H&M aims to decarbonize the fashion supply chain with a climate finance tool
©H&M Group
H&M Group is taking a leadership position in establishing collaborative financing solutions that enable the necessary decarbonization of fashion supply chains. To realize this ambition, H&M Group, together with Southeast Asia’s largest bank, DBS, has initiated a collaborative finance tool – a first-of-its-kind green loan program that facilitates supply chain decarbonization in the apparel sector.
In line with the group’s ambition to achieve net-zero CO2e emissions by 2040, H&M Group has for the past years focused on making funding available to reduce greenhouse gas emissions across and beyond its own supply chain. Its Green Fashion Initiative enables supplying factories to invest in the technologies and processes needed to reduce energy demand and replace fossil fuels across the fashion industry.
To help accelerate the adoption of green initiatives across the supply chain, a collaborative finance tool was developed. Through the programme, suppliers get access to financing from DBS and technical support from sustainability consultant, Guidehouse, to embark on factory upgrades to decrease their climate impact. Unlike traditional banking solutions which seek to encourage such green activities indirectly, this program directly provides financing with highly favorable terms to suppliers for specific GHG emission reduction activities, as approved by H&M Group.
Earlier this year, the collaborative finance tool completed the first successful transaction with a manufacturer in India to fund capital expenditures to reduce scope 3 greenhouse gas emissions. With the support of the loan, supplier Raj Woollen financed the installation of solar panels, energy-efficient motors, as well as water conservation technologies to conserve resources and reduce carbon emissions.
Recognizing the complexity and scope of the climate challenge, H&M Group identifies collaboration as a cornerstone of its climate action framework and collaborative financing efforts as the only way to create rapid change at scale. Existing collaborative financing models and those currently under development have the potential to build an ecosystem of solutions. However, further commitment from brands and investors is needed to co-invest and share the financial responsibility of a project and give further alternatives to support suppliers in their decarbonization journey. H&M Group encourages other brands and financial institutions to join its initiative and the group’s COP28 delegation is looking forward to meeting involved stakeholders at the conference to continue the dialogue.
