High ESG risk fashion industry continues to threaten investor capital

Luxury apparel faces counterfeit risk

The fashion industry is staying true to its reputation as an ESG laggard, as risks abound regarding climate change, human rights abuses and business ethics, according to a Morningstar report.

One of world's largest industrial polluters, the $1.7trn industry accounts for 10% of annual global carbon emissions, outpacing emissions caused by all international flights and maritime shipping combined. Out of the 36 companies in Morningstar's apparel, luxury, footwear and retail coverage, 25 faced controversy over human rights abuses, with six involved in a category level 3 event (5 denotes those with most severe impacts). Morningstar said that while it anticipated companies could manage risks over the long-term, it expected short-term volatility around cost and supplier relations...