Investors increasing use environmental, governance and social filters to screen out companies that seemingly do bad things. But what if a company can realise the error of its ways and change for the better? Someone who refused to invest in it based on past practices could miss out on future gains.

It’s a dilemma that hangs over investors looking at clothing retailer Boohoo (BOO:AIM) which is repairing a reputation left in tatters following last year’s modern slavery scandal. That caused many fund managers and retail investors to lose patience with the company and sell out.

Shares even recoiled from Boohoo, urging investors to steer clear on the grounds this retailer’s name was mud.

Yet to its credit, Boohoo grasped the nettle and is now delivering on its promise to facilitate better standards in its supply chain and if it sustains this pace of progress, the company could become investable again.

There is an argument to suggest that investors who don’t like a company’s behaviour could do better by owning the shares and pushing for change, rather than simply avoiding the stock. In Boohoo’s case, it has been subject to trial by the media instead of shareholder pressure. It had no choice but to make amends given it is a listed business and firmly under the spotlight.

Boohoo is now working with fewer suppliers and making efforts to have better oversight of its supply chain.

It has launched a new sustainability plan, one that establishes ambitious targets in terms of the smarter manufacture of clothing, better terms for its suppliers and actions to reduce its carbon footprint.

Since it sells easily discarded cheap clothing, Boohoo’s business model facilitates waste, so it still fails on certain ESG grounds. The company also faces the possibility of a US import ban relating to labour issues in its supply chain. Until there is more clarity on that matter, it’s a key risk investors should consider.

Fundamentally, Boohoo remains a structural growth winner and the recent purchase of brands from Debenhams and Arcadia provides it with an even bigger opportunity to grow market share across a broader demographic.

Analysts are starting to warm to the stock again including Andrew Wade at Jefferies who says Boohoo’s latest update is ‘an important step in re-establishing momentum in the shares’ and could see investor focus turn back to trading and valuation fundamentals.

Berenberg says the stock is ‘not for the faint hearted’ but it thinks the shares are now worth buying. It adds: ‘The group has begun to make changes to the working practices in its supply chain, and we think it can make these changes while maintaining its sector-leading growth and margin profile.’

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