Continuing to fight the fashion revolution

Written by Neil Brown on 10th Jul 2020

Fashion Revolution Week felt more relevant than ever in 2020 as we focus again on the need for businesses to protect employees throughout their supply chains in times of stress. We welcome the growth in this annual campaign to increase transparency in the global garment industry and, of course, the publication of its latest Fashion Transparency Index.

We have written in the past about the sustainability challenges faced by fast fashion and how our thinking has evolved on this industry. Since launching the Sustainable Future funds in 2001, our view has always been that unsafe and degrading working practices make no business, common or investment sense.

Valuable insight

Against the backdrop of the extreme stresses faced by companies and their employees in this crisis, the Transparency Index, in its fifth year, gives a valuable insight into the fashion industry. The Index ranks 250 of the world’s largest fashion brands and retailers against 220 indicators, covering topics from animal welfare and climate, to forced labour, gender equality, supplier disclosure, and waste and recycling.

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Headline results confirm our current thinking on this sector: while improvements are evident, there is much to be done, with no brand scoring anywhere near full marks and a truly poor average of 23 per cent (up from up from 21 per cent from 200 brands surveyed in 2019). We commend H&M’s top spot with 73 per cent, and highlight Puma, which we hold in our funds, being ranked seventh out of 250 brands.

Social risk during coronavirus

Based on these findings, we believe our Better monitoring of supply chains and quality control theme is more important than ever, with huge improvements required across this sector. Just 2 per cent of brands publish a time-bound, measurable strategy for how they will achieve a living wage for all workers across their supply chains. We view the lack of progress on this key social impact as unacceptable and a potentially significant risk through the Coronavirus epidemic.

As the sector grapples with issues of sustainability, we have shifted our investments from high street retailers to companies that assess supply chains on behalf of those businesses, adding Intertek to portfolios in 2018. The Testing, Inspection and Certification (TIC) industry is vital for sustainable development, ensuring the safety of products both for the users and the people making them. We have also continued to look for clothing businesses focused on closing the loop and moving towards a circular economy, buying Italian textile manufacturer Aquafil, as well as companies exposed to our Enabling healthier lifestyles theme such as Puma.

How success will be determined

Now more than ever, the ability to manage a supply chain will determine success in the fashion industry. We believe positive impacts delivered through the supply chain can reduce fashion and business risk, both in the short term and as we come through this crisis: fighting the fashion revolution has never been more important.

For a comprehensive list of common financial words and terms, see our glossary here.

 


Key Risks

Past performance is not a guide to future performance. Do remember that the value of an investment and the income generated from them can fall as well as rise and is not guaranteed, therefore, you may not get back the amount originally invested and potentially risk total loss of capital. The majority of the Liontrust Sustainable Future Funds have holdings which are denominated in currencies other than Sterling and may be affected by movements in exchange rates. Some of these funds invest in emerging markets which may involve a higher element of risk due to less well-regulated markets and political and economic instability. Consequently the value of an investment may rise or fall in line with the exchange rates. Liontrust UK Ethical Fund, Liontrust SF European Growth Fund and Liontrust SF UK Growth Fund invest geographically in a narrow range and has a concentrated portfolio of securities, there is an increased risk of volatility which may result in frequent rises and falls in the Fund’s share price. Liontrust SF Managed Fund, Liontrust SF Corporate Bond Fund, Liontrust SF Cautious Managed Fund, Liontrust SF Defensive Managed Fund and Liontrust Monthly Income Bond Fund invest in bonds and other fixed-interest securities – fluctuations in interest rates are likely to affect the value of these financial instruments. If long-term interest rates rise, the value of your shares is likely to fall. If you need to access your money quickly it is possible that, in difficult market conditions, it could be hard to sell holdings in corporate bond funds. This is because there is low trading activity in the markets for many of the bonds held by these funds. Mentioned above five funds can also invest in derivatives. Derivatives are used to protect against currencies, credit and interests rates move or for investment purposes. There is a risk that losses could be made on derivative positions or that the counterparties could fail to complete on transactions.

Disclaimer

The information and opinions provided should not be construed as advice for investment in any product or security mentioned, an offer to buy or sell units/shares of Funds mentioned, or a solicitation to purchase securities in any company or investment product. Always research your own investments and (if you are not a professional or a financial adviser) consult suitability with a regulated financial adviser before investing.