Investment Institute
Medio Ambiente

Why sustainable fashion could be in style for responsible investors

  • 12 Enero 2023 (7 min de lectura)

Key points

  • The fashion industry is responsible for as much as 10% of global carbon emissions
  • Companies are harnessing innovations, new technology and more responsible processes to become more sustainable
  • This, alongside new policies and regulations, is creating potential investment opportunities

Fashion is one of the biggest industries in the world, generating around $2.5trn in annual sales but at the same time, it is thought to be responsible for a sizeable 10% of annual global carbon emissions – more than all international flights and maritime shipping combined.1

No surprise then that it was high on the agenda at the United Nations (UN) climate change conference COP27. At the event, The Global Fashion Agenda - a non-profit organisation for sustainability in fashion - launched an industry consultation, together with the UN, on climate targets – with one of its aims to create a range of measurable metrics.2

As consumers, we are increasingly making more environmentally conscious choices and when it comes to buying clothes, more and more people want to know where garments are made and that workers are treated fairly.

And they are spending their money accordingly: the sustainable fashion market is expected to grow from $6.9bn of sales in 2021 to $10.3bn in 2026.3

But for investors it is vital to identify companies at the forefront of low carbon processes, technological innovation and social responsibility – those creating potentially appealing investment opportunities, as fast fashion gives way to sustainable style.

And we believe this warrants investors’ attention as it’s been estimated that the financing of innovations in the fashion sector in response to sustainability challenges could be worth between $20bn and $30bn a year.4

Fashion’s environmental and social impact

The climate impact of fashion runs throughout the whole value chain, from raw materials to the end of a product’s lifespan.

Studies show that it takes 3,781 litres of water to make a pair of jeans – from growing cotton to delivering the final product to the store.5

Every year the industry uses 93 billion cubic metres of water – enough to meet the total consumption needs of five million people. And as much as 20% of industrial water pollution globally has been attributed to the dyeing and treatment of textiles.6

In an era of ‘fast fashion’ it may not surprise that the average number of times a garment is worn has decreased 36% compared to 15 years ago.7 When clothes are thrown away, 73% will be burned or buried in landfill.8

A ‘circular economy’ model for fashion – based on the idea of ‘reuse, repair, recycle’ - could address some of these issues, and could be worth $700bn by 2030, according to the Ellen MacArthur Foundation.9

While this may appear at first glance counterproductive for companies in the business of making and selling new clothes, there is money to be made in resale, rental, and using recycled clothing to make more garments.

And we must not forget the social aspect. The clothing and textile industry today employs some 300 million people across the value chain, a large proportion of them women.10 Businesses need to consider issues ranging from health and safety to fair wages and more, and investors increasingly want to see evidence of this throughout the supply chain.

Innovations making a positive impact

While many companies in the sector report on sustainability targets, there have been some headline-grabbing announcements such as when the founder of outdoor clothing retailer Patagonia declared that all future profits from the privately held company would be used to help combat climate change.11

Less dramatically, but none the less important, we are already seeing companies in the fashion value chain using renewable energy to power factories and warehouses; opting for more sustainable raw materials and more environmentally friendly processes such as using less water to dye cotton.

New technologies such as blockchain are also being harnessed – a consortium consisting of LVMH, Prada and Cartier has created a way of giving products a digital identity, allowing them – and customers – to track a product’s lifespan from the raw materials through to second-hand sales.12

But for the industry as a whole there is still some way to go, as evidenced by two recent surveys. The Business of Fashion Sustainability Index 2002, covering 30 of the fashion sector’s biggest companies, suggests that “there is less evidence that targets are translating into action”.13 And the Fashion Transparency Index found that 50% of major brands still disclose no information about their supply chains.14

Policy developments could give investors more clarity

Policymakers and regulators have a key role to play in driving sustainability in the fashion sector. Regulators have clamped down recently on companies that are believed to have been involved in greenwashing.

Meanwhile industry initiatives such as the UN Alliance for Sustainable Fashion and the Fashion Industry Charter for Climate Action are among those aiming to coordinate action across the industry.15

There are further developments in the pipeline that could give investors more clarity – and could affect the path of sustainability in the fashion industry.

A new US bill proposed last year would require clothing and footwear companies with revenues of over $100m, specifically in New York, to disclose environmental performance and climate targets.16 The Fashion Sustainability and Social Accountability Act is expected to be debated this year - if passed, it could pave the way for similar regulations elsewhere in the US. Elsewhere, the UN and GFA consultation launched at COP27 is expected to publish its targets in June.17

Identifying the sustainability leaders

The fashion industry is undoubtedly a contributor to climate change, and a change in consumer behaviour is needed – and already partly underway. We are also seeing encouraging moves from policymakers and industry bodies as well as clothing manufacturers and retailers themselves. This is giving investors greater reassurance, and measurable targets they can assess, as well as creating potential investment opportunities.

But there is a clear need for further investment in innovation and new processes and manufacturing techniques, which would provide additional opportunities for investors. Companies will increasingly need to adapt their business models, whether that is manufacturing or the way that clothes are designed to last longer and be more easily recyclable.

For clothing manufacturers and retailers, it is becoming increasingly important to demonstrate a commitment to sustainability and a consideration of environmental, social and governance (ESG) issues. We believe that those who are ESG leaders have a competitive advantage in terms of appeal to consumers and potential to grow sales and could face fewer ESG-related risks.

Identifying such companies – and engaging with them on this transition – is key, and as sustainability becomes a core part of fashion rather than just a niche, we see an increasing scope for potential opportunities for responsible investors.

References to companies are for illustrative purposes only and should not be viewed as investment recommendations.

  • U3RhdGUgb2YgRmFzaGlvbiAyMDIyLCBNY0tpbnNleSAvIEhvdyBNdWNoIERvIE91ciBXYXJkcm9iZXMgQ29zdCB0byB0aGUgRW52aXJvbm1lbnQ/ICh3b3JsZGJhbmsub3JnKQ==
  • Q2FsbGluZyBmYXNoaW9uIHN0YWtlaG9sZGVyczogbmV3IGNvbnN1bHRhdGlvbiBzZXQgdG8gZGVmaW5lIGhvbGlzdGljIGFuZCBjb25jcmV0ZSB0YXJnZXRzIGZvciBhIG5ldC1wb3NpdGl2ZSBpbmR1c3RyeSAodW5lcC5vcmcp
  • JDYuOSBCaWxsaW9uIFdvcmxkd2lkZSBFdGhpY2FsIEZhc2hpb24gSW5kdXN0cnkgdG8gMjAzMSAtIChnbG9iZW5ld3N3aXJlLmNvbSk=
  • VW5sb2NraW5nIEludmVzdG1lbnQgdG8gU2NhbGUgSW5ub3ZhdGlvbiBpbiBGYXNoaW9uIChiY2cuY29tKQ==
  • SG93IE11Y2ggRG8gT3VyIFdhcmRyb2JlcyBDb3N0IHRvIHRoZSBFbnZpcm9ubWVudD8gKHdvcmxkYmFuay5vcmcp
  • QSBOZXcgVGV4dGlsZXMgRWNvbm9teTogUmVkZXNpZ25pbmcgRmFzaGlvbidzIEZ1dHVyZSAoZWxsZW5tYWNhcnRodXJmb3VuZGF0aW9uLm9yZyk=
  • QSBOZXcgVGV4dGlsZXMgRWNvbm9teTogUmVkZXNpZ25pbmcgRmFzaGlvbidzIEZ1dHVyZSAoZWxsZW5tYWNhcnRodXJmb3VuZGF0aW9uLm9yZyk=
  • RmFzaGlvbiBoYXMgYSBodWdlIHdhc3RlIHByb2JsZW0uIEhlcmUncyBob3cgaXQgY2FuIGNoYW5nZSB8IFdvcmxkIEVjb25vbWljIEZvcnVtICh3ZWZvcnVtLm9yZyk=
  • RmFzaGlvbiBhbmQgYSBjaXJjdWxhciBlY29ub215IHwgRWxsZW4gTWFjQXJ0aHVyIEZvdW5kYXRpb24=
  • SG9tZSAtIFRoZSBVTiBBbGxpYW5jZSBmb3IgU3VzdGFpbmFibGUgRmFzaGlvbiAodW5mYXNoaW9uYWxsaWFuY2Uub3JnKQ==
  • WXZvbiBDaG91aW5hcmQgRG9uYXRlcyBQYXRhZ29uaWEgdG8gRmlnaHQgQ2xpbWF0ZSBDcmlzaXM=
  • QVVSQSDigJMgVGhlIEF1cmEgQmxvY2tjaGFpbiBDb25zb3J0aXVtIChhdXJhbHV4dXJ5YmxvY2tjaGFpbi5jb20p
  • VGhlIEJvRiBTdXN0YWluYWJpbGl0eSBJbmRleCAyMDIyIC0gQm9GIElOU0lHSFRTIChidXNpbmVzc29mZmFzaGlvbi5jb20p
  • RkFTSElPTiBUUkFOU1BBUkVOQ1kgSU5ERVggMjAyMiAtIEZhc2hpb24gUmV2b2x1dGlvbiA6IEZhc2hpb24gUmV2b2x1dGlvbg==
  • VU4gQWxsaWFuY2UgZm9yIFN1c3RhaW5hYmxlIEZhc2hpb24gLyBGYXNoaW9uIEluZHVzdHJ5IENoYXJ0ZXIgZm9yIENsaW1hdGUgQWN0aW9uLCBVbml0ZWQgTmF0aW9ucyAvIEluc3RpdHV0ZSBvZiBQb3NpdGl2ZSBGYXNoaW9uLCBCcml0aXNoIEZhc2hpb24gQ291bmNpbCAvIEZhc2hpb24gVmFsdWVz
  • TmV3IFlvcmvigJlzIFB1c2ggdG8gTW9yZSBUaWdodGx5IFJlZ3VsYXRlIEZhc2hpb24gTGFwc2VzIGludG8gTmV4dCBZZWFyIHwgQm9GIChidXNpbmVzc29mZmFzaGlvbi5jb20p
  • Q2FsbGluZyBmYXNoaW9uIHN0YWtlaG9sZGVyczogbmV3IGNvbnN1bHRhdGlvbiBzZXQgdG8gZGVmaW5lIGhvbGlzdGljIGFuZCBjb25jcmV0ZSB0YXJnZXRzIGZvciBhIG5ldC1wb3NpdGl2ZSBpbmR1c3RyeSAtIEdsb2JhbCBGYXNoaW9uIEFnZW5kYQ==

Artículos relacionados

Medio Ambiente

How investors can get on board with sustainable travel and transport

  • por Chris Iggo
  • 19 Junio 2023 (7 min de lectura)
Medio Ambiente

La brecha de recursos: razones por las que el Día de la Deuda Ecológica debería importar a los inversores

  • por Chris Iggo
  • 14 Junio 2023 (7 min de lectura)
Medio Ambiente

How regulatory momentum is helping drive biodiversity-aware investment

  • por Liudmila Strakodonskaya
  • 09 Mayo 2023 (5 min de lectura)

    Disclaimer

    Este documento tiene fines informativos y su contenido no constituye asesoramiento financiero sobre instrumentos financieros de conformidad con la MiFID (Directiva 2014/65 / UE), recomendación, oferta o solicitud para comprar o vender instrumentos financieros o participación en estrategias comerciales por AXA Investment Managers Paris, S.A. o sus filiales.

    Las opiniones, estimaciones y previsiones aquí incluidas son el resultado de análisis subjetivos y pueden ser modificados sin previo aviso. No hay garantía de que los pronósticos se materialicen.

    La información sobre terceros se proporciona únicamente con fines informativos. Los datos, análisis, previsiones y demás información contenida en este documento se proporcionan sobre la base de la información que conocemos en el momento de su elaboración. Aunque se han tomado todas las precauciones posibles, no se ofrece ninguna garantía (ni AXA Investment Managers Paris, S.A. asume ninguna responsabilidad) en cuanto a la precisión, la fiabilidad presente y futura o la integridad de la información contenida en este documento. La decisión de confiar en la información presentada aquí queda a discreción del destinatario. Antes de invertir, es una buena práctica ponerse en contacto con su asesor de confianza para identificar las soluciones más adecuadas a sus necesidades de inversión. La inversión en cualquier fondo gestionado o distribuido por AXA Investment Managers Paris, S.A. o sus empresas filiales se acepta únicamente si proviene de inversores que cumplan con los requisitos de conformidad con el folleto y documentación legal relacionada.

    Usted asume el riesgo de la utilización de la información incluida en este documento/ material audiovisual. La información incluida en este documento/ material audiovisual se pone a disposición exclusiva del destinatario para su uso interno, quedando terminantemente prohibida cualquier distribución o reproducción, parcial o completa por cualquier medio de este material sin el consentimiento previo por escrito de AXA Investment Managers Paris, S.A.

    La información aquí contenida está dirigida únicamente a clientes profesionales tal como se establece en los artículos 205 y 207 del texto refundido de la Ley del Mercado de Valores que se aprueba por el Real Decreto Legislativo 4/2015, de 23 de octubre.

    Queda prohibida cualquier reproducción, total o parcial, de la información contenida en este documento.

    Por AXA Investment Managers Paris, S.A., sociedad de derecho francés con domicilio social en Tour Majunga, 6 place de la Pyramide, 92800 Puteaux, inscrita en el Registro Mercantil de Nanterre con el número 393 051 826. En otras jurisdicciones, el documento es publicado por sociedades filiales y/o sucursales de AXA Investment Managers Paris, S.A. en sus respectivos países.

    Este documento ha sido distribuido por AXA Investment Managers Paris, S.A., Sucursal en España, inscrita en el registro de sucursales de sociedades gestoras del EEE de la CNMV con el número 38 y con domicilio en Paseo de la Castellana 93, Planta 6 - 28046 Madrid (Madrid).

    Advertencia sobre riesgos

    El valor de las inversiones y las rentas derivadas de ellas pueden disminuir o aumentar y es posible que los inversores no recuperen la cantidad invertida originalmente.

    Clientes Profesionales

    El sitio web de AXA INVESTMENT MANAGERS Paris Sucursal en España está destinado exclusivamente a clientes profesionales tal y como son Definidos en la Directiva 2014/65/EU (directiva sobre Mercados de Instrumentos financieros) y en los artículos 194 y 196 de la Ley 6/2023, de 17 de marzo, de los Mercados de Valores y de los Servicios de Inversión. Para una mayor información sobre la disponibilidad de los fondos AXA IM, por favor consulte con su asesor financiero o diríjase a la página web de la CNMV www.cnmv.es

    Por la presente confirmo que soy un inversor profesional en el sentido de la legislación aplicable.

    Entiendo que la información proporcionada tiene únicamente fines informativos y no constituye una solicitud ni un asesoramiento de inversión.

    Confirmo que poseo los conocimientos, experiencia y aptitudes necesarios en materia de inversión, y que comprendo los riesgos asociados a los productos de inversión, tal como se definen en las normas aplicables en mi jurisdicción.