Lack of external pressure, education and funding are all inhibiting change in sector – investors are key to facilitating transition
LONDON, 27 October 2021: With the largest environmental impact in the textiles, apparel and clothing (TAC) supply chain, wet processors have the opportunity to make simple, practical improvements to bring not only environmental benefits but significant financial benefits, too, Planet Tracker’s latest report reveals.
According to the report, produced by the financial think tank in collaboration with the Apparel Impact Institute (Aii), a one-off investment in processes that lower the environmental footprint of wet processing facilities could not only produce an annual water saving of 11.5% and average GhG reduction of 10.8%, but also give an average annual cost saving of USD 369,500, with an average payback period of just 13.8 months.
What’s more, these changes are often simple to implement. Practices such as installing meters, reusing cooling water and wastewater, maintaining steam traps and improving insulation can produce significant savings in water and energy use, and drastically reduce GhG emissions – and resulting in financial savings.
These cost savings are significant, amounting to industry cost savings of USD 6.1 billion annually – with a present-day value exceeding USD 25 billion, based on a 10-year payoff period and an average investment of USD 455k per wet processing facility.
But due to factors including a lack of access to knowledge, bank loans, understanding of the potential financial environmental saving, and insufficient pressure from both regulators and consumers, these changes have been slow to be implemented.
Now, though, with the introduction of corporate GhG accounting, companies are increasingly focused on reporting Scope 3 emissions that occur across their entire supply chain. This should incentivise companies to assist their suppliers in the transition to sustainability – but because suppliers often serve several companies, brands are reluctant to fund the transition cost on their own.
“This creates a huge opportunity for investors to facilitate a key environmental transition for wet processors through a range of funding mechanisms, as well as other parts of the textiles manufacturing chain such as garment manufacturers,” according to Catherine Tubb Ph.D., Senior Investment Analyst at Planet Tracker and author of the report.
“Impact investors are in a unique position to have an opportunity to invest directly into the wet processors themselves or into another vehicle that is directly investing”.
The report calls on investors to:
- Actively seek opportunities to directly invest in the supply chain of textiles producers, and take advantage of JVs or pooled debt to affect change;
- Continue to pressure brands to give transparency in the supply chain and to encourage them to invest in supply chain improvements;
- Seek partners such as Aii to help aid external investment opportunities.
And on companies and brands in the textiles industry to:
- Issue ESG-labelled bonds to pass funding to wet processing companies – these could be Sustainability Linked Bonds (SLBs) or other Green, Social, or Sustainable (GSS) Bonds;
- Cultivate long-term relationships with suppliers to enable them to get secured financing;
- Push for active and consistent environmental transparency from their own operations as well as those of their suppliers.
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ABOUT PLANET TRACKER
Planet Tracker is an award-winning non-profit financial think tank aligning capital markets with planetary boundaries. Created with the vision of a financial system that is fully aligned with a net-zero, resilient, nature positive and just economy well before 2050, Planet Tracker generates break-through analytics that reveal both the role of capital markets in the degradation of our ecosystem and show the opportunities of transitioning to a zero-carbon, nature positive economy. www.planettracker.wm165.uk
ABOUT TEXTILES TRACKER
Textiles Tracker investigates the impact that financial institutions have in funding publicly listed companies across the Textiles, Apparel & Clothing sector. Fast Fashion has created cheap and abundant clothing globally, but the natural capital cost has been high, with toxic production practices, degradation of natural resources, massive and growing waste as well as labour injustice. By providing information and analysis on these problems, placing a value on them and quantifying the negative impact on profits and investor returns, Textiles Tracker will support and stimulate a transition to greater sustainability in the industry. Textiles Tracker identifies the nodes in the textiles supply chain that are creating the greatest damage, analyses their financial value, provides transparency of ownership and, through owners and investors, pressures for change in industry practices.
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