What is luxury?

 

Living like the Emperor of China! If you are hit by the ice-cold wind from the Mongolian steppes while you

kowtow to the Dragon Throne at minus 15 degrees in the middle of February, you will find no luxury there.

The Emperor of China’s windows came without double-glazing, he had no walls insulated according to ISO

standards and no central heating. The epitome of luxury apparently is not what it used to be.

 

Those were my thoughts as I was strolling through the Forbidden City. But what, then, is luxury?

 

Luxury is derived from Latin and means luxated, dislocated, or, in a figurative sense, deviating from the norm.

According to the Merriam Webster, today it stands for “a condition of abundance or great ease and comfort”

as well as “something adding to pleasure or comfort but not absolutely necessary”.

 

Do luxury companies indulge in the luxury of attaching importance to Environmental (E), Social (S), and

Corporate Governance (G) aspects by setting high prices? The question is whether companies whose business

model is based on selling products at the high end of the market act at the high end of the ESG spectrum

as well. Low prices come with a price, so to speak, in terms of environment, society, and the way companies

are directed and controlled. So, do high prices then trigger excellence in these areas?

 

Is sustainable business a luxury? Is it something pricey and wasteful that one can only afford to satisfy

hedonistic tendencies? At Erste Asset Management we are convinced that this is not the case. Especially in

the sector of luxury goods, which crucially hinges on image, the compliance with ESG criteria is no luxury,

but a hard necessity. Just think of blood gold or blood diamonds which have gained a high profile in the

media over the past years; images that do not necessarily fit the idyllic marketing world of a luxury

jewellery.

 

During these weeks before Christmas, the luxury sector is riding especially high. A significant part of total

annual sales is made at this time of the year, because consumers bend over backwards to treat their loved

ones. From Erste Asset Management’s point of view, it is the ideal time to ask the luxury sector the million

dollar question: how about your ESG efforts?

 

Sincerely

​

Mag. Gerold Permoser

Chief Investment Officer (CIO), Chief Sustainable Investment Officer (CSIO)