This article is part of BoF’s special edition, Can Fashion Clean Up Its Act? Click here to learn more.
HONG KONG, China — Elaine Chen-Fernandez doesn't look like your average old-school investor. At 34, there’s not a single grey hair on her head and her wardrobe is remarkably laid back. The only time you will see this young woman wearing a sharp suit is when she rolls up the sleeves to show off her heavily inked arms, which feature a portrait of Frida Kahlo as well as many other tattoos.
Chen-Fernandez looks like a nomadic creative because she is one at heart. After years spent searching for purpose in her life – a job at Condé Nast had her photographing food and she once even worked for a stint as a butcher – Chen-Fernandez finally found her calling.
A few years ago, she emerged as an impact investor, someone whose private investments are made with the intention of generating a financial return alongside a tangible social or environmental impact. Her journey getting there was both personal and intense.
When Chen-Fernandez was just 28, her mother passed away following a long battle with cancer. Suddenly she found herself back in her hometown of Hong Kong, and increasingly interested in her family's investment fund.
Though she is the first to admit that she was “not a finance person by any means,” Chen-Fernandez began to study ways in which she could invest her money with deeper meaning and purpose.
One of the people who provided Chen-Fernandez with inspiration and guidance was her aunt, Annie Chen, the youngest daughter of Thomas Chen Tseng-tao, one of the founders of property developers Hang Lung Group, who herself is an impact investor as the founder of the RS Group.
Sustainable fashion kept coming up on Chen-Fernandez’s radar as an area that both interested her, and one in which she felt she could make a difference. Finally, in 2018 she made her first investment with her own fund, dubbed Mad Otter Ventures, with an ethos of: "Doing good and doing well."
Currently, Chen-Fernandez’s fashion-related portfolio includes the Hong Kong-based environmental fashion NGO called Redress, as well as apparel-focused sustainable venture operating firm Resonance Companies.
“Any investment I am involved in is a personal investment; money is just a tool for me to be able to do the things I want to do,” Chen-Fernandez explains, adding that notions like “legacy” that were important to her parents’ generation are far less of a priority for hers.
“Seeing progress and seeing someone able to further their business because I made an investment brings me more satisfaction than any return I make. For me, it’s about investing in people and their ideas,” Chen-Fernandez says.
Though there are nuances of distinction, impact investment is sometimes used interchangeably with both SRI (socially responsible investing) and ESG investing, which takes into consideration environmental, social and governance factors alongside financial factors in the decision-making process.
Right now, if you were asked to name today’s global leaders in the realm of sustainable fashion, it is likely that many, if not all of them, would be women.
Dame Ellen MacArthur; Livia Firth; Stella McCartney; Global Fashion Agenda CEO Eva Kruse; Fashion Revolution Co-founders Carry Somers and Orsola de Castro; Kering’s Chief Sustainability Officer, Marie-Claire Daveu; H&M CEO and former CSO Helena Helmersson; and sustainable fashion consultancy founder Shaway Yeh are just a few high-profile names that come to mind.
Women are notoriously under-represented in the fashion industry’s leadership roles, but in the sub-sector of sustainable fashion, they have taken pole position. Crucially, at the same time as women have been rising in this field, they have also emerged as a force in the investment world.
Women are much more focussed on investing to achieve positive social change.
According to Boston Consulting Group (BCG), women are accumulating wealth at “record rates.” Strengthened by greater educational attainment and workforce participation, BCG estimated (prior to the widespread outbreak of Covid-19) that women will see their wealth reach $93 trillion by 2023. And while this is still a long way off from the 68 percent of global wealth currently controlled by men, the female share of the pie was estimated to grow by a compound annual growth rate of 7.2 percent over the next three years.
“More women are becoming active players in investing because women are more financially secure than before and now we are becoming more aware and conscious about where we want to put our money,” says Nicaraguan-born Estefania Lacayo, co-founder of the Latin American Fashion Summit which takes place in Cartagena, Colombia and has a strong focus on sustainability and responsible business.
“The first person who comes to mind is Carmen Busquets; she’s become focussed on impact investment and sustainable businesses in recent years,” says Lacayo, referring to the prolific Venezuelan investor who has not only invested in big digital assets like Net-a-Porter and Farfetch but also smaller brands with an ethical mission like House of Fluff, a faux fur brand.
While generalisations are naturally problematic, there are numerous studies that suggest differences in the way women invest their money, in comparison to men.
When asked about the “meaning of wealth,” two-thirds of women who participated in a survey from RBC Wealth Management said that money could be a way to make a difference in the causes they care about. Just more than half of men surveyed felt the same way.
According to data from UBS, women are “much more focussed on investing to achieve positive social change,” Tracey Woon, Vice Chairman for APAC at UBS Global Wealth Management, tells BoF, adding that by their estimates women globally are on track to invest $2.3 trillion in improving social good by 2021.
As with the sustainable fashion sub-sector, the broader impact investment world is, in many cases, being led by women. Take Tanya L. Barnes, who is a Managing Director and Head of Blackstone Impact in New York, or Jean Case, who leads the Washington D.C.-based Case Foundation as its CEO while serving as Chairman of the National Geographic Society. And at the investment bank’s Manhattan headquarters, Audrey Choi is CEO of the Morgan Stanley Institute for Sustainable Investing.
But female leadership in this space extends far beyond the East Coast of the US. In Hong Kong, Helene Li is the Co-Founder of GoImpact, a sustainable investment consultancy; in London, Liz Lloyd is the first Chief Impact Officer at CDC Group; and in San Francisco, Nancy E. Pfund is Founder and Managing Partner of DBL Partners, a go-to VC firm for social and environmentally focussed start-ups.
One reason that women were able to rise in this space so quickly is that they were able to spot an important gap in the market that other business leaders underestimated or misjudged as being soft.
The continued rise of female impact investors bodes particularly well for the women leading the way in sustainable fashion because it could help combat the homophily bias that has traditionally led male investors to invest more in male entrepreneurs – and has left female entrepreneurs under-funded. Now, with more female impact investors on the scene, a larger slice of the pie is expected to go to women-led businesses.
Christina Dean, the founder of Redress, as well as The R Collective, a for-profit sustainable fashion brand that utilises excess materials sourced from the world's leading luxury fashion brands and has been sold on Net-a-Porter and in Lane Crawford, is one of the beneficiaries of Chen-Fernandez’s investments in the sustainable fashion sphere.
Dean has worked with numerous investors as part of her enterprises, and is closing a financing round for The R Collective as this article goes to press. This round, Dean says, will see 100 percent of its investment coming from women.
“When I’m talking to female impact investors, of course they love the fact that this is a female-led business. There is a massive feeling of solidarity, of women being shoulder to shoulder,” Dean says. “It’s not to cut men out, it’s just an exciting space in which women are emerging as business leaders.”
It is important to note that there are generational and regional differences within this women-led space. Dean sees investors of Chen-Fernandez’s generation, especially those from Hong Kong (where Redress and The R Collective were founded) and mainland China as being distinctive, not only from the men who have traditionally dominated the broader investment sphere, but also from the older generation of female impact investors.
“For the younger ones, it’s about experimentation and start-ups and the thrill of that world. I definitely get the sense it’s also about [a route to a better] understanding [of] business,” Dean says, adding that a 25 percent equity shareholding may come with a board position, for example, which can be “quite cool for a younger person who can build up their know-how.”
On the other hand, “the older, more mature female impact investors, they [already] understand business, they understand the perils, they understand the challenges, and they are out there to support you. It's more like a mentorship,” Dean explains.
Another one of Dean’s investors who fits more into the latter mould is documentary film-maker and environmentalist Susan Rockefeller whose husband, David Rockefeller Jr., is a high profile member of the Rockefeller family’s fourth generation, holding positions at various family funds and foundations. Incidentally, and perhaps unsurprisingly, it is The Rockefeller Foundation that is often credited with coining the term “impact investing” in 2007.
They understand the perils, they understand the challenges, and they are out there to support you.
Susan Rockefeller has focussed on promoting sustainability in various industries (though she is loath to use the word, which she says is overused and poorly understood). Her investments span industries from fashion to beauty and agriculture to technology, with a focus on female-led enterprises.
“I see an opportunity in supporting women that have the brains and brilliance and vision to reimagine a world that’s going to be healthier for ourselves and for our children,” Rockefeller tells BoF.
It would be naïve to think that the investment activities of a relatively small number of high-net-worth individuals, no matter how passionate, intelligent or well-intentioned, are enough to reverse the fashion industry’s course, from being one of the world’s most wasteful and environmentally harmful, to one that provides a more unambiguously positive footprint on planet earth.
Indeed, leaders in the field like Dame Ellen MacArthur have long advocated for a “system-level change” approach to “an outdated, linear, take-make-dispose model.” But this does not mean investors aren’t an integral part of the change that is needed.
Dr Precious Moloi-Motsepe, a prominent South African entrepreneur and philanthropist, similarly believes that impact investment in the fashion industry is about more than just backing socially or environmentally friendly fashion brands and should look more broadly at tackling the industry’s challenges by focusing on fashion education, for example.
“[Our] long-term goal is to get designers to be more transparent about where they are sourcing from…and [about] their manufacturing practices,” she says, adding that her family’s non-profit foundation is also looking into supporting sustainable fashion in a different way.
“We don't have the tools currently to dispose of garments already out there in a sustainable way. There’s still a lot to be done in that space,” adds Dr Moloi-Motsepe, who is also Founder of African Fashion International (AFI), a firm which operates fashion week events in Johannesburg and Cape Town, South Africa.
There is no doubt that widespread and lasting institutional change takes more than just motivated individuals – whatever their gender. Socially and environmentally conscious entrepreneurs and investors are of course an essential part of the equation, but it takes leaders from government, NGOs, industry, as well as consumers demanding a shift in the status quo.
Nevertheless, investment from the private sector is critical and the confluence of women leading the way in sustainable fashion, as well as growing their impact investment clout, bodes well for an inching forward of progress, even if it’s not a complete industry makeover.
Values for Money
Not everyone agrees that the focus should be on increasingly wealthy female investors backing female-led businesses aligned with their values.
Mexican-born, California-based investor and e-commerce pioneer Lucy Lawrence co-founded one of America’s first luxury e-commerce sites, Ashford.com, in the 1990s and later established eBay Inc.’s Thought Leadership practice. Lawrence says that, although she does invest in fashion and luxury companies with a sustainable element – for example, Mexico’s leading luxury resale site Troquer, which also happens to be co-founded by two women – the driver of her investment decision-making is neither female first, nor sustainability first.
The top priority for me is creating opportunity in the market; [and only] after that comes the sustainable piece.
“I would say the top priority for me in any of these companies is creating opportunity in the market; [and only] after that comes the sustainable piece,” Lawrence says. To date, her investments have been concentrated in Mexico and across the Latin American region.
“It’s been my personal experience that a female entrepreneur can multitask and can be very dynamic in how they operate [but they also] have to be driven to create opportunity, thus success,” she explained, adding that she is also seeing a growing number of men rise in both sustainable fashion and impact investment.
Ytzia Belausteguigoitia, the co-founder of Troquer, credits Lawrence as “the anchor” of her company’s investors, a business mentor who has “gone the extra mile” at the resale e-commerce start-up, but she also points to male individual and institutional investors who were part of the company’s $2 million seed financing round as being similarly driven in making a difference with their money.
“They are young; they have this activist interest; they [also] want to contribute and be environmentally conscious,” Belausteguigoitia says.
Many female impact investors interviewed for this story described themselves as “patient” investors, looking at five-year (or longer) horizons to see returns. Some have more nuanced expectations and measure ROI (return on investment) differently than traditional investors or even the ESG performance criteria that passionate stakeholder capitalists tend to champion.
“I call it philathropreneurship,” Susan Rockefeller explains. “If I get a return on the investment, I’m thrilled. If I don’t, it’s still an opportunity from a philanthropic point of view.”
However, many impact investors don’t have the luxury of being able to take this soft approach. Others, including Kamelia Kamel, a Saudi Arabian impact investor now based in the UK, says she invests in fashion companies that incorporate sustainability into their DNA, such as British womenswear brand Deborah Lyons, for that added satisfaction.
“The company has to appeal to me beyond the returns. [But] if the founders [can] convince me that they know how to build a business that lasts, [have] products or services that stand out, are relevant, and delight their customers, then that will automatically translate to real value and returns,” she says, adding that she hopes to show others in the Middle East how financially viable impact investing in fashion can be.
“I would like to see Middle East investors become more actively aware of how essential and lucrative it is to invest in sustainability-focussed fashion brands. It’s the way of the future and it’s filled with potential and room for growth,” Kamel says.
According to a 2017 special report on impact investment by analysts from McKinsey & Company, one reason traditional investors hesitate to invest using ESG criteria is because “they believe sustainable investing ordinarily produces lower returns than conventional strategies, despite research findings to the contrary.”
“Several studies have shown that sustainable investing and superior investment returns are positively correlated. Other studies have shown no correlation. Recent comprehensive research (based on more than 2,000 studies over the last four decades) demonstrates sustainable investing is uncorrelated with poor returns,” the authors of the report wrote.
While any type of investment is inherently a risk, it is difficult to determine how risky impact investments are compared to traditional investments because they represent a hugely diverse spectrum of sectors and geographies.
Christina Dean, with so much of her work based in Hong Kong, has been cultivating one of the most influential of investor groups with big potential to cross over into the impact investment space. A Credit Suisse report released last October found that the number of wealthy Chinese people has overtaken the number of wealthy Americans for the first time.
“It’s not surprising for me that the big investors in Asia and [especially in] China care deeply about pollution and waste…because people [who have had to live in] toxic environments see it every day,” says Dean, citing UBS’s Return on Values report, which found that 85 percent of Chinese investors surveyed said they were focussed on pollution and waste issues.
“One female investor from China I spoke to said that when she walks into a fast fashion shop, it actually makes her feel sick, because it…reminds her of her youth visiting her parents’ enormously successful textiles factory business. She has this visceral understanding of the [sustainability needs of the] fashion industry,” Dean explains, pointing out that many ultra-high-net-worth Chinese investors have made their money from resource-intensive industries like textiles, mining and metals, which place them at the sharp end of complex supply chains and waste management.
Shaway Yeh points to another group of young wealthy Chinese who do not necessarily find the idea of going into the family business appealing. Instead, these fuerdai (or second-generation rich) see the intersection of fashion and sustainability as an appealing way to use their inherited wealth to create purpose for themselves while building a more fulfilling career.
“They’re well-educated abroad, and they have these international values. They also don't want to go work for a company and be a slave [or work for the family]. They want to do their own thing and invest,” she says.
Education will be key. Yeh, who studied at New York University in her youth, spotted the opportunity to specialise in sustainability before most of her peers. Having risen to the upper echelons of the fashion media establishment in China after working at Modern Media Group for over a decade, she enrolled in Harvard University’s corporate sustainability and innovation certificate programme in 2016. The expertise she gained there helped Yeh set up her Shanghai-based consultancy Yehyehyeh a year later.
Many young investors, however, are often fond of learning on the job. Take Veronica Chou, for example, heiress to billionaire textile and fashion magnate Silas Chou, who has a history of directing family investments into sustainability-focussed companies like Modern Meadow, which specialises in biofabricated and biodegradable materials. She has also invested in recycled shoes manufacturer Thousand Fell and Dirty Labs, a producer of sustainable cleaning products. Last year, she launched her own eco-friendly clothing and accessories line Everybody & Everyone.
While Yeh and Dean are bullish about more female impact investors emerging out of mainland China and Hong Kong, other markets with similarly intense environmental problems do not yet seem quite so ripe.
"Impact investments in India are largely in healthcare, agriculture, technology and last mile connectivity. Clearly, we have amazing women start-up investors but we're sorely lacking in the sustainable fashion industry," says Bandana Tewari, a sustainability activist and former editor-at-large for Vogue India.
"Maybe the reason is because investors believe there are ‘bigger’ issues in India and more money to be made when a colossal population is at play for a different set of needs and values. Sustainable fashion certainly takes a back seat but maybe this is a time to call out Indian investors' poor attention to sustainable fashion."
Ethics in a Crisis
In a post-pandemic world, there are differing notions for the future of the responsible business movement – even in the West where some headway was being made before the outbreak by widespread climate emergency protests. Clearly, many priorities have shifted.
Questions now hang over the continued growth of impact investment as wealth creation takes such a large hit from rolling pandemic-related shutdowns around the world and the inevitable economic pain they will cause.
According to a report in the Financial Times citing a new survey by the Boston Consulting Group, nine out of 10 investors would now prioritise a company’s economic recovery over its ethical principles. From the period April 5 to 19, the proportion of investors who believed it was important for a company to pursue its ESG agenda fell by 10 percentage points (the next survey after that period indicated that the number had stabilised).
Momentum for sustainable fashion has also stalled given the immediate threats posed by the spread of the coronavirus. But once recovery begins, will investors return with “patient” time horizon for returns when capital is needed elsewhere?
“We still don't know yet,” says Yeh. “There’s a lot of talk about what this crisis will do for sustainability. Should I try and convince my clients to spend money on this when everyone is on livestreaming platforms now just trying to sell everything they possibly can?”
Now is the time we will see who is really serious about sustainability.
“Those who are serious about it will continue to do it. A lot of people jumped on the bandwagon at the end of last year and those people now have gone quiet. But now is the time we will see who is really serious about sustainability.”
Yeh’s prediction seems to be supported by the BSG survey. For the 10 percent of investors who already prioritise ESG and consider it to be “very important,” it does continue to be a priority.
For what it’s worth, most of the other female impact investors BoF interviewed also remain optimistic, and some are even more hopeful than ever, that Covid-19 will spur a global change in consumption habits that finally proves definitive in changing fashion’s environmentally ruinous and socially problematic ways.
“I hope that’s true,” says Lacayo. “I think this has shaped us all and I really believe if you don't pivot your business and have sustainability in the DNA in your brand, you are going to be obsolete.”
Many of these women also remain committed to doing what they can, from an investment point of view, to ensure that the sustainable companies that do make it through the current crisis will be able to thrive in the newly changed market landscape.
“If we can invest and lead with love and work with people who are passionate about making a difference and making an impact, that’s where we have to go,” Susan Rockefeller says. “The old paradigm is not going to work anymore.”
Disclosure: Carmen Busquets is part of a consortium of investors which has a minority stake in The Business of Fashion. LVMH is part of a group of investors who, together, hold a minority interest in The Business of Fashion. All investors have signed shareholder’s documentation guaranteeing BoF’s complete editorial independence.