NEW YORK – Lululemon Athletica Inc and H&M Group are backing a US$250m fund which will finance projects to cut carbon emissions in fashion supply chains. The Apparel Impact Institute (Aii) has developed the funding framework for the Fashion Climate Fund. which will provide grants and other funding avenues. The fund will focus on renewable energy projects, developing next-generation materials, ditching the use of coal in manufacturing and improving energy efficiency. H&M Foundation and the Schmidt Family Foundation have joined the early backers and together with H&M and Lululemon, the four have put up an initial US$40m. Aii is aiming to raise US$10m reach from additional backers, set to be announced in the coming months.
It is hoped the Fashion Climate Fund will be able to unlock a further US$2bn in funding once effective solutions have been found and scaled up.
The funding will be focused on action areas identified by Roadmap to Net Zero, a report Aii co-authored with WRI. Programmes and projects identified in this include interventions across all tiers of the fashion supply chain.
We asked Aii who it is targeting to help it reach its initial US$250m funding target. A spokesperson told us: “For the US$250m, Aii will be bringing in more industry brands/retailers, corporation foundations, family offices, and other foundations – specifically those focused on addressing climate impact, from fossil fuels and the transition to clean energy, to technologies and regenerative practices.
“The US$250m will serve as the grant-making portion/catalytic finance that does not require a ROI, but will be deployed alongside other asset classes which do have a built-in ROI. These aligned assets are via strategic partnerships which Aii aims to announce in the coming months.”
The Aii also suggested it would seek to “unlock” a further US$2bn in funding. Asked to elaborate on this, they told us: “The Fund will be applied to the entire programme portfolio from incubation to commercialisation. Once an intervention is de-risked/has proven a success, Aii will recruit financial institutions to support suppliers by making traditional capital or technology investments. Aii is building relationships with specific venture capital funds, private equity funds, banks, and loan funds to supply attractive sources of financing for suppliers to make climate-improvement investments.
“Therefore, Aii intends to advance new and creative financial solutions for the market and track the amount of external capital leveraged as a result of the Fund, as well as the financial ROI and payback period for the supplier that is making the investment.
“The US$2bn is a conservative estimate coming from Aii’s experience with programs like Clean by Design, as well as the findings in their joint report with Fashion for Good, Unlocking the Trillion-Dollar Fashion Decarbonisation Opportunity. Based on the ratios of form of asset class applied to the solutions in the report, Aii expects US$100m in philanthropy combined with US$150m in industry contributions (together, the “US$$250m Fashion Climate Fund”) will drive US$150m in supplier contributions, US$400m in venture capital and private equity and US$1.2bn in bank debt, bonds and loan funds for supplier capital investments, resulting in a total of US$2bn.”
