Pollution, high carbon footprints and overproduction in the apparel and retail industry are going out of fashion for allocators scrutinizing companies’ environmental and social impact. Investors from Calvert discuss analyzing sustainability in the fashion industry and challenges along its supply chain.
According to the World Bank, the fashion industry is responsible for 10% of annual global carbon emissions, which is more than all international flights and maritime shipping combined.1 In addition to the impact on global warming, consumers and investors in fashion companies are also scrutinizing the sector’s fast pace of production, labor practices, pollution and biodiversity impact.
To unpack how investors who prioritize environmental, social and governance (ESG) factors can assess sustainability in the fashion industry, Morgan Stanley spoke with Calvert Research & Management’s Hellen Mbugua, Director of Research, and Kara Huang, who cover the Apparel and Retail sectors at the firm’s Investment Management division. They discussed the biggest sustainability challenges that fashion companies and their supply chains face and innovations that could make the biggest differences in mitigating issues such as climate change and waste.
Q: How do you define sustainable fashion?
Hellen Mbugua: The way we think about sustainable fashion is by looking at every stage in the supply chain: design, material procurement, processing and production,2 transportation, distribution, end of life, and understanding companies’ initiatives. The financially material factors are assessed based on impact to natural capital—how polluting and intense the water usage and carbon emissions are during processing; labor—balancing the positive, such as poverty alleviation,3 while ensuring fair labor practices; and waste management at the pre/post-consumer stage, are all important.
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This article was written by Morganstanley.com
