healthy and inclusive economies. According to the Global Resources Outlook by the International Resource Panel (IRP), resource extraction and processing account for 55 per cent of global greenhouse gas (GHG) emissions. The benefits for nature are equally compelling. Given that extraction and processing of virgin natural resources accounts for over 90% of biodiversity loss and water stress. Circular solutions can also lead to synergies between nature and climate action – regenerative agricultural practices, for instance, not only sequester carbon in soil but also enhance biodiversity, improve water quality, and build resilience against climate impacts. To avoid potential trade-offs and ensure circular strategies deliver net positive impacts for both people and the planet, tools such as life cycle assessments (LCAs) and robust impact-based metrics are essential.

UNEP FI’s Circular Economy as an Enabler for Responsible Banking series offers comprehensive guidance to help banks understand and capitalize on the interlinkages between the circular economy and climate, nature, pollution, and healthy and inclusive economies, providing actionable strategies for integrating circular economy considerations into their core lending and investment decisions. Embracing these strategies not only helps financial institutions mitigate risks but also increase portfolio resilience and tap into new value creation opportunities through innovative financing models and access to new markets.

What are the most overlooked pollution-related risks that financial institutions need to be more aware of?

Pollution risks often remain hidden in supply chains yet carry significant financial, legal, and reputational risks. UNEP FI’s Navigating Pollution: Blueprint for the Banking Sector identifies some of these overlooked areas. These include exposure to chemicals of concern embedded in value chains that can trigger liability or regulatory bans; micro-plastics with rising scrutiny; water quality risks from nutrient runoff and industrial effluents; and construction-related hazards such as improper waste handling and legacy contaminants.

The lack of reliable data and disclosure on pollutants makes it sometimes difficult for financial institutions to price risks or track progress. Addressing these blind spots requires improved disclosure standards so that financial institutions have better access to information, can better integrate pollution into credit and ESG assessments, and proactively engage with clients to transition away from polluting practices.

As is the case for most sustainability topics, there is an interplay between the public and private sector and action is needed from both sides. What do financial institutions need from governments to address circularity and pollution?

For banks and investors to mobilize capital at scale, governments and policymakers can contribute to creating the enabling conditions that provide predictability and confidence for private investment. Some examples of measures that can help financial institutions channel private capital into systemic circular and pollution solutions are:

• Developing policy frameworks that include circularity and pollution targets for real economy sectors, backed by strong product standards and restrictions on hazardous substances.
• Creating and nurturing markets for circular and non-toxic products and services, through measures such as extended producer responsibility or public procurement policies including circularity and pollution-related criteria.
• Considering circularity and pollution-related disclosure requirements for businesses to contribute to data collection efforts.
• Deploying de-risking mechanisms and incentives through for instance blended finance schemes, guarantees, and tax shifts. These measures can improve the bankability of circular and pollution-prevention projects.