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‘Time to Be Bold’: Aii Launching $250 Million Fashion Climate Fund

Lewis Perkins, president of the Apparel Impact Institute (Aii), is acutely aware that time is running out to act on climate change.

Speaking to Sourcing Journal in the wake of the latest Intergovernmental Panel on Climate Change (IPCC) report, which warned that the impacts of a heating planet could soon outpace humanity’s ability to adapt, Perkins urged the fashion industry to “unlock” $2 billion of blended capital to stave off irreversible damage before it’s too late.

Together with Textile Exchange, the Sustainable Apparel Coalition and the ZDHC Foundation, the California-based organization is raising $250 million in corporate, philanthropic and treasury capital for a Fashion Climate Fund designed to narrow the $1 trillion investment shortfall needed to halve the industry’s carbon emissions by 2030 and zero them out by 2050.

“While we were already discussing the concept of a donor collaboration for climate action in the apparel supply chain, our work with Fashion for Good and HSBC on the ‘Unlocking the Trillion-Dollar Fashion Decarbonization Opportunity’ report inspired the framework and strategy behind this fund and the power to unlock more blended capital,” Perkins said.

The fund will operate in tandem with a Climate Solutions Portfolio that will serve as a registry of early, mid- and late-stage initiatives that can drive emissions reductions in the fashion supply chain, including Aii and Higg Co’s recently announced carbon leadership program, a combination of tech assessments and personalized strategies that is being trialed by brands such as American Eagle Outfitters and C&A.

“We’re asking the industry to register all their programs, so it provides visibility into what’s happening and where it’s happening,” Perkins said. “It puts criteria to what makes a project viable and what’s missing to help it get the resources it needs to make it viable, and then the funds are allocated to pilot new solutions or open up regions with proven solutions.”

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Written by 270 researchers from 67 countries and published Monday, the IPCC report described a bleak future where the world’s poorest will bear the brunt as they increasingly grapple with heatwaves, flooding, hurricanes and other hallmarks of global warming. Millions could die from heat stress, unchecked air pollution, infectious diseases, mosquito-borne illnesses such as dengue and malaria, starvation and malnutrition. More could be forced to flee their homes as they become uninhabitable from rising sea levels.

António Guterres, the United Nations secretary-general, described the assessment as an “atlas of human suffering and a damning indictment of failed climate leadership,” with “fact upon fact” that reveals how people and the planet are “getting clobbered by climate change.”

Many of the most at-risk regions are also the sites of clothing and footwear manufacturing, Perkins noted. A 2021 study by Cornell University’s Jason Judd and J. Lowell Jackson, for instance, found that a significant number of factories in production hubs such as Bangladesh, Cambodia and Indonesia will likely fall below the level of a coastal flood at least once a year by the end of the decade, forcing them to relocate or drown. Another analysis commissioned by Forum for the Future revealed that all six of the top cotton-producing countries—Brazil, China, India, Pakistan, Turkey and the United States—will struggle with extreme weather events, jeopardizing the fiber supply.

“The latest IPCC report paints a sobering picture of the existing impact that climate change has caused,” Muhannad Malas, senior climate campaigner at Stand.earth, told Sourcing Journal. “But I think where sectors and policymakers really need to focus is on the silver lining of the report, which is it is not too late. Every action that we can take today will matter, every fraction of degree warming that we will be able to avoid will save communities and every dollar that’s invested in a just transition to clean and renewable energy will bring economic benefits to companies, like fashion brands, and massive benefits to people such as the workers of those companies.”

Fossil fuels, Stand.earth previously said, are the “elephant in the room” that the industry is happy to ignore, with its continued dependence on dirty coal and petrochemical-derived materials such as polyester undermining its sustainability efforts.

In a recent analysis, the environmental group found that most brands are failing in their efforts to meet the 1.5 degree Celsius pathway. Of nine brands—American Eagle Outfitters, Gap, H&M, Inditex, Kering, Levi Strauss, Lululemon, Nike and Uniqlo owner Fast Retailing—eight have increased their supply-chain emissions “substantially,” which the group said “is inconsistent with UN Fashion Charter goals.” Gap, Uniqlo, Kering and Levi’s, it said, showed double-digit year-over-year growth in supply-chain emissions in 2019, as did Nike during its 2020 fiscal year. Even with the pandemic-induced downturn, Lululemon’s supply-chain emissions spiked by 12.7 percent from 2019 to 2020, while H&M’s showed a 1.7 percent bounce.

“The scale of the commitment that we’ve seen from the fashion industry does not scratch the surface in terms of what’s needed to be on the path to meet the targets under the Paris agreements,” Malas said. “I think the focus for brands right now should be, ‘Well, what else can we do and what have we not done?’ They need to start thinking about how to make sure that they’re not increasing revenues and profits at the expense of workers, farmers and communities.”

In November, Aii and the World Resources Institute (WRI) published a report that identified several “interventions” or “levers” that can usher in more than 60 percent of the necessary reductions to limit global temperature increases, including maximizing material efficiency, scaling sustainable materials and practices, improving energy efficiency, accelerating the development of “next generation” materials, transitioning to renewable electricity and eliminating coal in manufacturing.

But decarbonizing the global economy, whether it involves clothing or cars, requires a hefty amount of cash, said Michael Sadowski, a research consultant with WRI and a co-author of the report. “Unless we invest to deploy renewables or shift to recycled materials, we don’t have a chance,” he told Sourcing Journal.

“And I think the apparel-sector dynamic is such that brands are generally not willing to pay for things on the manufacturing side. Nor are they necessarily willing to commit to longer-term relationships.”

In other words, Sadowski said, setting lofty targets should only be the beginning for fashion firms. Since roughly 90 percent of a brand’s footprint can stem from its supply chain, companies also need to lend their suppliers the practical and financial support they need to make the changes that are necessary to rise to the challenge. As it stands, two-thirds of the companies that have announced Scope 3 targets beyond their direct control are not on track to achieve the desired carbon cuts, according to a recent study by the Climate Board and Textile Exchange. Until brands help finance improvements by co-investing with their suppliers, committing to longer deals or paying more for their products, “it’s going to be really difficult to meet these targets,” he said.

Perkins, who expects to announce the Fashion Climate Fund’s inaugural partners during the Global Fashion Agenda’s Copenhagen Fashion Summit in June, says this is where collective action can come in.

“We’ve had conversations with banks about bundling lending—matching a portfolio of facilities to a portfolio of brands that helps de-risk [investment] in a moveable supply chain,” he said. “We might create 100 facilities in a region with 15 brand retailers attached to them. It doesn’t mean all 15 brand retailers are in all 100 facilities, but you’ve got this sort of consortium, so if someone defaults within the portfolio, the portfolio is still strong.”

The Fashion Climate Fund will “align” with another $1.75 million in blended capital in order to release “critical access” to debt and equity to ramp up disruptive solutions. “This is a key issue for suppliers and brands to drive more capital into the supply chain to optimize [operations] and reach Science Based Targets,” Perkins said.

One thing he’s sure about is that the time for deliberation is over. The answers are there; the industry only needs to manifest them on a broader scale. “We don’t have time to soft-pedal this,” he said. “It’s time to be bold, and we can’t wait to double down on this important and ambitious work.”