Estimating an investment opportunity of $1 trillion, a new Fashion for Good-Apparel Impact Institute report breaks down the funding needed by solution category and identifies the types of funders best placed to take advantage of the opportunity and benefit from the positive returns.
Recent studies estimate that 2-4 percent of global greenhouse gas emissions stem from the fashion industry. With global average temperatures projected to rise by 3° Celsius this century — well beyond the 1.5° Celsius goal of the Paris Agreement — disruptive solutions and unprecedented actions are needed to curb emissions and achieve net zero by 2050.
A new report — co-authored by Fashion for Good and the Apparel Impact Institute (Aii) and sponsored by HSBC — for the first time charts a trajectory for the industry to meet the net-zero ambition, mapping the integral levers across existing solutions such as renewable energy, and emerging innovations such as next-generation materials and circular and other end-of-life solutions for textiles. Estimating an investment opportunity of $1 trillion to finance the transition, the report breaks down the funding needed by solution category and identifies the types of funders best placed to take advantage of the opportunity and benefit from the positive returns.
Unlocking the Trillion-Dollar Fashion Decarbonization Opportunity estimates the emissions-reduction potential of existing and emerging solutions, and calculates the finance needed to scale them and drive the industry to net zero by 2050 — a critical step to mapping the path and actions for the fashion industry in the decades to come. The findings in the report are significant — analysis shows an estimated $1 trillion is required to finance the decarbonization of the fashion industry by 2050.
“Reducing carbon emissions will be one of, if not the, defining challenge of our generation and indeed the fashion industry. The good news is that a strong pipeline of solutions — both disruptive and ready to be implemented — can drastically decarbonize the industry,” says Katrin Ley, Managing Director at Fashion for Good. “This report highlights that not only are the opportunities plentiful and financially attractive — they are key to getting us to a net-zero, circular industry.”
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Though $1 trillion may sound substantial, the majority of this spend is allocated to projects that offer an attractive financial, as well as environmental, return on investment. More than $35 trillion of financial capital is available globally for good-return environmental, social, and governance (ESG) investments, a figure expected to exceed $50 trillion by 2025, according to Bloomberg Intelligence. However, critical barriers to unlocking the necessary funding remain. With input from key industry stakeholders, the report highlights those barriers and presents examples of financing opportunities.
“This report reframes decarbonization as an investment opportunity, rather than a cost,” says Aii President Lewis Perkins. “These proven, investable solutions require a tremendous amount of capital; and we now need to create the pathways for all forms of financial capital in order to bring them to scale.”
The financing opportunity is multi-faceted and will require a committed and coordinated effort by brands, manufacturers, philanthropy, government and industry organizations. The report splits up the amount of finance required per emission-reduction solution across the different financiers, appealing to different risk appetites and profiles, and providing a nuanced and detailed pathway to achieving net zero.
Key findings include:
An estimated 47 percent of CO2 reductions come from implementing existing solutions, 39 percent comes from scaling emerging solutions, and 14 percent from other solutions — including reducing overproduction, material efficiency improvements, and scaling circular business models.
The report uncovers key actions and recommendations to unlock the $1 trillion financing opportunity, including:
the cost breakdown by financier groups needed to accelerate the transition to a net-zero industry
for governments to strengthen policy framework and mechanisms to catalyze private investment.
for philanthropies to encourage coordination and explore blended-capital approaches.
for brands to pursue stronger engagement and commitment to innovation and suppliers.
for manufacturers to adopt a strategic capital improvement plan that is aligned with brand partners
for banks and lenders to prioritize key production regions and innovative financing opportunities
“The fashion industry is becoming increasingly aware of its environmental impact and of the need to swiftly transition to net zero,” said Zoë Knight, Managing Director and Group Head of the HSBC Centre of Sustainable Finance. “This report shows that, while there are challenges to overcome, this transition is possible and will open up new opportunities for businesses in this sector. Collective action is critical. The financial system must play its part by providing the investment to fund net-zero solutions at scale.”
The full report and findings can be downloaded and read here.