Investment Board
The EAM Investment Board gives a structured form to the ongoing and responsive
dialogue with and among sustainability research agencies. The Board provides the
opportunity for the consultation process between own research and external research
to take place. It also discusses rating details, the ESG‘s assessment of the IPOs of new
issuers and sustainability issues in general.
Luxury clothing and jewellery
In a 2013 edition of ERSTE RESPONSIBLE RETURN – The ESG Letter we raised the question whether low prices in
the textile industry caused low sustainability standards in production. We reached the conclusion that sustain-
ability was hindered by the high degree of out-sourcing in the textile industry, and thus rendered low priority.
In the current edition of our magazine we reversed the question and asked ourselves whether producers of
luxury apparel and jewellery actually spend parts of their high margins on sustainability.
“The best things in life
are free. The second
best are very, very
expensive.“
Coco Chanel
In spite of extensive talks with our research partners we cannot answer the aforementioned question due to
the massive lack of information with respect to ESG standards in luxury goods companies. Still, the risk associated
with ESG factors is often lower in the luxury segment: In contrast to companies that manufacture their goods
in developing countries, the production sites of luxury companies are largely based in Europe. This results in
better work-ing conditions and controls in OECD countries – although the lack of transparency made one of
our research partners doubt the clustering of production sites in OECD countries.
The chemical use and environmental footprint of companies is mainly defined by the types of raw material
incorporated into their products. According to REACH*, leather production involves 15 to 18, and textile pro-
duction 25 to 30 hazardous substances. The awareness of the chemicals used has been on the rise especially
in Europe, which has brought about new guidelines. One of the main ESG issues with luxury goods manufacturers
seems to be the procurement of resources such as cotton, precious metals, and leather, since the regulatory
framework is less stringent in these areas.
By and large, luxury goods producers harbour lower sustainability risk than common textile and jewellery
producers. This is due to the geographic location of the production sites and the suppliers of raw materials as
well as to the relatively lower number of outsourced processes. The massive lack of transparency with regard
to the production conditions, however, should worry investors, given that luxury goods depend on marketing
and are thus subject to a high reputation risk.
Interestingly, NGOs who criticise the working conditions and environmental standards of producers often
focus their attention on low-budget manufacturers. Luxury companies on the other hand are often spared
that scrutiny, with their actions hardly ever questioned neither by NGOs nor their customers.
Status:
The lack of transparency is reflected in the EAM-Ratings. Even though no luxury producer infringes with
exclusion criteria, all luxury companies (apart from Tiffany & Co.) show a rating of C- and are thus not suitable
for investment
* REACH stands for “Registration, Evaluation, Authorisation and Restriction of Chemicals“ and is a chemicals regulation issued by the EU.
(Richard Boulanger)
