H&M, DBS initiate first-of-its-kind green loan program to help decarbonize fashion sector

“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 tackling its negative climate impact. But we also see that impactful climate action requires collaborative financing. For us, sustainability investmen ts are not only a responsible approach but a strategic necessity for future success”, says Ulrika Leverenz, Head of Green Investment, H&M Group.

In line with the Group’s ambition to achieve net-zero CO2e emissions by 2040, H&M Group has for the past years set focus 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 program, 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 programme directly provides financing with highly favourable terms to suppliers for specific GHG emission reduction activities, as approved by H&M Group.

“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 decarbonize”, says Tan Su Shan, Group Head of Institutional Banking, DBS.

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.

“Raj Woollen is committed to its sustainability and environmental initiatives, and one key goal is to reduce the impact of our manufacturing processes on the environment. This joint project with H&M Group, Guidehouse, and DBS has been a successful combination of expert energy assessment, close support in selecting the most suitable technology solutions, and an attractive financing model. We are confident that this will ensure the highest possible results in our decarbonisation journey, and we are grateful for this partnership.” Sumeet Nath, Managing Partner, Raj Woollen Industries.

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.