PA Future spoke to Danae Motta, sustainability investing and engagement specialist for Robeco’s Fashion Engagement Equities strategy, about the firm’s engagement approach with apparel companies, the challenges Motta has faced so far in the industry, and ambitions for the fashion industry.
The strategy was launched last year, is classified as an Article 8 fund and is the first active strategy in the market focused exclusively on fashion. It aims to generate attractive investment returns while promoting change in the fashion industry “from it’s wasteful take-make-waste production model toward a circular one that is fair to workers and the environment.”
In the past years, the industry has been under immense pressure by its stakeholders to address, disclose and overcome its environmental and social challenges. As consumer demands increase and an awareness of sustainability sharpens, there is a need for the industry to become more sustainable.
Can you explain Robeco’s engagement approach?
We have a long-term engagement approach and engage with 100% of the companies that we have in our portfolio. These companies are sitting at different stages of sustainability integration, given their geographical focus, business type and business model. The idea is through ongoing engagement with these companies, we will bring them towards a leader position in sustainability integration.
Our engagement is very customised, but the topics are always the same. There are so many topics to engage companies on, such as child labour, migrant labour, forced labour etc. So, we believe the best way to engage is to lay the foundations for responsible sourcing practices. This is done by engaging on more forward-looking topics that will hopefully help prevent individual issues from happening.
The three key areas we look at is good governance, responsible sourcing and purchasing practices, and responsible and supplier engagement.
These topics break down into (i) sourcing, such as unsafe working conditions, deforestation risks, or high use of agrochemicals, (ii) production, such as the payment of living wages, phasing out of fossil fuels in production, or wastewater and chemical management, (iii) consumption, for example, responsible marketing practices, product labelling and repair services, and (iv) end-of-life management, such as non-destruction policy for unsold goods and scale circular services.
Although the individual engagement is done by ourselves, we are also part of the Platform Living Wage Financials (PLWF), where we are the lead engagers for a couple of companies, and collaborative engagers providers. This helps us stay collaborative and stay ahead of what is happening in the industry.
What is the biggest struggle you have encountered when engaging with companies?
The main challenge is the lack of standardisation. There is no Science Based Targets Initiative (SBTI) on human rights at the moment. There are lots of loopholes in different regulations, but the main issue is both how to measure human rights impact from brands and from ourselves.
Fashion supply chains are incredibly complex, more so than other industries. There is a need for transparency and traceability, continuous supplier relationship and improved supplier relationships. Investor pressure and regulatory pressure is important. Yet, issues vary depending on what company we engage with, as for example, the issues faced by a luxury company are different compared to a fast-fashion company.
Are you seeing a positive reception from the companies engaged with?
Reflecting on the past year, there is a willingness from companies to make a difference in its of integration, governance, and oversight on sustainability. We have many due diligence trips to meet companies in person and share our findings with them. There has been a good stream of understanding and consistent efforts to drive certain issues forward.
Overall, there has been a positive outcome. As investors, we come in well informed, aware of what the issues are, and ask the right questions, upholding discussions with their human rights specialist to bring certain topics to the management table. While some brands will be confident on these topics because sustainability is embedded in governance oversight across the company, it is importance to bring the focus to internal operations.
There is a growing race for transparency. It is very difficult, especially further down the supply chain, and consistent improvement towards becoming a more responsible buyer is key. We also see that often companies may be doing much more in the background than what they are communicating externally. This is because there is a lot of risk of reputational repercussions, especially with human rights topics, which are highly sensitive.
I interviewed Martin Buttle, better work lead at CCLA, who recently engaged with Nike on its worker’s rights issues. Despite the discouraging outcome – where limited progress has been made – it raised the topic of the limits of investor power. Do you think collaboration is key between all stakeholders to drive change in the industry?
To drive positive change in the fashion industry, there must be a full collaboration. All different actors must work to support each other, meaning governments need to play their part and review minimum wages, offer workers unions and collective bargaining workers. International bodies must work on different standards, and the media needs to continue pushing companies and influence consumer behaviour.
Where do you hope the fashion industry will be in the next five years in terms of its social and environmental challenges?
My ambition is to reach full transparency in supply chains, which is well beyond a one year timeline. There is a lot of work input from leaders across the industry and huge barriers exist, and it will take time.
We are really pushing the responsible buyer perspective, such as responsible purchasing practices, ring fencing, wage costs into negotiations and collaborative planning. My hope is that there will be a more balanced approach between the purchasing team and sustainability team in a company. Many times, these teams have very different goals which go against one another. So, this harmonisation is really something that I hope to see much more, and we are on the right track.
Also, I’d like to see more collaboration during our engagement. We promote this extensively and we have seen some companies already start doing collaborative auditing, collaborative reports, and sharing these findings. This helps put away the pressure to suppliers who are bombarded by reporting on data.
To move the needle faster, bottom-up initiatives and collaboration between grants is key. Although we have only been engaging for a year, I am happy with our progress because approaching the topic of human rights was challenging at the beginning. Due diligence trips remain key to show that investors really care and help us understand on the ground beyond the simply reading papers and publications.
Overall, I hope more investors will join shareholder proposals, collaborative engagement and start to talk about this topic.
