20 years of sustainable investing and what this tells us about the future - Flipbook - Page 10
Fashion
Fashion, by definition, is among
the
fastest-moving
industries
and one that has presented
many challenges for sustainable
investors over the years. The team’s
work since 2001 also highlights
how their thinking on themes can
change and, in this instance,
FRC Stewardship
shines a light on their engagement
Code launched
efforts as an active owner of
to encourage more responsible
companies. In short, clothing
share ownership.
supply chains have lengthened
under relentless pressure on costs
in recent decades as emerging economies offered lower wages,
weaker labour laws and tax breaks to win valuable contracts from
major brands.
2010
2006: Since the earliest days of the SF funds, labour standards in
supply chains have been one of the most important engagement
areas and there have been several projects designed to improve
these, from Oxfam launching Better Returns in a Better World in
2006 to Fashion Revolution, formed in the wake of 2013’s Rana
Plaza disaster.
2009: The team assessed the fashion industry’s supply chains and
the working conditions within them, concluding that conditions were
unacceptable in a significant number, that change was coming and
there were opportunities available to companies that could drive
improvements. The team focused on the need for decent work and
wages throughout the chain and identified Inditex, the owner of the
10 - Liontrust: 20 Years of Sustainable Investing
Zara brand, as they believed its proximity sourcing model allowed
for a more sustainable form of manufacturing.
2013: This issue of unsafe working conditions came into sharp focus
with the 2013 collapse of the Rana Plaza complex in Bangladesh,
a disaster that resulted in the loss of more than 1,100 lives. Many
of those killed were employed in the garment industry and change
was urgently required. The Sustainable Investment team was part of a
coalition of shareholders representing around $1 trillion in assets under
management who engaged with companies following the disaster,
helping to drive through change such as the Fire & Safety Accord.
2016: Ultimately, after many years of analysis, the team concluded
retailers have been unable to show sufficient improvements in
the supply chain and the image of ‘Fast Fashion’ has become
irrevocably damaged as a result. The theme exposed more risks than
opportunities for the large retailers and the Sustainable Investment
team sold out of names including H&M and Inditex in 2018.
Today: This is not to say they no longer find opportunities within this
theme with the team now focusing on companies that assess supply
chains on behalf of retailers. The testing, inspection and certification
(TIC) industry is vital for sustainable development, ensuring the safety
of products both for the users and the people making them. With more
complex supply chains, product innovation, stringent regulations and
ever-increasing consumer demands around sustainability, the TIC
sector enjoys a long-term structural growth rate that should continue
to rise ahead of global GDP. Overall, the team continues to believe
unsafe and degrading working practices make no business, common
or investment sense and will continue to play their role in bringing
them to an end.