Investment dilemma: what is the true cost of fast fashion?
From an ESG perspective, investing in either luxury clothing brands or fast fashion can be a dilemma. The question arises as to whether we should prioritize the economic accessibility offered by fast fashion, despite its negative environmental and social impact, or opt for luxury fashion brands that have adopted more responsible practices but are less accessible in terms of prices.
Fast fashion is known for its affordability and accessibility, catering to a wide range of consumers. However, there is a downside to the constant influx of trendy collections resulting from mass production of cheap clothing: workers who make these clothes are often underpaid, natural resources are being depleted, and the production process involves massive waste generation. In addition, the poor quality of garments made by these companies makes their reuse and resale unattractive. That said, some affordable fashion brands are adopting more sustainable practices to reduce their impact on the environment and on local communities.
The luxury fashion segment has traditionally been associated with money, exclusivity and excess – not so much with sustainability. This perception, however, is changing. Luxury fashion is becoming increasingly intertwined with sustainable practices. To safeguard their supply chains, many luxury brands are opting for vertical integration, with companies including various parts of their supply chain into their own business process (for instance, by taking over their own suppliers). This integrated structure enables these companies to reduce exposure to human rights controversies, to maintain animal welfare standards and play a role in the protection of endangered species. For instance, a premium Italian fashion brand played a significant role in saving the vicuña, a small llama species threatened with extinction in the 1980s, by establishing a vicuña nature reserve in Peru.
Ultimately, the choice between investing in luxury or fast fashion is not necessarily a binary one. Instead, investors should select companies that demonstrate sustainable and socially responsible practices. Encouraging the fashion industry to adopt a more sustainable approach, such as implementing circular practices in the production process, is crucial. As investors, we should strive to support and promote these positive changes in the fashion industry.
Sandra Saïdi - Portfolio Manager Sustainable Equities