The Fashion Engagement Equities Strategy will invest in 30 to 40 publicly listed companies across the entire fashion value chain, including sourcing, production, consumption and end-of-life, writes Michael Nelson.
The firm will particularly be looking for companies exposed to casualisation, premiumisation, circularity and automation megatrends. The strategy is categorised as Article 8 under the Sustainable Finance Disclosure Regulation.
“There is increasing demand for the fashion industry to transform, and companies with leading sustainability characteristics are likely to do better than laggards in the long run,” said Dora Buckulčíková, portfolio manager at Robeco.
According to Robeco, fashion is a growing industry generating $2.5tn in sales per year and employing more than 300 million people globally across its supply chain. Future growth is expected to be driven by rising global population growth, increasing disposable incomes and conspicuous consumption.
The fashion industry faces several social and environmental challenges, however. The WWF states that many garment factory workers experience inhumane working conditions as clothing businesses chase cheaper costs to increase profit. Employees – often women and children – also receive less than the living wage and work long hours in unsafe conditions, with business models continuing to encourage overconsumption and generate excessive waste.
Additionally, the fashion industry is currently a big polluter, consuming huge volumes of water in the production of cotton and dyeing, with water use unregulated in many areas. In the textile hub of Dhaka city in Bangladesh, for example, groundwater levels are dropping by up to one metre per year.
Leather tanning and fabric dying also release chemicals into water supplies, leading to further pollution, and vast amounts of textiles are landfilled or burned as brands destroy stock that is ‘out of season’. In fact, of the roughly 100 billion articles of clothing produced each year, less than 25% is recycled into new clothing.
For Robeco, therefore, says Buckulčíková, it is critical that sustainable solutions are implemented to transform the sector’s operations from a linear, ‘take-make-waste’ model to a circular one, and that pressing social issues including workers’ rights and living wages are addressed.
This story first appeared on our sister publication, Portfolio Adviser.