Fast fashion is an environmental disaster. In 2015, it was estimated that the global textiles and clothing industry was responsible for the consumption of 79 billion cubic metres of water, 1,715 million tons of CO2 emissions and 92 million tonnes of waste. If nothing changes, by 2030 those numbers will increase by at least 50 per cent.
Now, more than ever, our clothes have become disposable. A 2018 report from management consulting firm McKinsey found that people see cheap clothing as disposable – with the majority of items thrown away after wearing them only seven or eight times. How about what you’re wearing right now? From growing cotton to dyeing and processing, it takes an estimated 20,000 litres of water to make just one pair of jeans and one T-shirt. It would take you 13 years to drink that amount.
Nestled on the outskirts of the small Finnish city of Jyväskylä, one company is aiming to fix the fashion industry’s dependence on environmentally ruinous materials, one fibre at a time. Founded in 2014, Spinnova, transforms cellulose from FSC-certified wood into textile fibre without using any chemicals. Or, to put it simply, it turns wood into clothes.
“Sustainable textiles must be able to perform as well as ones made of current materials,” says Spinnova CEO and co-founder Janne Poranen. With this in mind, Spinnova’s fibre is soft, strong and stretchy, making it ideal for everything from loungewear to workwear – all while using a fraction of the natural resources and chemicals required by current processes. After years of research and development, Spinnova is now ready to scale up its production.
By ditching cotton for wood-based fibre, Spinnova’s production process uses 99 per cent less water than the cotton value chain. Its product also contains no microplastics and biodegrades in just a few months. It can even be recycled. It’s a far cry from the industry Spinnova is trying to disrupt. But to truly change the garment industry, Spinnova needs to compete not just on quality, but also price. “Our technology is designed to be scaled,” says Poranen. By this, he means it’s modular. What works at a small scale will also work at an industrial scale – all that’s needed is investment.
For Pictet, a leading wealth and asset management company, the opportunity to engage with companies as an investor is key to push for positive change. “As shareholders, we can support companies in their journey to transform and implement better solutions for the climate,” says Rosa Sangiorgio, head of ESG at Pictet. Engaging with companies to transform them to be more economically, environmentally and socially sustainable is a major challenge – but it can have huge positive outcomes for everyone. “If I have in my portfolio a company that is considered risky, because of its environmental or social impact, supporting it de-risking through innovation allows me to transform risks into opportunities,” says Sangiorgio.
It’s a way of thinking that can be replicated across all areas of business. In the automotive industry, it’s estimated that electric vehicles will make up 32 per cent of the total market share for new car sales. That’s 31.1 million cars. And getting from our fossil fuel addiction to a more sustainable electric vehicle future is going to require one thing above all others: batteries, lots and lots of batteries.
“It’s very likely that, over the next five to seven years, we will see just a major move in customer demand from combustion engines into hybrid and eventually into fully electric vehicles,” says Peter Carlsson, a former Tesla executive who, in 2015, founded Swedish battery manufacturer Northvolt. If electric vehicles are the future, then Carlsson is one of the best-placed to help drive the world towards it.
With China taking an early lead in manufacturing batteries for electric vehicles and Tesla dominant in the United States, Northvolt is pitching itself as the first big player in Europe. The company has already signed multi-billion dollar deals with BMW and Volkswagen to build a number of battery production facilities in Europe in preparation for the coming sales boom.
One of the key elements of Northvolt’s big battery plan is hydroelectricity, a form of energy supply that is abundant in Sweden. “We’ve built the vertical integration of active material manufacturing together with cell assembly,” Carlsson says. “If you combine that vertical integration with renewable energy at a very affordable cost, it’s creating a really attractive business proposition that can compete on a global basis.”
The European Investment Bank seems to agree. In July 2020 it issued a €350 million loan to help fund the construction of a vast hydro-powered battery production facility in Skellefteå, a small industrial city in the north of Sweden. Northvolt aims to deliver more than 400,000 car batteries a year from 2024, with all the raw materials in them collected from reliable and safe sources – many of them within Sweden itself.
Disruption on this scale doesn’t come cheap. But for investors, putting money into companies with a strong focus on tackling the climate crisis is no longer seen as a high risk move. “If the financial industry embraces the ideas of using environmental, social and corporate governance data within their processes, and of measuring the negative and positive impact of their investments, then it can become a very powerful bridge towards innovation,” says Sangiorgio. While in the past such initiatives risked amounting to little more than box-ticking and greenwashing, Sangiorgio says pressure from consumers and regulators – but also the financial industry itself – is forcing companies to implement meaningful change that drives social and environmental progress.
Scaling up as quickly as Northvolt is – and disrupting an industry worth $2 trillion – is a huge task. “The biggest challenge right now is to get the skills,” says Carlsson. “Outside China this ecosystem is fairly limited. We need to bring up the skills and the workforce. This is not like bending steel, it’s a fine, mechanical, chemical process. It has more similarities to manufacturing semiconductors than it does to mechanical assembly.”
Get the skills in place and, Carlsson hopes, the scale will follow. He believes strongly that Europe must build its own supply chain for electric vehicles – both to compete economically but also to show the most environmentally sustainable way to build the batteries on which we will all one day depend. “This is not just about building battery factories, it’s building all the components that supply all these factories. Right now, that European ecosystem is small – but it’s growing. “For Europe’s competitive edge, for its economic growth and for jobs, it’s pretty damn important.”
For companies looking to solve humanity’s greatest challenges – however big or small – they need help from investors with the knowledge and expertise to take a great idea and really make it work. “Sustainability, positive impact, it’s a journey,” says Sangiorgio.
A focus on sustainability – be it environmental, economic or social – is at the core of Pictet’s strategy for making better long-term investment decisions for its clients. “We have information today that we didn’t have 20 years ago,” says Sangiorgio. Until recently, investors didn’t know how much CO2 a company was responsible for, nor was there a set of clearly understood rules around, say, gender diversity on company boards. “Today, we have this information,” says Sangiorgio. “This helps us both with managing the risks and identifying the opportunities that will be the successful and profitable businesses of the future.”
Pictet is a leading independent asset and wealth management group, with more than CHF570 billion in assets under management, and more than 4,800 staff across 30 global offices. Pictet Group’s Responsible Vision embraces new financial models that are based on solid science and innovative partnerships, and also take account of environmental, social and governance factors in investment decisions and active ownership practices. Find out more here: group.pictet/responsible-vision
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