8 min read

Wake Up, Babe; New Fiber Dropped

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Happy Thursday!

As you might have heard, Earth Day is right around the corner. Since 1970, millions of people have celebrated the day by planting trees and cleaning up parks, and it’s been inspiring to see how the movement continues to gain traction.

This year’s theme, Invest In Our Planet, will resonate with the FWIW readers who strive year-round to align their investing and purchasing decisions with a more sustainable future. So this week, we are bringing you five ideas to help you on your sustainable investing journey:

Discover the business case for investing in clean energy: In the past six years, the As You Sow/Corporate Knights Clean200 companies generated a total return of 91.21%, beating the MSCI ACWI/Energy Index of fossil fuel companies (61.31%).
Research sustainable funds: This week, Morningstar featured six sustainable funds to consider, all vetted using the firm’s sustainable-investing framework. Looking for more options? We have a handy list of tools for researching sustainable stocks and funds.
Learn about cleantech: Tech-based solutions to the climate crisis are evolving every day. Whether you want to know more about investing in solar energy, green hydrogen, methane plugging, or other solutions, the FWIW Guide to Cleantech Investing has you covered.
Get inspired: Bloomberg’s new list of 12 Climate Tech Innovators features a handful of pioneers working toward a net-zero future. Only one company on the list is publicly traded today (Li-Cycle), but you might discover emerging areas to watch.
Invest in sustainable fibers: Yes, this one might sound pretty niche, but many companies are working to reduce the environmental impact of textiles. We have more details in our deep dive below.

If you are looking for other ways to help the planet beyond your investments, the Great Global Cleanup is one way to get involved in your community. We have more news below on what’s happening this week on Wall Street and beyond.

News you can use

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More small businesses are offering 401(k) plans, reports the Wall Street Journal. That’s in part due to new state-facilitated retirement savings programs around the country. And it couldn’t come at a better time, as a recent survey shows that 52% of Americans are not on track to retire comfortably. If you’re among the millions with new access to a 401(k), we have some tips on how to take advantage of this perk.
As Q1 earnings reports trickle in, analysts are watching for clues about the shape of the economy — and so far it’s a mixed bag. Many of the big banks reported strong earnings and revenue gains, although investment banks like Morgan Stanley and Goldman Sachs saw profit falling amid a slowdown in dealmaking.
The stocks are greener on the other side of the Atlantic. The Netherlands, Finland, Hong Kong, and France are the most sustainable stock markets, according to a new analysis by Morningstar. 48 country-specific equity indexes were scored on sustainability and ESG risk. The top-ranked earned their spots thanks to companies like ASML, Adyen, Nokia, Sampo, AIA Group, LVMH, and Schneider Electric. The US was in the 16th position, bolstered by big names like Apple and Nvidia. FWIW can help you learn more about gaining exposure to international stocks and markets.

Figure in Focus: 4.15%

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That’s the interest rate being offered on the new Apple and Goldman Sachs savings account launched on Monday. As stated in the press release, this figure is ten times the national average, which was 0.39% as of April 17, and gives the tech giant a decent shot at luring depositors away from other banks. The company also promises no fees, no minimum deposits, and no minimum balance requirements.

With the Fed hiking interest rates, financial experts advise that parking cash in a savings account is more profitable than it has been in years. While high-yield savings accounts may not offer the long-term returns of stocks, bonds, and other assets, they are good places to maintain an emergency fund. You may just have to look outside your regular bank and use comparison websites like Bankrate to find the best deal. Some online banks, like LendingClub, Vio Bank, and CIT Bank, are offering even higher interest than Apple, but make sure to check that all the other conditions work for you. Read all about finding the right match in a previous edition.

Asking for a friend….

We know there is a lot to think about these days, and it can sometimes be a bit overwhelming. To help with those nagging questions and so you have useful resources at your fingertips, here are few links to resources and past stories relevant in these turbulent times:

FWIW’s Guide to Long-Term Investing
Unpacking the ESG Alphabet Soup (including a link to our ever-growing glossary of common terms)
Some of our favorite inflation-fighting strategies
How to Practice Faith-Based Investing
“Siri, What Is a Recession?”

New Threads

This week, aspirational athleisure brand Lululemon took another step towards its sustainability goals with a brand-new type of fiber (fancy talk for thread). There are fibers in a balanced diet, fibers in paper, and textile fibers all around you — in your clothes, the chair you’re sitting on, your curtains, rugs, car interiors, makeup wipes, etc.

Textile fibers may be of natural origin, like cotton, wool, and silk, or man-made, like polyester, acrylic, and nylon, and we make a lot of them. Global annual production doubled in two decades to reach 113 million tons in 2021 and is projected to reach 149 million tons by 2030. This is contributing to problems like water shortages and environmental pollution. Non-biodegradable synthetic fibers, which will spend much more time in landfills than closets, are warming the planet since they are derived from and made with energy from fossil fuels.

In order to create a more sustainable textile and fashion industry, climate-conscious companies are developing and using new fibers. Keep reading to find out more about these innovations and companies paving the way.

What’s wrong with plain ol’ cotton and other natural fibers?

Fibers that have been in use since ancient times are arguably more eco-friendly than the modern plastic versions, but they still have negative environmental impacts when produced on large scales with the wrong methods. Future shortages of these natural fibers are also predicted due to climate change.

Take cotton, for instance. It’s the second-most important fiber by volume after polyester, but according to the WWF, farming it is causing harmful pesticides and fertilizers to leach into the environment, taking up plenty of water, leading to soil degradation, and destroying natural habitats.

Even if we figure out a way to grow all cotton sustainably, there’s another reason we can’t rely on it. “Water scarcity and extremes in rainfall are expected to increase production risks in cotton’s most important growing regions, making life far more precarious for cotton farmers,” wrote MSCI analyst Liz Houston. By 2040, 40% of cotton-producing regions are likely to see shorter growing seasons due to rising heat, while drought could hit half of the global crop, Reuters reported.

Similarly, production of other natural fibers, like wool, silk, and even animal leather, hurt the environment and are expected to be affected by unstable weather. Man-made cellulosic fibers, like viscose, rayon, Tencel, and modal, are mostly made from wood pulp, which raises concerns of deforestation.

So what then? Alternative fibers!

Efforts are being made to substitute and supplement the fibers we have today, but we’re still in the very early stages. Below are some emerging fiber categories and a few of the companies giving us glimpses of the future to consider investing in and/or shopping at! You can also read more about investing in sustainable fashion here.

New vegan leathers: No, not the 100% plastic kind that may be worse for the environment than regular leather. We’re talking leather from plant material, like pineapple leaves, apple peels, flowers, or even the root-like structure of mushrooms. For example, luxury fashion group Capri Holdings owns a 30% stake in cactus leather pioneer Desserto, which has collabed on lines with Fossil Group and Adidas, among others. Chipotle’s new restaurant design concept includes cactus leather chairs. Allbirds sources plant-based leather from Natural Fiber Welding, which also counts BMW and New Balance among its partners and Ralph Lauren as an investor.
Cotton alternatives: This group includes plant-based fibers, like jute, coir, flax, hemp, and kapok (yes, we had to look that one up!). They made up just 6% of the total global fiber production volume in 2021, but their popularity is poised to grow since they tend to need less water and pesticides. For example, the denim industry is blending hemp with cotton. Dallas-based Panda Biotech is partnered with Kontoor Brands, the owner of Wrangler and Lee, and Levi’s has a small cottonized-hemp collection.
Bio-based polyester and bio-based nylon: It sounds like an oxymoron since everyone knows them to be the noisy fabrics made from crude oil, but companies are working to create more sustainable versions. You gotta love science. Lululemon just debuted shirts made partly with plant-based nylon. Patagonia uses a 100% biobased polyester sourced from sugarcane. Major brands, including Zara-owner Inditex, are also testing a biobased polyester made by startup Kintra Fibers.
Lab-grown fiber: Boston-based Galy has found a way to grow cotton ten times faster from cells in a lab using 80% less water.

What can you do?

Since this is a new area of innovation, many US climate tech firms involved are still smaller private companies, and there are no exchange-traded funds (ETFs) specifically devoted to it. But until alt fibers become more mainstream, there are a few things you can do as an investor:

Check whether the retail brands you invest in are making smart, sustainable choices. This could be sourcing fiber that is certified and verified by initiatives like Better Cotton, Canopy’s “green shirt,” the Responsible Wool Standard, and the Recycled Claim Standard/Global Recycled Standard. You can also look for ecolabels to know whether the brand is using recycled fibers to reduce their emissions, but beware of vague claims.
Support companies that recycle waste or help in waste collection. For example, publicly traded UNIFI sells a polyester fabric made with plastic bottles. PureCycle Technologies converts waste polypropylene (PP), which is used in clothing, blankets, and doormats, into like-first-use PP.
If you want to bet on cotton, the Invesco DB Agriculture Fund tracks cotton prices among other commodities, like sugar, coffee, and cattle.