The Fast Fashion Industry
Advantage Capital Strategies identifies industries that have detrimental environmental, social, and economic effects and takes action to mitigate risk through screening and advocating for change.
We are not currently divested from fast fashion but are aware of the industry as a possible screen in the future.
The Fast Fashion Industry Explained
“Fast fashion” refers to those clothing retailers who produce affordable clothing based off runway looks for the latest season. These clothes are “fast” because they come straight from the runway to the rack, but that speed – and the very low price tag of these clothes – has repercussions.
Many fashion retailers are guilty of using fast fashion practices in their product line, but some are worse than others. Online retailers Boohoo and Missguided are often considered to epitomize the fast fashion industry because of the incredible low prices they charge for their clothing – sometimes as low as £4. New items are constantly added to their online retail stores, sometimes as often as a few times each week, urging customers to purchase the latest fashion for the same price as a cup of tea [1].
We have not identified any fast fashion companies on the S&P 500. On IDEV, Industria de Diseno Textil (ITX), Hennes & Mauritz AB (HM B), Fast Retailing Ltd (9983), and Boohoo Group (BOO) are commonly referred to as fast fashion because of the price point of their clothes.
The Economic Rationale for Divestment
Fast fashion is at risk of being negatively impacted by government regulation. In the UK, a bill was recently proposed that would prohibit fast fashion retailers from discarding or burning unsold stock, as well as charging a small fee on every item sold to help fund research into sustainable clothing practices [2]. Such proposed legislation poses an economic risk for fast fashion retailers.
While many fast fashion companies have experienced positive growth in the past 10 years, we have observed a prominent slowing of their growth rates, with some posting negative returns in the past two years.
The Social Rationale for Divestment
It is also problematic that fast fashion factory workers are often not subject to proper labour rights and are not paid livable wages, even in countries such as the UK [3]. Testimony heard by British MPs claimed that some garment workers in the UK were being paid £3 an hour, an illegally low wage [2]. These workers are often prevented from unionizing.
The Environmental Rationale for Divestment
Perhaps surprisingly, the fashion industry, particularly fast fashion, is a major polluter, often cited as the second biggest polluter after oil and gas. Textile dyeing and finishing is the second biggest polluter of clean water after agriculture, and 8% of global greenhouse gas emissions can be traced back to the fashion industry [4]. The UN estimates that about 2,000 gallons of water are required to make a single pair of jeans [3]. If the fashion industry continues to produce at this rate and using the same practices, the UN estimates that the industry will be responsible for a quarter of the world’s carbon budget by the year 2050 [3].
The fashion industry in general has a pollution problem, not just those companies considered to be fast fashion. However, fast fashion companies are more problematic because the price and quality of the clothes they produce inherently imply that these items should be worn a limited number of times and discarded once the season ends; sometimes, the clothes aren’t even worn at all. The average life span of a product from a retailer like Boohoo is five weeks [2].
Indeed, one major problem associated with fast fashion is that it is not made to last; according to Quantis, approximately 60% of all clothing “ends up in incinerators or landfills within a year of being produced” [4]. The UN also estimates that “the equivalent of one garbage truck of textiles is landfilled or burned” every second [3].
Fast fashion is also problematic because items are often made using synthetic fibers such as polyester, which release microplastics when washed. It is estimated that 35% of all microplastics in the ocean are from synthetic clothing [2]. Unsold stock is often incinerated instead of being recycled or donated, releasing pollutant into the air.
