Cookie Settings

Continuing to fight the fashion revolution

Fashion, by definition, is among the fastest-moving industries and one that has presented many challenges for sustainable investors over the years. Our work on this industry over two decades highlights how our thinking on themes can change and also shines a light on our engagement efforts as an active owner of companies.

As the idea of ‘fast fashion’ proliferated, clothing supply chains lengthened under relentless pressure on costs with emerging economies offering lower wages, weaker labour laws and tax breaks to win contracts from major brands. But since launching the Sustainable Future (SF) funds in 2001, our view has always been that unsafe and degrading working practices make no business, common or investment sense.

Fashion Revolution Week has become an established part of the sustainable calendar and this year’s event, against a backdrop of Covid-19, felt more relevant than ever in pushing for businesses to protect employees throughout their supply chains in times of stress.

Overall, the aim of the event is to increase transparency in the global garment industry and a key part of this is the publication of the annual Fashion Transparency Index. This 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. Headline results confirmed 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 disappointing average of 23% (up from up from 21% from 200 brands surveyed in 2019).

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. Just 2% of brands publish a time-bound, measurable strategy for how they will achieve a living wage for all workers across their supply chains and we view such a lack of progress on this key social impact as a major risk during and beyond the Covid-19 epidemic.

As the fashion sector grapples with issues of sustainability, we have shifted our own investments away from high street retailers and it is worth investigating why we ultimately made such a move. Since the earliest days of the SF funds, labour standards in supply chains has been one of our most important engagement areas and we have seen several major projects to improve this, from Oxfam launching Better Returns in a Better World in 2006 to Fashion Revolution itself, formed in the wake of 2013’s Rana Plaza disaster.

A decade ago, we completed a detailed project to assess the fashion industry’s supply chains, concluding that working conditions were unacceptable in a significant number, that change was coming, and there were opportunities available to companies that could drive improvements. We focused on the need for decent work and wages throughout the chain and identified Inditex, the owner of the Zara brand, as an investment for our funds as we believed its proximity sourcing model allowed for a more sustainable form of manufacturing.

This issue of unsafe working conditions came into sharp focus with the 2013 collapse of the Rana Plaza complex in Bangladesh, a disaster that resulted in the loss of more than 1,100 lives. Many of those killed were employed in the garment industry and change was urgently required. As a direct result, we saw the Accord on Fire and Building Safety in Bangladesh and Alliance for Bangladesh Worker Safety quickly established, notable wins for an industry that had previously been slow to respond to such issues.

After years of ongoing analysis, we concluded in 2016 that retailers had been unable to show sufficient improvements in supply chains and the image of fast fashion had become irrevocably damaged as a result. The theme exposed more risks than opportunities for the large retailers and we sold out of names including H&M and, ultimately, Inditex in 2018.

This is not to say we no longer find opportunities within this theme but we now focus on companies that assess supply chains on behalf of retailers. The Testing, Inspection and Certification (TIC) industry is vital for sustainable development, ensuring the safety of products both for users and the people making them. With more complex supply chains, product innovation, stringent regulations and ever-increasing consumer demands around sustainability, this sector enjoys a long-term structural growth rate that should continue to rise ahead of global GDP.

We identified Intertek as a positively exposed company benefiting from growth in increasing safety standards, outsourcing, regulations and sustainability, adding it to our funds in 2018. It also has the sustainability profile, business fundamentals and valuation that we need to invest with confidence.

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 chain can reduce fashion and business risk, both in the short term and as we come through the Covid-19 crisis: fighting the fashion revolution has never been more important.

For a comprehensive list of common financial words and terms, see our glossary at:

For more article like this, please visit our insights page

About the author

Peter Michaelis, Head of Sustainable Investment team, Liontrust

Peter Michaelis joined Liontrust in April 2017 following the acquisition of Alliance Trust Investments, where he was Head of Investment. Peter has been managing money in Sustainable and Responsible Investment for over 19 years. After completing a PhD in Environmental Economics, Peter started his career working for the Steel Construction Institute as an Environmental Engineer. He then moved to Henderson Global Investors where he was able to use his experience as a Sustainable and Responsible Investment Analyst and Assistant Portfolio Manager. In 2001 he moved to Aviva Investors, where he was promoted to lead Portfolio Manager on a number of its Sustainable and Responsible Investment funds, before being made Head of Sustainable and Responsible Investment.

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 issue of units/shares in Liontrust Funds may be subject to an initial charge, which will have an impact on the realisable value of the investment, particularly in the short term. Investments should always be considered as long term. Some of the Funds managed by the Sustainable Future Equities team involve foreign currencies and may be subject to fluctuations in value due to movements in exchange rates.


Issued by Liontrust Fund Partners LLP (2 Savoy Court, London WC2R 0EZ), authorised and regulated in the UK by the Financial Conduct Authority (FRN 518165) to undertake regulated investment business. This document 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. Examples of stocks are provided for general information only to demonstrate our investment philosophy. It contains information and analysis that is believed to be accurate at the time of publication but is subject to change without notice. Whilst care has been taken in compiling the content of this document, no representation or warranty, express or implied, is made by Liontrust as to its accuracy or completeness, including for external sources (which may have been used) which have not been verified. It should not be copied, faxed, reproduced, divulged or distributed, in whole or in part, without the express written consent of Liontrust. 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.

The information, materials or opinions contained on this website are for general information purposes only and are not intended to constitute legal or other professional advice and should not be relied on treated as a substitute for specific advice of any kind.

We make no warranties, representatives or undertakings about any of the content of this website (including without limitation any representations as to the quality, accuracy, completeness or fitness of any particular purpose of such content, or in relation to any content of articles provided by third parties and displayed on this website or any website referred to or accessed by hyperlinks through this website.

Although we make reasonable efforts to update the information on this site, we make no representation warranties or guarantees whether express or implied that the content on our site is accurate complete or up to date.

Be the first to hear news and insights from Embark Group

Our emails are designed to be topical and engaging, however if you don’t like what we send, you can unsubscribe at any time. We promise never to pass your details on to a third party.

  • This field is for validation purposes and should be left unchanged.