By Thomas Kostigen
Fast fashion has become the subject of both scorn and envy in the retail world. Now it’s getting the same treatment in environmental circles.
Fast fashion companies such as H&M, Zara, and Uniqlo, get items from manufacturers to stores in record time, in bulk, and at low prices. These cheap clothes can make massive profits. Indeed, five years ago Amancio Ortega, the founder of Zara, overtook Bill Gates as the richest man in the world for a few days.
Fortunes came down again and the pandemic worsened things. Topshop, another fast fashion retailer, recently went bankrupt. Environmental, social, and governance (ESG) issues have serially plagued the fast fashion sector. Cheap clothes off the backs of low wage earners with little regard for environmental issues was largely the model for success in times past. That’s quickly changing. Fast fashion retailers are in many cases leading the charge into sustainable supply chain protocols and getting out in front of diversity and fair wage issues.
For many investors and financial advisors, fast fashion companies may be worth another look. Case in point, H&M, which has pledged to use 100 percent sustainable materials by 2030. Its stock has doubled from pandemic levels.
Fast fashion companies largely target millennial shoppers for sales of their goods, and the majority of millennials prefer companies that abide by ESG considerations. That’s why it’s important for investors to vet the track record and the current and future ESG efforts of fast fashion companies. If sustainability efforts aren’t apparent, the chances for success aren’t good.
To be sure, there is a long way to go towards becoming environmentally friendly for most fashion companies. Use of water is profligate, waste is enormous, as is the use of fossil fuel energy in textile production. And often there is toxic runoff from dyes and other problems.
According a recent study by Princeton University, “The fashion industry is currently responsible for more annual carbon emissions than all international flights and maritime shipping combined.” The report says that if the fashion industry doesn’t get its act together, it will see a 50 percent increase in the amount of greenhouse gases it produces within a decade.
Luxury brands also contribute to this environmental problem, too. Many of them have been slower than fast fashion companies to embrace ESG protocols, in many cases because their demographic of shopper is older.
“Doing background research on brands before purchasing clothes can help you become a more informed consumer and steer your purchases in a manner that aligns with your environmental values. The fashion industry has caused a substantial amount of damage to our environment. However, if we start to take proactive steps towards advocating for a green-friendly fashion industry and becoming an environmentally-conscious consumer, we can finally slow down climate change,” the Princeton study concludes. Investors, can use the same words of advice with their portfolios for the same effect.
Another trend to look at is reselling or vintage sales. This is when previously used items are resold, and it’s a fast-growing business model. The Real Real and even some traditional retail stores are seeing huge gains with these (re)sales programs. H&M has a twist on this and gives consumers rewards for turning in their used items.
Investor and advisors then may want to look at the fashion industry not so much for fast sales, but fast turnarounds when it comes to environmental friendliness.
Thomas Kostigen is a contributing writer to MyPerfectFinancialAdvisor, the premier matchmaker between investors and advisors. Thomas is a best-selling author and longtime journalist who writes about environmental, social, and governance issues.
