ESG investing in fashion: A case of greenwashing?

Cotton, a key raw material for the textile industry, is considered one of the dirtiest crops. Over 75% of the world’s cotton is sourced from emerging markets, with the largest demand coming from the US, China, Europe and Japan. Many global apparel brands are now shifting to sustainable sources to fulfil their cotton needs. However, we are not convinced.

Key Takeaways

In this webinar, Charanjit Singh, our head of ESG Investment Research, highlights:

a. Sustainability of the textile supply chain is a key focus for the fashion industry
b. Major apparel brands are claiming that a large share of their cotton supplies are now ‘sustainable’; however, we disagree
c. Around 80% of the reported sustainable cotton is the Better Cotton Initiative (BCI) type, whereas the remaining 20% is Organic Cotton
d. BCI Cotton’s sustainability performance is no match to Organic Cotton, and we see serious limitations in claiming BCI as sustainable. It is similar to considering supercritical coal as sustainable
e. Brands prefer BCI Cotton since it is not priced at a premium, unlike Organic Cotton, which carries a 7-40% premium
f. Growth of BCI Cotton has jeopardised the growth of Organic Cotton, which has a huge hidden cost for the society, in our view
g. Investors need to take necessary measures to manage the greenwashing in the fashion industry and analyse brands carefully for their sustainable sourcing strategies

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