Nonprofit organization, the Apparel Impact Institute (Aii), has announced the lead funders in its new US$250M ‘Fashion Climate Fund’: Lululemon, H&M Group, H&M Foundation, and The Schmidt Family Foundation.

The Fashion Climate Fund was formed by Aii and its major partners to stimulate collective action to address fashion's supply chain emissions. The Fund could unlock an estimated $2 billion in blended capital across various asset classes, including debt and equity, by leveraging a first-of-its-kind collaborative funding model for fashion between philanthropy and corporate entities, to help meet the industry's goal of halving carbon emissions by 2030.

Hundreds of fashion manufacturers and retailers have promised support for the Science-Based Target Initiative (SBTi) to cut greenhouse gas emissions in their supply chains, however, there are still significant impediments to action: According to the report Roadmap to Net Zero: Delivering Science-Based Targets in the Apparel Sector, published by Aii and the World Resources Institute, 96% of the fashion industry's emissions come from third-party farms and factories that are shared across the industry and deemed too risky for brands, retailers, or traditional sources of capital to make necessary upgrades and overhauls.

The Fashion Climate Fund will provide programmatic funding for supplier interventions across the value chain, following the report's roadmap and the financial modeling insights set forth in Aii and Fashion for Good's report, Unlocking the Trillion-Dollar Fashion Decarbonization Opportunity. These interventions will include transitioning to renewable electricity, accelerating next-generation materials, scaling sustainable materials and practices, eliminating coal in manufacturing, and improving energy efficiency. To address such issues, Aii has formed strategic partnerships with organizations such as Textile Exchange, Fashion for Good, and Solidaridad, among others.

Philanthropic funding will offer the appropriate kind of financing to expedite and de-risk pre-seed and pilot innovations, while industry backing will speed proven solutions from pilots to scaled effect, thanks to Aii's unique methodology. Over the next eight years, this is expected to unleash $2 billion in blended capital.

The Fashion Climate Fund is a more ambitious, urgent, and comprehensive version of Aii's existing Clean by Design program. Since 2018, Clean by Design has gathered and implemented over $12 million in charitable financing into factory energy efficiency projects, unlocking $175 million in financial capital as well as environmental savings.

Aii will launch a Climate Solutions Portfolio to serve as an online register of early, mid, and late-stage initiatives that address supply chain greenhouse gas emissions in order to better assist solution management and fund application. The portfolio will be used by fund partners and strategic advisers to align the sector and make program and grant choices. Brands, retailers, suppliers, solution providers, innovators, foundations, government grantmakers, private equity, and banks are among the major stakeholders for this platform, which will enter Beta development in 2022.

Lewis Perkins, President of Aii, said that by uniting industry leaders and climate-focused philanthropists behind scalable solutions, the Fashion Climate Fund paves the way for greater collaboration and cross-pollination of solutions, facilitating greater investment and stronger collective action toward the industry goal of halving emissions by 2030, while also seeking climate justice for the citizens and communities where fashion is made. They are highly pleased by these lead partners' leadership and decisiveness today and are proud to play this role as they begin the first phase of project financing.

Aii is in talks with more lead partners, with the intention of each backer investing $10 million over the next eight years. This is the first step toward a bigger commitment by businesses and capital markets to meet science-based goals. To achieve even larger growth, Aii will continue to bring in more lead partners to this Fund and establish strategic connections with investment capital, including commercial lending and private equity.