You may not know this, but the fashion industry produces about 10% of annual global carbon emissions, which is more than all maritime shipping and international flights combined. Because of this, many impact-focused family offices have put capital behind the sustainable-fashion industry to drive the sector forward. Andrew Cohen reports on this burgeoning trend this week, seeking expert commentary on how to make a difference in fashion.
We also report on how industry leaders Goldman Sachs and Rockefeller Capital Management say their family office clients are showing strong interest in investing in sports, as leagues alter their ownership rules to embrace capital from institutional investors. Read on to hear how that movement is taking shape.
As always, we appreciate any comments, ideas and insights that would make this newsletter more useful. I look forward to growing this family office community with your help. Please email me at [email protected].
HANDPICKED: How family offices can lead the way in sustainable fashion investments
By ANDREW COHEN
Maybe environmental concerns shouldn’t focus on a carbon footprint but a wardrobe malfunction.
The fashion industry produces about 10% of annual global carbon emissions, which is more than all maritime shipping and international flights combined, according to the United Nations.
Nearly 2,000 gallons of water are used to make a single pair of jeans, equivalent to the amount of water an average person drinks over seven years. The global sustainable-fashion market, currently valued at around $8 billion, is projected to reach $33 billion by 2030 as impact investors seek to support companies innovating supply chain and production processes.
“We need a lot more consumer understanding of the dynamics of the fashion industry — understanding how much clothes are produced and thrown away right away, understanding how much toxic materials go into every [article of clothing],” Yihana Von Ritter, director of private market investments at Align Impact, told Crain Currency.
Align Impact works with family offices, foundations and individuals to advise them on impact investing opportunities. Funds devoted to sustainable fashion, such as Alante Capital and the Good Fashion Fund, typically have investment portfolios spanning 10 to 20 companies.
“If I were to have a conversation with a family office interested in sustainable fashion, my nudge would be to invest in one of these funds to get diversified exposure, and that’s typically a 10-year lockup,” Von Ritter said.
Align Impact looks to support companies using alternatives to plastics, synthetic chemicals and chemical dyes. Namastate, for instance, is a Los Angeles-based clothing brand that uses 100% plant-based materials.
“Hemp is the miracle plant,” Von Ritter said. "We’re really excited about all of the production that could come from there."
Melke is a New York City-based sustainable-clothing brand founded by Emma Gage — a member of the Carlson Family Office, started by Radisson Hotel Group founder Curt Carlson. Melke avoids using any plastic or synthetic materials and instead emphasizes lots of hemp, wool and linen, Gage said.
She also buys organic cotton through “deadstock,” a sustainable-fashion production concept that involves buying unused materials from another company.
“Organic cotton would be my least favorite to use but one that I use just because of water consumption," Gage said. "In terms of fabric and accessibility, a lot of people use cotton. I’ll usually buy cotton as a resale by a company that’s selling it.
“I think the number-one place that you can really focus on sustainability is making sure you aren’t overproducing, that there’s a really high sell-through rate — which means what you do produce you are selling at either full cost or not having to mark down or go into resale.”
Other sustainable-investment opportunities highlighted by Von Ritter include the invasive-species leather brand Inversa, plant-based fur maker BioFluff, nature-based dye brands Colorfix and Nature Coatings, and lab-grown leather brand VitroLabs.
“I would think of these as long-term investments,” Von Ritter said. “A lot of what we’re doing — particularly the excitement around innovation production, producing new types of textiles, new ways of dyes and clothes — all of these have a research and development cycle required in order to get to scale. These are not one year in, two years later you’re out.”
The Good Trade has compiled a list of 99 sustainable-clothing brands, including mainstream sellers such as Etsy, Allbirds and Patagonia.
High-net-worth investors searching for the next major sustainable-fashion brand should be encouraged by the 79% of consumers who have changed their purchase preferences based on sustainability practices, according to the Capgemini Research Institute.
In 2022, U.S. Sen. Kirsten Gillibrand, D-N.Y., introduced The FABRIC Act, which aims to position the U.S. as a global leader in responsible apparel production through new wage and labor regulations and domestic manufacturing investments. Co-sponsors include Sens. Cory Booker, D-N.J.; Elizabeth Warren, D-Mass.; and Bernie Sanders, I-Vt.
“Most investors don’t realize the blissful fashion industry is the second-largest carbon polluter after fossil fuels — larger than the airline industry," said Chris Kolbe, co-founder of HyperNatural, a plastic-free apparel brand. "Pollutive synthetic materials and chemicals are the most significant portion of the problem”
“When regulations mandate transparency and accountability, the consumer demand for sustainable brands will explode, and there will not be enough sustainable materials to meet the consumer shift.”
Goldman, Rockefeller navigate the sports asset class for family offices
By ANDREW COHEN
Wall Street giants Goldman Sachs and Rockefeller Capital Management say their family office clients are showing strong interest in investing in sports as leagues alter their ownership rules to embrace capital from institutional investors.
“The discussion around the broader sports ecosystem continues to be a very big area of focus for family offices, and these sessions have been very popular over the last few years,” Anushka Gupta, head of Goldman Sachs Apex in the Americas, said during a webinar Tuesday. “Sports is an asset class that has outperformed and in many ways is uncorrelated, and of course is an area of significant passion for many family offices we work with.”
Goldman launched a new sports franchise unit last year for its high-net-worth clients interested in team ownership, while J.P. Morgan set up a similar unit earlier this year as did Rockefeller Capital Management, a wealth management company with a family office services division. Former New York Yankees star and Miami Marlins owner Derek Jeter is on Rockefeller’s board of directors.
“Half of the [English] Premier League football teams are now owned by Americans. We have a lot of clients that want to take a look,” Rockefeller President and CEO Greg Fleming said at a New York media gathering in May. “There’s now a market around secondary sales, so there’s a lot of dialogue around that. The dialogue is a factor of 5-to-1 of what gets done, but we need to have the capability because so many clients want to look at it.”
ESPN has reported that private equity firms spent close to $86 billion on the sports industry in 2022, according to Preqin data. A new index from the sports private equity fund Arctos shows that sports team investments delivered an annualized return of 12% over the past two decades, compared with 10% for the S&P 500 and nearly 15% for private equity.
“Resoundingly, an area we see many family offices spending time is in women’s sports — things like the National Women’s Soccer League, WNBA [Women's National Basketball Association], the Women’s Tennis Association,” said Goldman Sachs' Gupta. “We’re doing early work understanding what the media right construct looks like, what the league dynamics support in terms of expansion — and that ranges from things like golf, sailing, rugby, surfing to NASCAR and UFC.”
The National Football League is the last major U.S. sports league to hold out from allowing institutional investment, but owners are in the process of establishing a framework to welcome private equity firms. In May, Atlanta Falcons owner Arthur Blank announced the addition of four limited partners to the team’s ownership group, including family office investor Rashaun Williams.
“There are complexities based on specific leagues on what’s approved in terms of where institutional players can play a more active role versus traditionally it being more individual and family-led,” Gupta said. “We’re continuing to see that evolve; we’re at the very early innings of that shift with a lot of scrutiny from various leagues.”
LOOSE CHANGE
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Help us with a story: We’re working on a story about how much money family offices are spending on education. If you have any comments on the topic, reach out to [email protected].