Fashion industry still off-trend when it comes to sustainability, says Pollination

The significance of the fashion industry amid the transition to a more sustainable economy is not being adequately understood by investors, Pollination has told Environmental Finance.

“Fashion has the potential to not only drive significant changes in outcomes and approaches across supply chains and the people who work in these, but also positive impacts on climate and nature,” said Helen Crowley, partner at climate-focused investment and advisory firm Pollination.

“Its power is in that it can be ‘sexy and compelling’ while also being a huge influencer of change,” she said, adding that this potential isn’t “taken as seriously as it could be by investors”.

Crowley called on investors to think about what they can do to accelerate change within the fashion industry, which has numerous sustainability-related problems.

The UN Environment Programme estimates that the fashion industry is responsible for around 10% of global emissions, which is more than all international flights and maritime shipping combined. Fabric dying and treatment causes around 20% of all global wastewater, while plastic microfibres – equivalent to 50 billion plastic bottles – ends up in the oceans each year. The industry is also accused of poor labour conditions in its supply chains.

The Ellen MacArthur Foundation estimated that global consumption of clothing could rise from 62 million metric tones in 2019 to 102 million by the end of the decade, meaning these problems could worsen.

$20 billion investor Redwheel recently sold its shares in clothing company H&M over concerns that it was not doing enough to reduce its climate impact. It shifted its investment to companies that are doing more to help the fashion industry’s transition. This includes Intidex, which owns high street fast fashion brands Zara and Stradivarius and is investing €1.1 billion per year to create a ‘closed loop’ system and developing a ‘resell, repair or donate’ programme.

Crowley said: “Divesting is maybe one action that people can do, but I think it’s more about creating positive incentives for corporate change”.

This might include offering companies sustainability-linked loans or bonds to “provide the capital to help a company improve their business”. She predicted that innovative financial mechanisms will play an “increasingly important catalytic role”.

As the economy shifts away from linear and extractive models, Crowley argued that fashion will have to develop more circular and regenerative approaches. It is therefore an important investment area when looking for transition and nature-positive opportunities.

There is already a lot of innovation happening in the market, she explained, especially in terms of new or recycled materials, as fashion looks to wean itself off fossil-fuel based fibres.

However, the lack of investor interest in this aspect of the sector means “we are missing the opportunity to invest in, and create from, a more diverse basket of natural materials and fibres”, which could include ancient varieties of silk and cotton or wild animal fibres such as yak fur.

“The investment opportunity needs to be articulated more clearly,” she said.

She admitted that there is still a lot of work to be done in the industry, especially as fashion companies will “have to rethink their whole value proposition”. But, she added: “We will be surprised just how much positive change we can empower and catalyse in the coming years”.

This article was originally published in Environmental Finance.