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Aii’s Climate Solutions Portfolio is Open for Applications

One thing standing in the way of fashion’s lofty environmental ambitions? Financing, or rather the lack thereof. Innovations, particularly those with the potential to be transformative, are often costly to implement at scale, which is necessary to create impact in an industry that is at once sprawling and siloed.

This is poised to change Tuesday as the Apparel Impact Institute (Aii) issues its first call for applications for the Climate Solutions Portfolio, a registry of carbon-slashing solutions that revolve around six industry-specific “intervention areas” or “levers” that the Sustainable Apparel Coalition spinoff identified with the World Resources Institute in 2021: next-generation materials, better and preferred materials, material efficiency, energy efficiency, thermal heat innovations and clean energy.

But this “data-backed tool,” as the Bay Area-based organization dubs it, isn’t just a rundown of projects with promise—including its own carbon leadership program with Higg Co—Kurt Kipka, Aii’s chief impact officer, told Sourcing Journal. It will also underpin the deployment of “catalytic” grants from the $250 million Fashion Climate Fund, which was announced at last year’s Global Fashion Summit in Copenhagen with the goal of unlocking roughly $2 billion in blended capital, including debt and equity, to help the fashion sector halve its carbon emissions by 2030.

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H&M Group, the H&M Foundation, Lululemon and The Schmidt Family Foundation made the initial infusions in June, followed by Calvin Klein owner PVH Corp. in September and Target in November. The companies have committed at least $10 million apiece, though each will take a different “approach” to how it fulfills that sum between now and 2030. Eventually, Aii hopes to onboard a total of 25 such industry and philanthropic partners to disburse the goal amount over the next eight years.

“We like to view it as our deployment mechanism,” Kipka said of the Climate Solutions Portfolio. “Ultimately, we want to be able to mold ourselves transparently accountable to the funding decisions we make and this type of solutions portfolio will enable us to do that while simultaneously helping us to highlight other fund-worthy projects that perhaps we just don’t get to but [could] find other organizations that might be willing to take them forward.”

At the outset at least, deciding which proposals will get picked will come down to the ask. While $250 million is the “aspirational amount,” as Kipka put it, Aii plans to distribute up to $30 million a year. Right now, it’s looking at annual grants of between $50,000 and $250,000 that will likely power an “array” of initiatives across the four main tiers of the supply chain. Not all tiers pollute the same: More than half (52 percent) of a supply chain’s carbon emissions are generated by Tier 2, or material production, according to the organization’s 2020 annual report. Tier 4 (raw material extraction) trails it at 34 percent, then Tier 3 (raw material processing) at 15 percent and Tier 1 (finished product assembly) at 9 percent.

“There [are] different levels of maturity and prioritization, that ultimately, we feel that the industry is best to take on,” Kipka said. “[With] this type of philanthropic catalytic funding, we can help to kind of supercharge or expedite the process of certain initiatives, either getting off the ground or getting emphasis [that] they may not [get].”

Though Aii is looking to fund 10 to 20 projects across four maturity levels—which is to say, pre-seed, pilot, model and scale—its decision-making methodology leans toward scale and size. Critically, they must demonstrate through data that they can meaningfully reduce greenhouse gas emissions to pass muster.

“We’re naturally going to be drawn to projects that are going to give both us and the industry the biggest bang for their buck,” Kipka said. “We’ll literally be looking at dollar in, carbon reduction out both in terms of the current state of those projects.”

Climate Solutions Portfolio
The Climate Solutions Portfolio will underpin the deployment of “catalytic” grants from the $250 million Fashion Climate Fund. Courtesy

That’s not to say the Carbon Solutions Portfolio won’t be taking projections into consideration. Aii will still consider longer-term investments that might end up being “highly lucrative” for carbon reduction by the close of the decade, though it might start to double down on schemes with more tangible results as 2030 inches closer. The multi-year view is what’s unique about the Fashion Climate Fund.

“It’s quite common for three years to the max funding timeline,” Kipka said. “[But] If we see a project that has a seven-year trajectory between now and 2030, and it seems feasible, we’ll put in milestones along the way to ensure that expectations are being met or that the phases of development are being followed.”

Aii will manage the fund, but it’s not running the selections alone. The organization has assembled a Climate Solutions Portfolio advisory council that includes environmental scientist Linda Greer; Beth Jensen, director of Climate+ at Textile Exchange; Crispin Wong, senior director of product sustainability and environment at Lululemon; Mallory McConnell, vice president of corporate Responsibility at PVH Corp.; and Phil Patterson, managing director at Colour Connections Textile Consultancy. Kipka will represent Aii at the table.

“We’re thrilled to have them and they’re going to get their hands dirty,” he said. “That’s part of the requirements for becoming a part of the council. It’s one where there’s going to be a lot of homework involved as we start to look at the data that we get on a regular basis from these applicants.”

There won’t be a lot of dilly-dallying; applications close on March 31 and Kipka said he expects to start working with finalists by May. The Climate Solutions Portfolio will be live to the public in July.

Applicants who don’t get past the first cut shouldn’t despair, however; a subsequent round of applications will open in the summer. Thereupon, the Climate Solutions Portfolio will fall into a six-month cycle, each with a renewed call to action that digests what Aii has learned to date while spotlighting white-space opportunities.

“​​I’m particularly interested in what we’re missing and using that as a guide for solutions providers in this sector to kind of rally behind and bring to the table,” Kipka said.

As both the Fashion Climate Fund and the Climate Solutions Portfolio get off the ground, Aii will be staffing up. For an organization that started off as a program builder and implementer, the shift to grant application manager won’t be easy. Aii recently hired a portfolio manager who will begin in earnest in May. Kipka will also be building out a portfolio management team that will oversee the projects based on their areas of expertise. Grantees, for their part, should expect to check in regularly with their progress. All initiatives will be tracked closely using a data-oriented approach to ensure that they’re delivering on expectations. The idea—and hope—is to be able to conduct an apples-to-apples analysis of any project across the value chain.

A lot—perhaps more than Kipka cares to admit—is riding on this. Most fashion companies are nowhere close to curbing their emissions in line with the 1.5-degree Celsius trajectory as set out in the Paris Agreement. If anything, their climate footprints are ballooning.

Figuring out where to begin is one bottleneck the industry struggles with, Kipka said. The Climate Solutions Portfolio could at least help them narrow down the possibilities, whether it’s efficiency schemes that have been Aii’s bread and butter since its inception, new circular business models or regenerative projects at the farm level.

“What we’re trying to accomplish here is trying to answer that question of what is a good project? What’s going to deliver a quantified reduction? And what type of claim can you make against that reduction?” he said. “Ultimately, it really does come down to knowing where…and how to get started with a number of projects that are right there in front of you.”

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