One of Boohoo’s biggest shareholders has dumped almost all of its stock in the fashion company and criticised its response to allegations of poor working conditions in its supply chain.
Standard Life Aberdeen, the UK’s largest listed asset manager, said action taken by Boohoo after a Sunday Times investigation claimed workers at a factory making its clothes were paid below minimum wage and suffered poor working conditions was “inadequate”.
Boohoo has announced an independent review of its UK supply chain but SLA said it had sold all of its holdings in Boohoo across three funds that aim to invest responsibly and that these accounted for the vast majority of its investment in the retailer.
“Having spoken to Boohoo’s management team a number of times this week in light of recent concerning allegations, we view their response as inadequate in scope, timeliness and gravity,” said Lesley Duncan, deputy head of UK equities at Aberdeen Standard Investments, SLA’s fund management business.
SLA was Boohoo’s third-largest independent shareholder, according to data provider Capital IQ. Its investment in Boohoo has been criticised this week, with questions being asked about why funds branded as responsible owned shares in a fast-fashion brand.
According to Morningstar, another data provider, at least 3 per cent of the assets in three sustainable funds from SLA, including a fund that aims to back companies with good employment practices, were invested in Boohoo.
SLA said the retailer passed its ethical screening when it first invested after Boohoo listed in 2014. It added that it had spoken to management about environmental, social and governance issues in the years since it first invested.
“Over the years we have told the company that it needs to improve its management of supply chain transparency, environmental efficiency and working conditions. While we would have liked progress to have been quicker we did feel that progress was being made,” said Ms Duncan.
But she added that over the past few weeks, SLA had become increasingly concerned about the “progress that was being made, which even before recent developments, had negatively impacted our conviction levels”.
Other funds badged as sustainable have also come under fire for investments in Boohoo. According to Morningstar, 20 sustainable funds held the stock, including funds offered by Legal and General Investment Management, Man Group, JPMorgan, Premier Miton and DWS.
Ketan Patel, fund manager of Amity UK at EdenTree Investment Management, questioned the logic of these investments.
“Fast-fashion has a real issue. It is predicated on being cheap and disposable, and those two things don’t go with being sustainable,” he said.
Boohoo has shrugged off previous revelations about the businesses that make its clothes, including an investigation in 2018 by the Financial Times that found unsafe working conditions, unauthorised subcontracting and underpayment of wages in Leicester garment factories.
The company has also received good scores from ESG ratings providers such as MSCI.
“Human rights abuse in the fast-fashion industry has been an open secret for years. Investors holding Boohoo shares, even ones brandishing their ESG credentials, did precious little about it,” said Martin Buttle from campaign group ShareAction.
“Boohoo is far from the only firm with these problems in its supply chain. The risk for the investment sector is an accusation of complicity in the fashion industry’s blind pursuit of profit.”
DWS said it had “stringent ESG” rules. “Given the recent developments around labour standards we have already re-evaluated our investment into Boohoo, independent of the ratings by external data providers.”
LGIM said it was talking to Boohoo about its supply chain. Man called the reported issues at Boohoo “concerning” and said it was “looking closely at how we can most effectively engage with them on it”.
JPMorgan declined to comment. Premier Miton did not respond to a request for comment.
https://news.google.com/__i/rss/rd/articles/CBMiP2h0dHBzOi8vd3d3LmZ0LmNvbS9jb250ZW50L2I2MTczNDMzLTg1M2YtNGI4Ni1hNTBkLTVmNDkzM2JjOTBjMtIBP2h0dHBzOi8vYW1wLmZ0LmNvbS9jb250ZW50L2I2MTczNDMzLTg1M2YtNGI4Ni1hNTBkLTVmNDkzM2JjOTBjMg?oc=5
2020-07-10 13:36:00Z
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