The Decarbonisation of Textile, Apparel, and Footwear Suppliers (D-TAFS) fund will provide long-term loans for energy-efficiency measures, renewable energy installations and water-use improvements. It will also support work to identify and reduce hazardous chemicals used in production.
D-TAFS is a global structured debt initiative targeting $250 million, scalable to $400m, The fund is managed by impact investor and asset manager SIMA Funds in partnership with the International Finance Corporation (IFC).
Inditex, the owner of Zara, has committed $50m as an anchor investor, while the IFC, a global development institution that focuses on emerging markets, is providing $60m.
The GEF has also committed $13.8m in concessional financing to the fund’s riskiest investment tranche.
This position means the GEF would absorb losses before investors in the fund’s more senior tranches if borrowers default.
The GEF said this structure helped reduce the perceived risk for development finance institutions and private investors. Other participants include FMO, Proparco and British International Investment.
The financing package, including agency funds, totals $16m from the GEF and is expected to generate more than $150m in co-financing.
D-TAFS aims to support at least 60 borrowers during its 10-year life. Its targets also include reducing three million tonnes of carbon dioxide equivalent emissions and benefiting 150,000 workers, most of them women.
The programme is focused on suppliers because they account for most of fashion brands’ Scope 3 emissions. These are indirect emissions generated across a company’s value chain, including by suppliers.
Alongside the investment, the GEF is providing a $917,000 technical assistance grant for hazardous chemical and waste management.
The funding is expected to support about 100 factories with chemical assessments, staff training and the adoption of safer alternatives.
The work will include progress towards a Preferred Chemicals List covering about 1,300 high-use chemicals. It will also support efforts to reduce mercury in supply chains under the Minamata Convention.
The GEF said the funding model could be applied to other supply chains where large companies depend on smaller suppliers, including electronics and food.
It forms part of the organisation’s wider work to use blended finance to address pollution in sectors such as agriculture, mining, electronics and tourism.
