Some investors may have slid sustainability to the back burner when it fell out of political favor in the United States and 2030 goals looked increasingly unreachable, but a new report is here to remind them there’s an opportunity for “significant” returns on investment where fashion is concerned.
The report, “Investment in Circular Fashion: Opportunities and Success Stories,” released by the British Fashion Council’s Institute of Positive Fashion (IPF) last month, says, while many investors still see sustainable fashion as a niche movement, it’s actually at a key inflection point that could make it anything but.
“With fashion contributing 2-8 percent of global carbon emissions and facing mounting regulatory pressure, the sector must reinvent itself—creating unprecedented opportunities for forward-thinking investors,” according to the report.
Its author, Irene Maffini, founder of Fashion Reimagined, which supports innovators developing the next generation of materials and circular services—and an investor in sustainable fashion herself—says fashion, like many industries today, is “ripe for technological disruption.”
“Having witnessed renewable energy and electric vehicles transform from ‘uninvestable’ to mainstream during my 15-year clean tech career, I recognize the same patterns in textiles today,” she said. “The sustainable fashion revolution isn’t coming, it’s already underway, creating pathways for significant returns, while addressing critical environmental challenges.”
But first, investors will have to get beyond the five key myths Maffini blames for stalling investment in sustainable fashion.
Myth 1: Sustainable fashion is just a niche market
Despite the public—and regulatory—push for it, plus Gen Z’s clear preference for all things eco-friendly, many investors have committed to the belief that sustainable fashion is something favored by the few and not at all fundamental.
But the reality, according to the report, is that the industry, valued at roughly $2 trillion is experiencing “extraordinary growth.” Of that multi-trillion dollar market, secondhand apparel—the fastest growing segment in sustainable fashion—was valued at $100-$120 billion in 2022 and projected to reach $367 billion by 2029, and potentially accounting for as much as 40 percent of the apparel market by 2030.
“There’s a lack of acknowledgment of how important fashion is,” Edward Brial, founder and CEO of regenerative cotton provider Materra, said in the report. This thinking that fashion is not a scalable or large market opportunity is kind of crazy because textiles drive economies and are foundational to the wealth of nations.”
What’s more, the circular systems more consumers are leaning toward, reinforce each other. When resale is strong, it pushes brands to make product that’s more durable. When recycling is robust and invested in, it means end-of-life scraps become high-quality new fibers for use in something else.
“While market projections vary significantly, documented investment activity reveals substantial commercial interest across multiple distinct segments,” Maffini wrote. “Materials innovation (bio-based alternatives, clean chemistry) attracted over $500 million in funding in 2023, while circular economy platforms businesses like Depop achieved multi-billion-dollar valuations. Second-hand apparel reached $100-120 billion in 2025, demonstrating existing market scale. Strategic corporate investment from H&M Group Ventures, Inditex, and Kering, alongside the diversity of investment approaches—from specialized funds to family offices—demonstrates broad recognition of transformation opportunities regardless of market size debates.”
Myth 2: Fashion is about design, not technology
There’s little left in today’s world that’s not about technology in some shape or form, and fashion has never been more intertwined with tech. Still, the category continues to bear its “frivolous” label, which leaves it undervalued by tech investors who aren’t acknowledging things like material science breakthroughs happening in fashion.
The reality, however, is that fashion is a materials industry, where 67 percent of textiles are made from synthetics still derived from fossil fuels, according to the report, and 90 percent of dyes are petroleum-based. Moving away from this reality toward more sustainable materials isn’t just a benefit for the environment “but a technological shift with significant IP potential.”
“The sector is experiencing a technological revolution, with over 650 material innovations now available (up 400% since 2017),” Maffini said. “In 2023 alone, sustainable materials startups raised over $500 million from 88 unique investors. UK-based innovators like Colorifix and Pact demonstrate how advanced technology in biotechnology and materials science is creating IP-protected solutions for the industry’s most significant environmental challenges.”
Myth 3: Sustainable materials can’t scale and circular business models are too complex
Fashion has been talking about scaling circularity for years now, toggling between great faith in growth that could fundamentally curb fashion’s footprint, and a resignation that there’s just too much to figure out for this to happen anytime soon. The belief that it can’t scale—or can’t scale fast enough—leaves critics claiming eco-friendly materials will remain too expensive and niche, and that circular business models have too much going on where logistics is concerned to be profitable.
In this case, according to Maffini, the reality is a lack of innovation or, at least the spend to see it through.
“The fashion industry itself is not really an industry that is doing a lot of innovation… historically, compared to other industries like the FMCG industry, beauty or food. Those industries are spending much more for R&D,” Yoobin Jung, an investor at Plug and Play, said in the report.
While as many as 85 percent of leading brands have set public decarbonization targets, for example, only 1 percent of fashion industry revenue is being spent on R&D, compared to 10-15 percent spend for consumer electronics and as much as 30 percent for pharmaceutical companies. It reflects both a challenge and an opportunity. But on the bright side, there’s progress being made.
“Corporate adoption demonstrates scaling momentum across both material innovation and circular business model experimentation,” the report noted. “A sample of 53 leading brands tracked by Textile Exchange reported sustainable material use jumping from 15.8% in 2020 to 57% in 2023, while major retailers like H&M, Zara, and Uniqlo have committed to near 100%
sustainable materials within this decade, with corresponding capital investments. Circular business model innovation is also advancing, with 163 brands operating resale programs (up 31% from 2022) and strategic acquisitions like H&M’s majority stake in Sellpy demonstrating corporate commitment to circular strategies.”
Myth 4: There are no clear exit pathways and brands won’t acquire innovators
While it may be true that established fashion companies are stuck in their ways, there is increasing interest in bringing on younger, scrappier partners who have a solution to one of their problems.
The reality of the exit landscape for sustainable fashion innovators is that there are multiple pathways for investors to see a return on their spend.
“We don’t see a lack of exit opportunities. What we see is a bigger ‘valley of death’ that the startups have to get across to be able to scale to a certain point and to be considered as being
a technology that is acquirable,” Mary McCarthy, partner at venture capital firm Sofinnova Partners, said in the report.
While that may be true, more and more startups are reaching that scale—and there are companies beyond fashion that are relevant in the apparel industry ecosystem.
“The exit landscape is diversifying beyond traditional fashion acquisitions to include chemical companies, supply chain companies, industrial conglomerates, private equity, and public markets,” Maffini wrote. “Documented successful exits include Depop’s $1.63 billion acquisition by Etsy and several trade sales (Quantis, Poshmark, Textile Genesis, Zigzag), multiple IPOs (The RealReal, ThredUp, Rent the Runway, Allbirds, Spinnova, HeiQ AeoniQ, Renewcell), and significant private equity investments like Carlyle Group’s stake in Jeanologia and Spiber and TPG stake in Vinted. This expanding landscape of potential acquirers creates multiple proven exit pathways for sustainable fashion innovators.”
Myth 5: Traditional VCs always spot the next big thing
Contrary to their belief in themselves consistently spotting game-changing opportunities before everyone else does, traditional VCs have a blindspot when it comes to fashion, according to the report.
Many are missing out—or exempting themselves from giving fashion attention because technology development timelines are too long, they’re missing infrastructure or manufacturing opportunities because they’re focused on asset-light business models, or they simply don’t have the expertise or interest in following textile supply chains.
Alexander Shapiro, an investment manager at Conduit Connect, said “Purely on the impact side, I think we’ve just generally taken a view that there’s enough clothes out there… pieces of technology that enable an existing garment to be reused or last as long as possible, that’s largely an impact decision from our perspective.”
But even while mainstream VCs take their time in recognizing sustainable fashion’s potential, Maffini said a crop of forward-thinking investors is emerging.
“Brand investors (H&M Group Ventures, Inditex, Bestseller), supply chain partners (PDS Ventures, Indorama, Toyoshima, MAS Holding), specialized funds (Alante, Bombyx, Mills Fabrica, Regenration.VC), family offices (Novel Fashion Holdings), accelerators (Fashion for Good), impact investors (Laudes) are leading the way,” she said. “The evolution mirrors early cleantech, which progressed into today’s thriving climate tech ecosystem. Strategic investors are providing not just capital but also market access, technical validation, and supply chain knowledge needed to help these innovations scale.”
Opportunities for Investment
While the report is UK-focused, outlining as its priority action for capitalizing on these missed investment opportunities, establishing a £500 million UK Sustainable Fashion Investment Fund, the concept would likely yield similar impact in the U.S., too.
According to Maffini, the fund would allow for deploying specialized expertise combining fashion and “deep” tech knowledge, as well as catalyze further co-investment and generate returns while driving “systemic change.”
“The transformation of the fashion industry represents one of the most significant untapped investment opportunities of our decade,” she said. “As regulatory pressures increase and consumer preferences continue to evolve, investors who develop the right expertise, partnerships, and conviction for sustainable fashion will gain significant advantages.”
