Fashion and design brands company H&M Group announced the launch of a new green loan program aimed at facilitating decarbonization in the fashion sector in partnership with Singapore-based financial services group DBS.
Under the new program, the H&M’s suppliers will get access to financing from DBS, with “highly favorable” terms to suppliers with specific GHG emission reduction activities. In addition to the financing, suppliers in the program will also receive technical support from sustainability consultant, Guidehouse, to embark on factory upgrades to decrease their climate impact.
Tan Su Shan, Group Head of Institutional Banking at DBS, said:
“Accelerating net zero for supply chains requires the rapid scaling of low-carbon technologies and new, innovative financing models to drive adoption. The collaborative finance tool is a prime example of how we can create impact for suppliers. DBS is excited to be harnessing our extensive network in Asia, in partnership with H&M Group, to provide access to sustainable financing in a practical way – by directly funding factory upgrades to help suppliers improve their energy efficiency and decarbonise.”
H&M Group has set a goal to achieve net zero emissions by 2040, with interim targets to reduce absolute Scope 1, 2 and 3 emissions by 56% by 2030. As with most fashion retailers, Scope 3 value chain emissions, or those outside of a company’s direct control, account for the vast majority of the company’s emissions footprint. According to H&M’s 2022 Sustainability Report, Scope 3 makes up nearly 99% of the company’s emissions. Of these, over 60% derive in supply chain areas including fabric production, garment manufacturing, raw materials and transport.
The new program marks the latest in aa series of supply chain-focused financing initiatives by H&M, including the Green Fashion Initiative, aimed at enabling supplying factories to invest in the technologies and processes to reduce energy demand and replace fossil fuels, the implementation last year of a SEK 3 billion (USD$ 290 million) annual budget for value chain emissions reduction projects, participation as a lead funder of the $250 million Fashion Climate Fund, the initiation of a Sustainable Supplier Facility with Guidehouse to facilitate decarbonization-related funding for suppliers, and the implementation of an internal carbon price to drive behavioral change in buying, design, merchandising, production and logistics.
Ulrika Leverenz, Head of Green Investment at H&M Group, said:
“H&M Group has been engaged in climate mitigation for years and we continuously push ourselves to demonstrate climate leadership within our industry. We see that our industry is committed to tackle its negative climate impact. But we also see that impactful climate action requires collaborative financing. For us, sustainability investments are not only a responsible approach but a strategic necessity for future success.”
H&M Group and DBS said that the new financing initiative has already completed its first transaction with India-based manufacturer Raj Woollen to fund the installation of solar panels and energy-efficient motors, as well as water conservation technologies to conserve resources and reduce carbon emissions.