What is Planet Tracker?
We're a nonprofit financial think tank. Our theory of change is that finance, whether it's investors or banks, can be leveraged to drive sustainability improvements across industries and supply chains, particularly in the textile sector. We focus on nature capital and emphasize to investors and financiers that neglecting nature and sustainability increases investment risks. We advocate for pushing management teams and suppliers to align with climate targets and prioritize nature, as this ultimately benefits financiers in the long term. Our goal is to reconcile sustainability motives with the profit motive inherent in finance markets.

What does Planet Tracker focus on?
At Planet Tracker, we operate across two main streams: the material stream, which includes our textiles program, plastics program, and petrochemicals focus, allowing us to address plastic issues derived from petrochemicals. Additionally, we have a food system transition stream dedicated to analyzing food land use and oceans.

Our team at Planet Tracker represents diverse backgrounds. Personally, I've been with Planet Tracker for three years and have accumulated over a decade of experience in finance, primarily in equity research. Our team comprises individuals with backgrounds in banking, finance, and sustainability, allowing us to bridge the gap between these sectors.

What is Planet Tracker's mission?
We engage with major European international banks and large asset managers such as BlackRock, Legal and General, and Fidelity. Our interactions typically involve discussions with their portfolio managers and analysts, where we present our research and help them understand the risks and sustainability challenges within industries. We highlight problems, offer solutions, and identify barriers to addressing these issues. As owners of many corporates, they play a crucial role in driving companies toward sustainability. We advise on the questions they should ask management and the metrics they should request for public reporting to track progress.

When we believe they're not addressing issues adequately, we provide pointed criticisms, urging the industry to improve. Many of these investors lack expertise in sustainability, so we fill that gap with our reports, expertise, and discussions. We aim to facilitate a deeper understanding of sustainability challenges and empower investors to drive positive change within companies.

Could you give an example?
We've recently delved into water risk within the textiles sector, a critical yet often neglected aspect compared to climate reporting. While many major brands are actively setting climate targets, they often overlook their water impacts. However, water usage in textile production, especially in processes like wet processing and fiber production, is substantial and known for its environmental and social repercussions. Unfortunately, brands frequently lack transparency, particularly concerning their suppliers' water impacts.

Given the projected increase in water stress due to factors like population growth and climate change, these issues pose significant threats to businesses. Our research, incorporating data from reputable sources like the World Resources Institute and Open Supply Hub, allows us to assess both current and future water stress levels at factory locations. We stress the importance of investors considering water risk when evaluating their investments and advocate for proactive measures to enhance sustainability in the industry.

Even consider the literal implications: What risks does this brand's position pose for my investment? Consequently, what dialogue should I initiate with the management team regarding water concerns? To clarify, ignoring water issues isn't an option. So, if you're starting to feel concerned, what questions should you be asking the brand? We outline the problem, elucidate its significance, and propose actionable steps for investors. This process exemplifies our approach, demonstrating how we tackle sustainability challenges from start to finish.

Does that mean that there is no knowledge of the problem?
It's easy for those immersed in the textile industry to assume widespread awareness of its challenges. Yet, many investors, despite their financial expertise, lack insight into the complexities of the supply chain. They may know of major incidents like Rana Plaza, yet struggle to grasp the detailed connections between, say, a fiber spinner in Bangladesh and a retail giant like Inditex. Our team has taken on the task of mapping out this industry landscape for them, clarifying the relationships between various players. Without this foundational understanding, addressing sustainability issues becomes nearly impossible.

The term "wet processing" might draw blank stares from asset managers, highlighting the gap in knowledge that exists even among seasoned investors. Educating them on such crucial aspects is paramount to advancing sustainability goals within the industry.

Attending conferences like the recent one in Amsterdam on sustainable apparel reaffirms that industry insiders are well-versed in these matters. However, engagements with investors, even those with a sustainability focus, often reveal a lack of familiarity with the basics. It's a humbling experience to realize the extent to which we need to backtrack, reiterating the fundamental problems and their context.

Are you pinpointing the issue, and furthermore, are you singling out specific brands or companies in the textile sector known for causing considerable environmental and social harm in their supply chains?
It's a bit of a mix. We identify systemic issues in the textile sector and spotlighting companies causing significant environmental and social harm. Our approach varies, sometimes targeting specific brands and other times taking a broader view. For instance, in our water risk assessment, we aim to cover as many entities as possible based on available data. In analyses like examining CEO compensation, we concentrate on the top 30 global brands, assuming larger companies have a larger environmental footprint. By identifying leaders and laggards, we prompt questions about why sustainability isn't universally prioritized. Our research involves data collection, benchmarking sustainability targets against CEO compensation. Through reports, webinars, and investor meetings, we disseminate findings widely to influence investor behavior and corporate practices.

The concept of the report is to put pressure on companies and encourage them to make adjustments if they do not meet the performance standards?
Navigating our work's impact is challenging; investors can't openly disclose decisions influenced by our insights due to legal constraints. However, we gauge interest through meeting requests and inquiries. For instance, our water reporting sparked significant interest, reflecting growing investor concerns in this area. Corporate responses can also indicate our influence. Recently, our analysis found shortcomings in FMCG (Fast-Moving Consumer Goods) companies' climate transition plans. Following our report, they adjusted their strategies and increased funding, likely in response to investor pressure. While we can't claim direct credit, it's evident our work spurred these changes.

Are there other sustainability challenges in the textile sector?
Greenhouse gas emissions remain a significant challenge across industries, including textiles. We're actively addressing this issue and not complacent about its severity, especially as the textile sector has shown concerning trends in emissions.

Another pressing concern is the composition of fibers used in textiles. The prevalence of synthetic, fossil fuel-based fibers is often overlooked by consumers, yet it poses a substantial sustainability challenge. While synthetic fibers offer certain performance benefits, such as in sportswear, transitioning towards textile-to-textile recycling and waste management is imperative for long-term sustainability.

Despite discussions around circularity and reuse, the industry still has a long way to go in addressing these challenges. Rapidly growing brands like Shein highlight the urgency of reevaluating business models for sustainability. This fiber challenge underscores the industry's need to consider its environmental footprint holistically, from production to end-of-life disposal, especially given the significant plastic waste generated. Elevating this issue on the agendas of both brands and investors is crucial for driving meaningful change in the textile industry.

How can the textile industry better support scale-ups to foster competitiveness and sustainability in the face of increasing dominance of oil-based synthetics?
Someone from Renew Cell, which recently filed for bankruptcy, emphasized the need for greater industry support for scale-ups. They stressed that without this support, the dominance of oil-based synthetics will persist, fueled by the growing production of petrochemicals by oil and gas majors. This could lead to further reductions in the cost of plastic, especially as the shift away from gasoline cars increases the focus on petrochemicals. The industry must acknowledge this challenge and invest in scale-ups to promote competitiveness and sustainability.

Planet Tracker’s Textile program aims driving the transition of the global textiles supply chain to more sustainable practices. Tell us me more about that program.
Our program consists of a small team, including myself, a data analyst, and additional analysts supporting research efforts. We recognize the importance of gradual changes. Our efforts are closely aligned with key initiatives such as the UN Sustainable Development Goals, biodiversity targets, COP 15, and achieving Net Zero emissions. Ultimately, our aim is to encourage the industry to meet these international targets for sustainability.

By 2030 Planet Tracker wants to bring about transformation and global financial activity. How realistic is this?
Honestly, do I think we'll be completely there by 2030? Sadly, I don't think we will because we are still so far away. But while achieving full sustainability by 2030 might be ambitious given the distance we still have to cover; I'm encouraged by the increasing focus on sustainability within the investment community. Investors, including asset managers and lenders, are increasingly considering sustainability in their decisions. This is evident in the emergence of green financing options and the growing recognition of the value of carbon and nature credits. What's reassuring is that sustainability is now seen as integral to long-term profitability, rather than just a fringe concept. Despite challenges such as political debates on ESG in the US, investors are realizing that sustainability is not just a checkbox but a crucial factor in investment decisions. Perhaps envisioning sustainability as a standard practice, rather than a separate entity like "ESG," could signal progress towards its normalization in investment practices.

Richard Wielechowski is the Senior Investment Analyst in the Textiles Programme at Planet Tracker. He has significant experience of analysing and modelling different industries and communicating the results to professional investors. Before joining Planet Tracker, Richard spent 10 years at sell-side equity firm Bernstein Research, covering sectors including Retail, Media and Medical Devices. Richard holds undergraduate and graduate degrees from the University of Cambridge and has completed all three levels of the CFA examinations.