For companies seeking funding, sustainability is no longer just a nice to have. It is a key element that investors weigh when considering where to place their dollars.
“Any brand that is going to be relevant to today’s consumer and positioned optimally in the capital markets must have sustainability and ESG as an underpinning of its product and narrative,” said Peter Comisar, managing partner and founder of STORY3 Capital Partners.
Per Comisar, the push for sustainability in apparel and footwear is coming from the urgent need for climate action to counteract the industry’s significant impact. It’s also being driven by two main influences: consumers and governments. “We’re increasingly seeing regulations that are mandating a cleanup of this area that we think will ultimately exponentially drive a movement towards more sustainable solutions and alternatives,” he said. Comisar believes this policy-setting framework will catalyze parallel governmental focus and regulation that has the potential to mandate change—and will likely find industry players scrambling to get compliant.
Referencing the EU’s framework for a climate-neutral textile industry that will drive huge changes in the supply chain and sourcing, Comisar specifically noted that the EU intends to implement eco-design requirements governing circularity, such as durability, reparability, recyclability and recycled content, in the same way there are currently for chemicals and labeling. Importantly, the EU is promoting consumer-facing transparency and a shift toward digital labeling after a recent screening of sustainability claims in the textiles sector suggested that 39 percent of green claims could be false or deceptive.
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Comisar gave a nod to the parallels between sustainability and e-commerce. Brands today wouldn’t launch without online sales, and environmental considerations are equally imperative. Additionally, much like companies jumped on the digital retail trend when it was nascent, there is a similar interest today in green-focused firms. “Brands or products empowering or rooted in this whole sustainability and green theme are big opportunities,” he said. “And frankly, on the investor side, there’s a lot of money being allocated to this space at this point in time.”
Comisar also noted the amount of capital and investor interest in supporting ESG. He said from individual investor to pension funds to sovereign funds, there is a tremendous focus and interest in capital deployment into ESG anchored companies at all levels of maturity. “Despite current market volatility and valuation retrenchment, ESG investment seems to be the one area of continued focus and investing out performance,” he added.
Comisar warned, however, that among the plethora of companies pitching green solutions, many are either not scalable or would be costly for brands to implement. Although the industry is in alignment that sustainability is necessary, he sees it as a tougher sell for brands to adopt anything that would significantly raise prices or erode margins, particularly during this period of inflation.
STORY3 is the third chapter in Comisar’s three-decade career driving financial transactions. Earlier, he was a partner at Goldman, Sachs & Co. and vice chairman of Guggenheim Partners. STORY3’s focus is on areas including consumer retail and media, with apparel investments such as Lands’ End, Perry Ellis, formal wear rental startup The Black Tux and scrub brand Figs.
All of STORY3’s investments have had sustainability as “one of the legs in their stool.” The firm’s first investment after it launched in 2018 was Recover, a company that turns pre- and post-consumer textile waste into recycled cotton fibers. Per Comisar, Recover is a “prime example” of STORY3’s target investments. “We’re looking at acquiring or investing in companies that have an immediate, scalable solution…[that] doesn’t require a price premium relative to current alternatives,” he said.
During Sourcing Journal’s Sustainability Summit: The Road to 2030, Comisar will join Katie Hoffman, partner and investment committee at Regeneration.VC, and Danielle Joseph, managing director of Closed Loop Partners, on the “Funding a Greener Future” panel. Both Regeneration.VC and Closed Loop Partners are funds specifically focused on sustainability; Regeneration.VC’s portfolio includes eco-friendly lifestyle label Pangaia and lab-grown leather company Vitro Labs, while Closed Loop Partners has invested in circular textile innovator Evrnu and The Renewal Workshop, which repairs and prepares merchandise for resale. The speakers will share their firsthand knowledge, including what they look for in possible investments.