What are you wearing?
If you’re like most people, your clothes are probably made of cotton produced with pesticides, fertilisers and hundreds of litres of water.
Or they might be synthetic, manufactured from petroleum and destined to end up as micro-plastic ocean pollution.
“The fashion industry has a lot to answer for,” says Maxime Le Floch, an analyst with Regnan’s impact investing team.
“Fashion is responsible for 5 per cent of annual carbon emissions. Some 6 per cent of global pesticide production is applied on cotton crops alone.”
But what if there was a solution?
Le Floch recently visited the Austrian headquarters of the Lenzing Group, which is pioneering the production of fabrics made from sustainably sourced wood pulp that are suitable for use in everything from shirts, shorts and shoes to towels, nappies and wet wipes.
Lenzing is part of Regnan Global Equity Impact Solutions Fund.
Its flagship fabrics — called lyocell, modal and viscose — are made from cellulose, the compound that makes up the cell walls of plants. They use 10 times less water to make than cotton and produce fewer carbon emissions than polyester.
The forests that supply Lenzing’s wood pulp bring other sustainability benefits, creating habitats for animal and insect life, improving biodiversity and sequestering carbon.
The company even powers its manufacturing plants with the wood left over from pulp extraction.
“And the performance of the fabrics is extremely good — they have good tensile strength, resist crushing, and their moisture management is very good,” says Le Floch.
“They are rapidly expanding the applications — they can even replace fabrics like silk and the denim in jeans.”
Already, some of the biggest names in fashion use Lenzing’s fabrics in their clothing, including H&M, Levi’s and ASOS.
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Le Floch says a company like Lenzing suits impact investors because it has the potential to create genuine sustainability alongside strong financial returns.
Currently, wood-based fibres represent just 6 per cent of the $500 billion-plus global textiles market.
“The applications are expanding all the time. It may not completely replace all fabrics but if you go from 6 per cent to say 8 per cent that’s a massive total addressable market expansion.”
As an impact investor, Regnan’s relationship with Lenzing goes further than simply holding shares.
“Using wood fibre for fabric is good but it shouldn’t come from primary forest or ancient forest.
“Lenzing are already auditing to make sure that doesn’t happen, but we have raised it with their head of sustainability and CEO that we want them to have a more systematic approach and communicate it a bit better, because we think this is also something that is part of their advantage.”
Still, for all the benefits of wood-based fabric, the textiles industry has a long way to go to sustainability.
The western world’s shopping habits are only making things worse, with fast-fashion, rapidly-produced, cheaply-made clothes bought and discarded after only a few uses.
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“There’s a dramatic lack of recycling — 87 per cent of clothing is incinerated or in landfill,” says Le Floch.
“Half a million tonnes of plastic microfibers are dumped in the ocean each year — that’s the equivalent of 50 billion plastic bottles.
“So, we need to keep perspective — we think lyocell fabrics are a big part of the solution but there are other wider issues within the fashion industry that must also be tackled.”
Maxime is an analyst with Regnan’s impact investment team. He focuses on Regnan Global Equity Impact Solutions Fund. Maxime has more than 10 years of experience in sustainable investment. Before joining Regnan he was an investment analyst with Hermes where he helped launch and manage the Hermes Impact Opportunities Equity Fund.
Regnan is a responsible investment leader with a long and proud history of providing insight and advice to investors with an interest in long-term, broad-based or values-aligned performance.
Building on that expertise, in 2019 Regnan expanded into responsible investment funds management, backed by the considerable resources of Pendal Group.
The Regnan Global Equity Impact Solutions Fund invests in mission-driven companies we believe are well placed to solve the world’s biggest problems.
The Regnan Credit Impact Trust (available in Australia only) invests in cash, fixed and floating rate securities where the proceeds create positive environmental and social change. Both funds are distributed by Pendal in Australia.
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For more information on these and other responsible investing strategies, contact Head of Regnan and Responsible Investment Distribution Jeremy Dean at email@example.com.
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