Clothes are being utilised less than ever before. Here Stewart Investors look at Lenzing, a company helping retail giants like H&M extend the lifecycle of fast fashion.
A big emerging waste issue is clothing. With the rise of fast fashion, companies like Zara and H&M, we’ve seen a doubling of clothing production in the last 15 years and a 36% decrease in clothing utilisation. We buy more, we use it less and then we just throw it away. Clothing is just not being recycled.
This creates issues for the fast fashion companies. It’s an externality to their business that will be potentially internalised at some point due to regulation. We don’t invest in fast fashion companies because we don’t follow whether Zara or H&M is going to be more popular next year or whether people are going to buy Prada more handbags or not. That’s not our domain expertise.
But it has helped us come across companies like Lenzing, a fascinating company from a sustainable development perspective. They make clothing fibres out of timber, meaning products made from Lenzing fabrics are 100% biodegradable. Lenzing either grow their own or source 100% sustainable timber and their manufacturing is closed loop – there is zero discharge to the environment. The water is treated to the highest standard and returned to the environment.
Lenzing worked with H&M to develop a sustainable line of fashion and raise consumers awareness. You can take clothes back to H&M and they work with Lenzing to recycle those clothes into a new product. Lenzing, despite being a commodity company, are working to integrate themselves up the supply chain to work with the end brands that are using their products.
Our investment in Lenzing is an interesting insight into our process. We don’t own them right now because they are a little expensive, which demonstrates our valuation discipline. As long-term investors, we are patient.
This material has been prepared and issued by First Sentier Investors (Australia) Limited (ABN 89 114 194 311, AFSL 289017) (Author). The Author forms part of First Sentier Investors, a global asset management business. First Sentier Investors is ultimately owned by Mitsubishi UFJ Financial Group, Inc (MUFG), a global financial group. A copy of the Financial Services Guide for the Author is available from First Sentier Investors on its website.
This material contains general information only. It is not intended to provide you with financial product advice and does not take into account your objectives, financial situation or needs. Before making an investment decision you should consider, with a financial advisor, whether this information is appropriate in light of your investment needs, objectives and financial situation. Any opinions expressed in this material are the opinions of the Author only and are subject to change without notice. Such opinions are not a recommendation to hold, purchase or sell a particular financial product and may not include all of the information needed to make an investment decision in relation to such a financial product.
CFSIL is a subsidiary of the Commonwealth Bank of Australia (Bank). First Sentier Investors was acquired by MUFG on 2 August 2019 and is now financially and legally independent from the Bank. The Author, MUFG, the Bank and their respective affiliates do not guarantee the performance of the Fund(s) or the repayment of capital by the Fund(s). Investments in the Fund(s) are not deposits or other liabilities of MUFG, the Bank nor their respective affiliates and investment-type products are subject to investment risk including loss of income and capital invested.
To the extent permitted by law, no liability is accepted by MUFG, the Author, the Bank nor their affiliates for any loss or damage as a result of any reliance on this material. This material contains, or is based upon, information that the Author believes to be accurate and reliable, however neither the Author, MUFG, the Bank nor their respective affiliates offer any warranty that it contains no factual errors. No part of this material may be reproduced or transmitted in any form or by any means without the prior written consent of the Author.
In Australia, ‘Colonial’, ‘CFS’ and ‘Colonial First State’ are trade marks of Colonial Holding Company Limited and ‘Colonial First State Investments’ is a trade mark of the Bank and all of these trade marks are used by First Sentier Investors under licence.