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ESG-principled investors abandon Boohoo
Shares in online fashion purveyor Boohoo (BOO:AIM) have plunged 45% from recent record highs to 230p following allegations of modern day slavery in supplier factories in Leicester. The negative backlash suggests that ESG-principled investors are turning their back on the company and that the shares have further to fall.
Boohoo has started a review of its supply chain and is seeking to hire two non-executive directors with experience in handling ESG issues. However, investors are worried about a brand backlash as the likes of Next (NXT) and ASOS (ASC:AIM) stop selling Boohoo’s clothes and social media influencers turn against the company.
Analysts worry that as many of the younger shoppers who form Boohoo’s core customer demographic have a sharp interest in business ethics, labour practices and sustainability, the
latest issues around suppliers might be damaging the brand.
Boohoo’s ‘test and repeat’ fast fashion model sees it sell products which shoppers typically wear once, then discard, which is yet another negative from an ESG perspective given the waste it creates.
The company has also attracted criticism over corporate governance practices such as an incentive scheme that would see directors share £150 million based only on share price performance and with no shareholder vote.