Decarbonisation or Decline: The Crossroads Facing Bangladesh’s Garment Export Sector

Access to affordable, long-term capital remains a fundamental barrier for factories undertaking capital-intensive decarbonisation projects. How do you see the financial institutions’ positioned in Bangladesh for such risk-laden, long-horizon investments? Then again, how do you see the role of blended finance or public-private partnerships evolving?
Lewis Perkins: Access to capital is one of the most pressing barriers to scaling decarbonisation in Bangladesh’s apparel sector. While local financial institutions are beginning to show interest, the market is still nascent, and there is risk for large-scale clean energy investments. However, financing approaches like blended capital can help. These public-private partnerships reduce the financial burden on manufacturers, and in the coming years, we expect these models to mature and scale. 

Our report identifies an existing $1.6 billion already committed towards decarbonising Bangladesh’s garment sector, with an additional $175 million expected from International Financing Institutions (IFIs) and local banks. AII helps unlock these funds through initiatives like our Clean by Design programme, which highlights proven decarbonisation solutions for Tier 1 and 2 production facilities but also increases de-risk investments by providing a roadmap of measurable, cost-effective solutions. 

The AII report underscores the increasing pressure from global buyers to meet sustainability and decarbonisation targets. But, how much of this demand is driven by genuine supply chain transformation ambitions versus brand reputation management or regulatory compliance? Do you see buyer-led initiatives translating into huge factory-level investments rather than remaining token or compliance-driven exercises? 
Lewis Perkins: Not one brand can solve this alone. The cost, the complexity, and the need for systems-level change require a shared infrastructure and shared financial responsibility. That’s exactly what AII provides: a non-competitive platform where brands, manufacturers, public actors, and capital providers can pool funds and co-develop financial tools that work for the industry.

Many brands are looking to genuinely transform supply chains, particularly those that work with AII. Sourcing renewable energy helps brands meet climate targets and align with consumer interests, while also increasing their own competitiveness in the market, especially in manufacturing hubs like Bangladesh, which are positioned to see lower operating costs and increased supply chain efficiency when capital is put towards scaling renewables.

While buyer-led initiatives definitely play a role in driving factory-level investments, these investments are usually already underway, and major brands are ready to transform their supply chains. Of course, many brands see shifting climate regulations as an impetus for action, but there is a true business case for brand investments in sustainability at the factory level.

Since factories are often outside of a brand’s own value chain, they may have multiple customers. This means that investments may often be pooled or facilitated by an organisation like AII, which offers a bird’s eye view to the industry, identifying prime regions, like Bangladesh, for brand investment.

H&M and Bestseller show this drive clearly by helping Bangladesh build its first offshore wind farm to accelerate renewable energy generation for the garment sector. The business case for decarbonisation is clear, and leading brands are moving accordingly. 

Capacity building within factories would be a critical enabler for all this to happen. Beyond technical skills, what organisational or—more importantly—cultural shifts do you believe are necessary at the factory management level to prioritise such investments? After all, industry is driven by cost-cutting and short-term survival pressures, not just in Bangladesh, but virtually everywhere.
Lewis Perkins: Decarbonisation isn’t just a technical challenge; it’s a leadership and mindset challenge. Factory management often operates under intense cost pressure and short-term planning cycles. To unlock real change, we need a cultural shift that treats sustainability as a core business strategy, not a side project.

But we also have to recognise the on-the-ground reality: many factories face both resource constraints and a lack of in-house technical expertise to support new technology implementation. Partnerships with OEMs, development aid agencies, and/or local technical consultants play a key role in supporting feasibility assessments, implementation, and post-implementation optimisation (after-sales support).

Coordination among government agencies, financiers, brands, and factories is repeatedly stressed as vital for success. However, in practice, what are the most significant institutional or governance hurdles to achieving this alignment? How do you propose establishing transparent, accountable mechanisms that can reconcile often competing interests, avoid duplication, and ensure sustained collaboration over the long decarbonisation timeline?
Lewis Perkins: The biggest barrier is fragmentation. Often, efforts are duplicated or misaligned because public and private actors work in silos. There is a need for trusted platforms that can coordinate across government, brands, banks, and suppliers. At AII, we act as a neutral convener to connect actors around shared targets, financing tools, and delivery frameworks that avoid duplication.

Do you see underlying perceptions or structural factors within Bangladesh’s financial institutions that act as barriers? What future-proof steps should the apparel industry there or international development partners take to shift their mindset and increase their active participation in funding decarbonisation?
Lewis Perkins: Local banks are typically not structured to support the long-term, lower-margin projects required for decarbonisation. High collateral demands and short loan tenures don’t work for most suppliers. That’s why AII is working to bridge this gap through blended finance, combining grants, concessional capital, and brand-backed guarantees to make projects more bankable. But beyond new tools, it’s also about building trust and strong relationships so banks feel confident deploying them. [See AII’s role mentioned above.]

The AII report seems a bit cautious about the social trade-offs of decarbonisation, such as job displacement or increased costs affecting workers. How do you reconcile the urgent environmental imperatives with the socio-economic realities of a workforce that is already vulnerable? What strategies would you suggest in ensuring a just transition for workers?
Lewis Perkins: A just transition is non-negotiable. At AII, we take seriously the need to align climate goals with worker well-being. That means engaging local NGOs, trade associations, and suppliers to ensure worker voices are part of the solution design. But it’s also about investing in local capacity to manage, maintain, and scale new technologies. We partner with institutions that can provide that training, and we believe decarbonisation should be a driver of economic opportunity, not displacement. If we do this right, it becomes a story of shared prosperity.

Given the current backdrop of tariff turbulence, how crucial do you think would the successful decarbonisation of Bangladesh’s industry be in maintaining its export numbers? If Bangladesh falls behind Vietnam or India on sustainability credentials, what effect do you think it will have on Western brands and retailers reliant on Bangladesh’s apparel producers?
Lewis Perkins: Decarbonisation is no longer a “nice to have” for export markets; it’s quickly becoming the cost of doing business, driven by regulations such as CBAM and CRSD. Tariffs and trade policies may fluctuate, but sustainability expectations from global brands are only moving in one direction. Western retailers are under growing pressure to meet their own climate targets and evaluate suppliers through a climate and risk lens. 

If Bangladesh can’t show progress, there’s a risk that sourcing will shift to neighbouring production hubs such as India and Vietnam. Investing in decarbonisation is a way to future-proof Bangladesh businesses and long-term market attractiveness. But there’s still a huge opportunity here. Bangladesh has a strong manufacturing base and is already attracting attention from brands ready to invest in cleaner operations. What’s needed now is a coordinated push to ensure the country remains competitive.

That’s exactly where AII is focused: helping Bangladesh position itself not just as the world’s second-largest apparel exporter, but as a leader in low-carbon manufacturing. Through supplier engagement, region-specific financing strategies, and partnerships with global brands and DFIs, we’re working to ensure Bangladesh’s factories are future-ready — and that the country retains its position as a key sourcing destination in a decarbonising world.

One cannot leave out the political context from all this. The political turmoil that has been ongoing for close to a year now, has not left the Bangladeshi garment industry untouched. All that is well-documented. Besides, political stability still seems far away, with the interim government being at the helm of affairs for nine months now. How does apparel industry decarbonisation happen in such a situation?
Lewis Perkins: It’s a fair—and necessary—question. At AII, we believe the path forward isn’t about waiting for the perfect conditions.

The decarbonisation of Bangladesh’s apparel sector is both an environmental necessity and business strategy. The global brands that rely on this region, the development banks, and the philanthropic capital all have a shared interest in helping the sector modernise and remain competitive. 

AII’s role is to act as a trusted, neutral programme manager that keeps momentum moving. We work across stakeholders (ex. suppliers, brands, local institutions, and international financiers) to design and manage programmes that are technically sound, financially viable, and aligned with the realities on the ground.

Through our supplier engagement in Bangladesh to drive real-world projects and tools like the Climate Solutions Portfolio and blended finance structures, we help deploy capital and solutions at the factory level in a way that is resilient to broader volatility. 

AII is helping build the trust, infrastructure, and financing pathways that can weather uncertainty and keep Bangladesh’s apparel sector moving toward a lower-carbon future.