Twinco Capital, a supplier finance solution provider, has raised US$12mn in an equity and debt round, which will support the launch of what it calls the first natively sustainable supply chain finance programme.

The investment was led by Quona Capital, a fund that invests in fintech innovators that are advancing inclusion in emerging markets, and included participation from Working Capital, as well as existing investors Mundi Ventures and Finch Capital. Zubi Capital provided the venture debt portion.

Founded in 2019 by banking veterans Sandra Nolasco and Carmen Marín, Twinco engages with large corporations, mostly in the retail and apparel sectors, and offers funding to their suppliers worldwide, advancing up to 60% of the purchase order value upfront and paying the remainder upon delivery.

It currently has programmes in place with a number of European and Latin American retailers who buy more than US$10bn per year of manufactured products, mostly from small and medium enterprises (SMEs) in emerging markets. The company says it has onboarded more than 100 suppliers in 12 different countries including Bangladesh, China, Indonesia, Pakistan, South Korea, Spain, Thailand, Turkey and Vietnam.

To enable it to provide financing at the purchase order stage – rather than against invoices as is generally the case in supply chain finance programmes – Twinco has developed its own risk model that uses machine learning to analyse suppliers’ commercial performance and ESG data in addition to the more traditional financial metrics used in credit decisioning. As a result, it says that it is well positioned to provide its customers not only with funding but also with data-based insights that can help SMEs produce products responsibly.

“If we are to have competitive and socially responsible supply chains on a global scale, suppliers need access to affordable financing from the very beginning of production, starting with the purchase order,” says Sandra Nolasco, CEO of Twinco. “Extraordinary events, such as those experienced these past years, have revealed the fragility of supply chains, which are historically unable to adapt to the complexity of global production networks. At Twinco, we propose a radical change in how to use finance as a tool to proactively transform global supply chains, to foster the participation of SMEs, improve efficiency and ensure responsible sourcing practices.”

The company says it will use the new cash to strengthen its technology and data capabilities and accelerate its expansion within major sourcing countries. In addition, the funds will support the launch of a new ESG focused offering that leverages the data that Twinco’s risk model is able to collect.

Twinco ESG Tilt, which the company has launched into pilot with an undisclosed client, provides buyers with “information on the intersection between financial, commercial and ESG performance for each of their suppliers, enabling them to provide preferential purchasing conditions to those that perform better from an ESG perspective, without using their own balance sheet”, Nolasco tells GTR. “By supporting the elements of the supply chain that will truly make a difference, we can drive real change.”

“The model that we have developed allows us to understand the exposure of specific suppliers to specific ESG risks and their impacts according to the raw materials they use. In the apparel sector, that includes human rights and labour conditions, climate infrastructure vulnerability and water stress. From this understanding, we can better assess what these suppliers are doing to mitigate those risks and impacts,” adds Arancha Diaz-Lladó, Twinco’s chief sustainability officer.

According to recent research conducted by HSBC and Boston Consulting Group, SME suppliers will need up to US$2.8tn a year between now and 2050 to bring the carbon footprint of global supply chains down to zero. However, the report added that many suppliers are unlikely to have the money to spend on making the transition. Sustainable supply chain finance programmes, whereby suppliers receive discounted invoice financing for progress against sustainability metrics, are widely seen as a solution to this problem, but Nolasco argues that in these programmes, the funding often doesn’t come early enough in the working cycle to enable suppliers to make the necessary ESG improvements.

“With Twinco ESG Tilt, the fact that we provide liquidity at the purchase order stage is a game changer, because we can support suppliers at the stage when they make key decisions in the production process, such as buying and paying for their raw materials,” she tells GTR.

Twinco says it plans to raise a U$100mn debt facility this quarter as demand for its solution grows.