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Non-profit think tank Planet Tracker has received a grant from Laudes Foundation to investigate the fashion industry’s environmentally linked financial risks.
Currently, the listed equities portion of the fashion industry generates over $1.2 trillion in revenues. Yet investors in this industry are not incorporating the true cost of their investments. Specifically, while multiple studies have highlighted the deep, environmental impact of the fashion and textiles industry, Planet Tracker has found little analysis assessing those natural capital-related financial risks across the value chain, which can impact shareholder value. Textiles Tracker will identify and analyze these potential financial risks, enabling investors to factor them in.
According to Planet Tracker, without a broader view of system dynamics influencing the industry – with a particular focus for this project on understanding the industry’s financial and related investment systems – change will happen piecemeal and slowly. If the cost of natural capital is factored into financial flows, change will occur far more rapidly as businesses cannot risk loss of capital or indeed reputation. This grant will provide resources to undertake a detailed analysis of the textiles industry and identify value-at-risk for investors.
The fashion industry has increasingly come to the attention of politicians, environmental activists, and media. The focus of scrutiny has been mainly on the impacts of the industry’s practices that are driven by a variety of trends. “Fast-fashion,” for example, has accelerated the rates of production and consumption.
Since 2000, global clothing production globally has doubled while utilization has decreased by 36%, resulting in up to 73% of all produced clothing (equivalent to $460 billion) ending in landfill annually.
The financial value generated by the sector’s largest companies do not price in or value the ecological cost of their current practices. Valuing natural capital in the textile industry and relating it to financial risk creates potential to catalyze a change in investment behavior, according to Planet Tracker.