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H&M, Lululemon Back $250 Million Fashion Climate Fund

H&M Group and Lululemon are among the backers of a new $250 million war chest to identify, fund and scale verified solutions to decarbonize the fashion supply chain.

“The biggest challenge we face today is not a shortage of ambition, or of ideas or even money,” Lewis Perkins, president of the Apparel Impact Institute (Aii), said at the Global Fashion Summit in Copenhagen on Wednesday. “The biggest challenge we face today is in bringing all the right players to the same table, to bring the most powerful forces together, and to properly resource this work in order to unlock even greater impact.”

The grantmaking vehicle, known as the Fashion Climate Fund, brings together the “power of big philanthropy” with corporate leadership to accelerate climate solutions that can drive 150 million tons of carbon dioxide reduction, Perkins said. With additional infusions from the H&M Foundation and The Schmidt Family Foundation, the first-of-its-kind collaborative funding model could unlock an estimated $2 billion in blended capital, including debt and equity, to help the fashion sector meet its goal of halving carbon emissions by 2030.

“We are all here, not just today in this room, but in our daily lives, our vocations and our avocations because of our shared vision and ambition to build a fashion industry where solving global challenges like climate change is more than just a nice idea,” Perkins said. “We all know that phasing out coal and other fossil fuels is a dire mandate. It must become a reality.”

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He noted that businesses hold “tremendous power” over what the energy and clean technology transition looks like and how quickly it succeeds.

“Climate is, after all, connected to everything,” Perkins said. “Carbon emissions removal, yes, and also land-use, biodiversity, water stewardship. And while our ambition is powerful, without action, we cannot reach our targets; we cannot get where we have all agreed that we need to go.”

According to a recent report by Aii and World Resources Institute, 96 percent of the fashion industry’s emissions stem from third-party farms and factories deemed too risky for brands, retailers or traditional sources of capital to upgrade or overhaul.

Lewis Perkins, Aii, at Global Fashion Summit
Aii’s Lewis Perkins, far left, at the Global Fashion Summit Sourcing Journal

Building on insights gleaned from analysis by Aii and Fashion for Good, which estimated last year that a $1 trillion investment gap stood between the industry and its net-zero ambitions, the new Fashion Climate Fund will provide programmatic funding for supplier interventions, including transitioning to renewable energy, promoting next-generation materials, eliminating coal in manufacturing and boosting energy efficiency.

Aii is currently running programs in the hotspots where 70 percent or more of garment manufacturing’s carbon emissions are concentrated, including Bangladesh, China, Pakistan, India, Italy and Vietnam.

“Our programs have unlocked roughly $175 million in sustainable finance in the supply chain and removed 1.5 million tons of CO2 emissions per year,” Perkin said. “But we can drive and unlock much more. …Today we usher in a new era of climate finance for the textile, apparel and footwear industries’ supply chain.”

Lululemon and H&M, which are contributing $10 million each to the fund, have both been dinged by environmental campaigners in the past. In a study published in November, said that both brands have increased their supply-chain emissions “substantially” in recent years, which it called “inconsistent with UN Fashion Charter goals.” Even at the height of the pandemic in 2020, H&M’s supply-chain emissions ticked up 1.7 percent year over year. Lululemon’s jumped by 12.7 percent., which like Lululemon is based in Vancouver, has trained its sights on the yogawear purveyor. In January, the watchdog group blamed the Team Canada outfitter for “threatening the future of Winter Games” because of its lack of “meaningful action to get rid of coal and deploy renewable energy in its manufacturing.”

The organization traced Lululemon’s long-anticipated foray into footwear to factories in China, where 66 percent of the power used for manufacturing stems from coal and only 9 percent originates from renewable energy, it said. So far Lululemon has done “very little” to advocate for the transition to green energy in China, Vietnam and other countries where its production happens, added.

People for the Ethical Treatment for Animals will lob another volley during Lululemon’s annual meeting Wednesday as it urges shareholders to support its resolution calling the brand to commission a report into slaughter methods for ducks and geese in its down supply chain. The animal-rights group accused Lululemon of “hiding” behind “meaningless” claims that birds used for its down-packed jackets are treated humanely.

In a statement provided by Aii, Esther Peck, vice president of sustainable business and impact at Lululemon, said the brand “remains committed” to its climate goals.

“Lululemon is proud to support the Fashion Climate Fund and collaborate with other brands as we collectively work to accelerate climate action and sustainability solutions in the apparel industry,” she said. “We remain committed to our climate goals and are confident that this fund will help to innovate solutions that decarbonize and modernize industry supply chains.”

Leyla Ertur, head of sustainability at H&M Group, which has committed to be 100 percent climate positive by 2040, hailed the Fashion Impact Fund as a lever to accelerate the industry’s “necessary transition.”

“It is time for urgent action and we as H&M Group are constantly looking out for investment opportunities to further strengthen the availability and usage of renewable energy and fund the innovation and distribution of technology that will allow us to fully decarbonize our production and logistics operations,” Ertur said. “We are inviting other players to join us on this journey.”

Perkins also extended that invitation to the summit’s attendees.

“This is only the beginning,” he said. “Over the coming months, we will bring—and announce—more strategic lead partners working on decarbonization in the textile, apparel and footwear sectors’ supply together into one great community of practice with the necessary insights, knowledge and resources to get the job done.”