Fixing fashion’s faux pas

Fashion is a source of joy and a means of self-expression and cultural identity for billions of people. But for all its positive effects, the industry is also grappling with negative impacts. Sourcing, production and processing of materials are resource-intensive and polluting. Fashion generates up to 10% of global greenhouse gas emissions.¹ It also creates a lot of waste. Of the 100 billion articles of clothing produced each year, 20% go unsold² and less than 1% are recycled for new garments.³

Social risks also abound. Manufacturing is concentrated in regions where wages are unfair, labor rights are inequitable or non-existent, and working conditions unsafe. On average, factory workers receive just 55% of the pay needed to maintain a decent standard of living.⁴

Fashion is already a USD 2.5 trillion industry.⁵ Increasing population growth and disposable incomes globally ensure robust demand for decades to come and intensify an already urgent need for the industry to become more sustainable. The Strategy aims to help reshape the face of fashion from its wasteful take-make-waste production model toward a circular one that is fair to workers and the environment.

The Strategy invests in and engages with publicly listed companies across the entire fashion value chain and product life cycle. This provides a rich and multi-layered universe that stretches from the fiber makers, fabric treaters and textile manufacturers that create woven fabrics and finished goods from raw materials, as well as (e-)retailers that market them to end consumers. And textiles are not the only target. Accessories and cosmetics serve to accentuate our apparel and appeal, so in addition to clothing, the Strategy also invests in footwear, jewelry, watches, eyewear, make-up and perfumes.

Technology companies are also in the investment mix. Design software and factory automation tools promise to make production less costly and more resource-efficient. Meanwhile, ‘smart’ chip-bearing tags and digital marketplaces are enabling the shift to circular business models that allow goods to be rented, resold, traced, certified and recycled.

Just as fashion’s sprawling reach offers a vast array of investment opportunities, it also presents a wide variety of sustainability challenges at each stage of the supply chain.

The Strategy invests in fashion companies that show potential in deploying sustainable practices in their operations and across their supply chains. It also invests in fashion’s ‘sustainability enablers’ – such as companies creating tracing tags to track and certify source inputs and finished products, recycling infrastructure to reduce and reuse waste, as well as next-generation materials that are naturally sourced or biodegradable.

Engagement and active ownership are equally critical components to the investment strategy. Engagements are designed to drive measurable improvements in companies’ sustainability performance over a three to five year period and focus on key ESG issues confronting all phases of fashion’s value chain (see Figure 2). They are carefully constructed by Robeco’s dedicated fashion engagement specialists based on rigorous analysis of a company’s sustainability profile, value chain position and progress potential. We also partner with key stakeholders from fashion and finance to help amplify impact and drive systemic change in the real economy.