In economics, capital is defined as the whole of resources needed for the production of goods and services. A distinction is made between financial and real (or physical) resources. Real capital is thus formed by non-financial assets.
Real Capital consists of (1) human knowledge and skills, which are manifested in labour, (2) the Earths natural resources such as raw materials and the biosystem, and (3) tools, machines and constructions that are produced by mankind. The current linear industry exhausts the second type of capital. The envisioned circular economy aims at preserving natural resources for as long as possible.
From a physical perspective, the preservation of resources is an economic form of utilization. Hence, sustainable, circular production methods are - intrinsically - economic. Yet, many people believe that sustainable products cost more than non-sustainable products. How is that possible?
One cause is the fact that some but not all exchanges of value in an economy are expressed in terms of money. If a production process has both positive and negative economic effects, the producer is inclined to mention only the positive ones. The negative effects are concealed.
A second cause is that money, although it was invented as a means for exhanging and measuring value, is seen today as something that has value by itself. This is not the case however. Although money is an important means for investment, it must be interchangeable with the physical resources that are required for real economic processes. If these resources disappear they cannot be replaced by money.
Money has several more characteristics that encourage investors to aim for short term profits, at the cost of long term profits. They have negative side effects for sustainable entrepeneurship. The Real Capital concept eliminates these characteristics. It makes investments in a sustainable, circular society profitable and attractive.
The circular economy can be implemented with new business models such as 'Product as a Service', where the provider sells the function of a product in stead of the physical product itself. The physical product is taken back after use, and can be reused for the production of a new product. This saves an enormous amount of energy and waste as well as the downgrading of materials. The Real Capital Concept is a combination of new business models, infrastructural resources and financial products that repair the faults of the current practices. It makes sustainable business offerings more competitive and profitable.
There are several reasons why we have chosen this sector. Building and construction forms one of the largest economic sectors. It is responsible for about 35% of the global CO2 emissions. Compared with other industrial sectors, it is also the least organized one: in the western economies there are no large enterprises that dominate the market and determine the organization of the supply chain. The market is formed by many small clients and many small suppliers (i.e. contractors). On the other hand, real estate is by far the most important sector for investors: directly (in the form of real estate funds) and indirectly (in the form of covered bonds).
Real Capital Concepts has developed detailed business models including process models and a contractual framework for 'Buildings-as-a-Service'. It has developed also new financial instruments that remove the disadvantages of the current financial products. They will be implemented in the form of a fund that owns the real estate and attracts money from investors. This fund is attractive for low risk and long term investors such as pension funds.