San Lie: Fast fashion, where do you draw the line?
This column was originally written in Dutch. This is an English translation.
By San Lie, Director of ASN Impact Investors
Fast fashion has a large and growing negative impact on the environment and the people. The companies that work according to that model have therefore recently been removed from the portfolios that my team and I are responsible for. An important step, as I also notice from the many reactions. These give the impression that there is now momentum for the entire financial sector to put pressure on making the clothing industry more sustainable.
Fast fashion, the business model in which new collections are released often and quickly, does not fit into a sustainable portfolio. The concept has now been joined by ultra fast fashion and even instant fashion: even more, even faster, even more polluting. For your idea: while Zara already releases 35,000 styles per year, a Chinese player like Shein releases 1.3 million. Indeed, almost 40 times as much.
Test for fast fashion
With this knowledge, we have tightened our fast fashion policy and developed criteria to assess whether companies work according to the fast fashion model. Is the clothing produced as cost-efficiently as possible? Is there a high turnover rate? That is, are there multiple fashion trends per season? Does production take place in low-wage countries? And is it done in an environmentally unfriendly manner? If a company operates in the above manner, we will henceforth exclude it from our investment universe.
Exclusion, unless
Unless the company focuses specifically and sufficiently on sustainability. To achieve this, the company must focus on reducing the number of collections and/or garments per year and improving the quality of garments so that their lifespan is extended. Furthermore, we want to see a shift towards the use of only renewable raw materials and towards a design and production process that takes the recycling of clothing into account.
Sustainable clothing companies remain welcome
For the record: we are not categorically excluding the clothing sector. Clothing is a necessary necessity of life that fits into the sustainable future we are moving towards. Outside the stock exchange, many companies are already proving how things can be done differently. Truly sustainable listed clothing companies are and will therefore remain welcome in our investment universe, provided they demonstrably take steps towards a more 'slow' model according to our criteria.
Living wage
Our fight for a living wage in the clothing sector has long been a reason to remain invested in the leaders in sustainable policies within the industry. Our commitment was also strongly focused on this and parties such as Puma and H&M certainly made progress, with policies that paid more attention to chain responsibility and the payment of a living wage. But the translation into practice is disappointing, while the pressure from the fashion industry on the environment is increasing.
A step with consequences
It was a diabolical dilemma, but we have now reached the point where getting out is the strongest signal we can give. That announcement last week provoked many more reactions than I expected. From customers, from colleagues, from sustainable (unfortunately not yet listed) fashion entrepreneurs and from the fast fashion companies themselves. The latter contacted us about our new policy and criteria and indicated that they wanted to comply with them.
That's good for me, because it is incredibly important that our step has consequences. We hope that other parties with a social mission - read: pension funds - will also look more closely at fast fashion and determine their position. Maybe our criteria will help with that.
It's the government's and investors' turn
I hope that the government will also intervene faster and more forcefully in a sector that seems to be trapped in its own system. The EU is preparing rules that will force the textile sector to become more transparent and encourage more recycling. Like France, the Netherlands has tightened producer liability for textile companies, but there is still room for improvement. If the market itself does not solve it, you need the government to change things.
Proud customers
But as far as I am concerned, in addition to the government, it is now certainly the investors' turn. And whatever they decide after their own research into the clothing sector, whether to remain invested and step up their engagement or divest as the ultimate signal - we wish them the support of the proud customers and participants we received.
San Lie is director of ASN Impact Investors. The information in this column is not intended as professional investment advice or as a recommendation to make certain investments.
