Sustainable finance fuels fashion industry decarbonisation

The report Unlocking the Trillion-Dollar Fashion Decarbonisation Opportunity: Existing and innovative Solutions estimates that more than 2% of greenhouse gas emissions comes from the industry, and that a trillion dollars is needed to decarbonise by 2050.

That report was produced by Apparel Impact Institute (Aii) and Fashion for Food and supported by HSBC, and now Aii and HSBC are joining forces again to support decarbonisation solutions.

HSBC has pledged US$4 million to Aii’s US$250 million Fashion Climate Fund (FCF) over the next three years, and will also provide sustainability and finance expertise to support the drive to halve emissions by 2030.

“At HSBC we are not only leveraging our philanthropy but also our trade finance expertise to support the apparel sector’s journey to net zero and the decarbonisation of trade and global supply chains,” said Jenny McInnes, Group Head Sustainability Policy and Partnerships at HSBC.

With a global market cap of US$148 billion and assets of over US$3 trillion, HSBC is the first bank to join the fund.

“Aii plays an important role in bringing key stakeholders to design solutions that tackle some of the systemic challenges facing the apparel and footwear industry," says McInnes.

Aii is also building financial tools to create greater incentives for suppliers to embrace decarbonisation projects via access to affordable capital, in conjunction with The Rockefeller Foundation.

Earlier this year, Aii met with key stakeholders including HSBC, BNP-Paribas, Standard Chartered, MAS Holdings, Brandix, PVH, Lululemon, H&M Group and Guidehouse to discuss plans for a climate finance solutions marketplace for access to affordable finance.

HSBC’s pledge will help support FCF in building the infrastructure needed to enable partners to identify their needs and secure finance for decarbonisation solutions – including renewable energy. 

Aii – changing the market around sustainable finance

Aii is a global nonprofit dedicated to identifying, funding, scaling, and measuring the fashion industry’s environmental impact solutions, working with leading brands and retailers including Target, Gap, PVH, Lululemon, H&M Group, and Ralph Lauren. 

The Fashion Climate Fund is a first-of-its-kind collaborative model between philanthropy and corporate entities, with lead partners being Lululemon, H&M Group, PVH, Target Corporation, HSBC, H&M Foundation and The Schmidt Family Foundation.

The fund was launched in June, 2022, with those backers committing to contributing $10 million over eight years to target fashion’s supply chain. It aims to reach $100 million in philanthropic donations, and $150 million each from brands and manufacturers, to unlock and additional $1.6 billion in debt and equity financing.

“We’re really trying to change the market around sustainable finance, ensuring that suppliers are getting the right kind of financial tools or funding available that make this more incentivised for suppliers,” said Aii president Lewis Perkins, of the group’s strategy.

Cementing its position as a leader in finance solutions to enable supply chain decarbonisation, H&M Group recently teamed up with Southeast Asia’s largest bank, DBS, to launch a first-of-its-kind, collaborative finance tool.

H&M taking fashion industry lead in driving finance solutions

H&M Group aims to achieve net zero CO2 emissions by 2040 and has been working hard to make funding available within (and outside) its supply chain via a Green Fashion Initiative.

This enables suppliers to invest in technology and processes required to reduce energy consumption and switch to renewables.

The new collaborative finance tool enables suppliers to get access to financing from DBS, plus support from sustainability consultancy Guidehouse.

The programme offers favourable terms to H&M Group suppliers for specific GHG reduction activities.

“Accelerating net zero for supply chains requires the rapid scaling of low-carbon technologies and new, innovative financing models to drive adoption,” says Tan Su Shan, Group Head of Institutional Banking, DBS.

“The collaborative finance tool is a prime example of how we can create impact for suppliers.”

The first supplier to take advantage of the new tool was Indian manufacturer Raj Woollen, which reduced Scope 3 GHG emissions by securing financing for solar panels, energy-efficient motors, and water conservation technologies.

With financial institutions, leading brands, and retailers working together to decarbonise the supply chain, the fashion industry is looking good when it comes to sustainability solutions.