Environmental data dearth in wet processing is undermining ESG investment in textiles sector, says Planet Tracker
Family and individual investors particularly exposed as 10% of textile wet processing companies fail to report on any environmental metrics
London. 5 May 2021. Poor environmental disclosure at a crucial and highly exposed stage of the textiles supply chain is impairing ESG investment in the sector, says Planet Tracker in a new report published today, Threadbare Data. Wet processing[1] companies, explains the financial think tank, are intensely reliant on water, chemicals and heat to treat and dye fabrics, yet are failing to report on how they are managing their significant environmental footprint to the detriment of their investors, business models and compliance with increasing government-led regulations.
Building on its 2020 investigation into water risk in the sector, Dye Another Day, Planet Tracker examined the environmental disclosures by 230 wet processors with a combined market cap of USD 586 billion, to ascertain how greenhouse gas (GhG) emissions, as well as chemicals, waste and energy management, are being disclosed and priced. Identifying and assessing 37 related qualitative and quantitative data points, Planet Tracker assigned an environmental disclosure score to each company and traced links to investors.
The top disclosure score of any company was 7/10, assigned to LVMH, which was expected for a well-capitalised and publicly traded large fashion and lifestyle conglomerate. But critically, 10% of the companies had an environmental disclosure score of 0, indicating a complete omission of environment-related disclosures. What’s more, though 90% did disclose at least one qualitative or quantitative environmental metric, the disclosure itself was generally poor and inconsistent. Notably, the analysis also showed that the wet processors which Planet Tracker previously identified as having operating facilities in high water risk areas provide the poorest environmental disclosures – thus compounding their investors’ risk exposure.
Indeed, poor disclosures significantly hinder investors in assessing the wet processors in their portfolios against their ESG investing principles. Linking this finding to investor groups, Planet Tracker found that family offices and individual entrepreneurs were particularly exposed since, on average, they hold companies with poorer disclosure scores.
Poor disclosure could also indicate a business risk: if wet processors are failing collect and disclose environmental data, they risk losing business from brands that are stepping up environmental data requirements from their suppliers. It also poses a regulatory threat as governments worldwide increasingly turn their attention to tackling the huge environmental strains caused by the fashion industry.
Catherine Tubb, Senior Investment Analyst at Planet Tracker, said: “The plurality of non-mandatory sustainability reporting frameworks in the market goes some way to explain the lack of consistent and standardised environmental disclosures in the textiles industry.”
She continued: “But as our analysis of wet processors reveals, the sector must accelerate its engagement with this issue, with investors, governments and regulators also working together to require a single global reporting framework – particularly as the environmental and financial risks attached are becoming increasingly material for sector’s stakeholders and our planet.”
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Notes for editors
About Planet Tracker
Planet Tracker is a non-profit financial think tank aligning capital markets with planetary boundaries. It was created primarily for the investor community to analyse the risk of market failure related to environmental limits which, other than climate change, are often not aligned with investor capital. Planet Tracker generates breakthrough analytics to redefine how financial and environmental data interact with the aim of changing the practices of financial decision makers to help avoid both environmental and financial failure.
Media contact
Ronak Anand
Moorgate Communications, a Finn Partners company
ronak.anand@finnpartners.com
+44 20 7539 3578
[1] Wet processing of textiles refers to the preparation, colouring (bleaching, dyeing and printing) and finishing of fabric.
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