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Aberdeen Standard divests fast fashion giant Boohoo over modern slavery allegations

ASI had exposure to scandal-hit firm via several impact and responsible funds

Aberdeen Standard Investment (ASI) has exited fast fashion retailer Boohoo, under investigation for links to modern slavery, from its impact and responsible investment funds. 

It follows days of focus on Boohoo’s treatment of workers after the Times newspaper revealed on Sunday it was paying as little as £3.5o (€ 3.85) an hour to make clothes. The minimum wage in the UK is £8.72 for people over 25. There is now a National Crime Agency investigation into modern slavery in Leicester factories in central England.

Boohoo was a holding in the ASI UK Impact Employment Opportunities fund, which has an objective to invest in companies that “promote and implement good employment opportunities and practices”. 

The ASI UK Ethical Equity fund, the ASI UK Responsible Equity fund and the Premier Ethical fund also had exposure to Boohoo. 

An ASI spokesman confirmed all the funds completed their exit from Boohoo yesterday.

Lesley Duncan, Deputy Head of UK Equities at Aberdeen Standard Investments, said: “We invested in Boohoo at IPO [initial listing] at which point it passed our ethical screens. The company has achieved strong revenue growth driven by the structural shift in retail from high street to online and its flexible test and repeat model enabling the company to adapt quickly to changing consumer trends.

“We have considered the ESG performance of the company and pro-actively engaged with management on an ongoing basis. Over the years we have lobbied the company to improve its management of supply chain transparency, environmental efficiency and working conditions. While we would have liked progress to have been quicker we did feel that progress was being made.”

Duncan continued that it had this week spoken with Boohoo’s management in light of the allegations, but did not view its response as adequate. 

“We strive to use our influence as significant investors to achieve progress. In instances where our standards have not been met, divestment is both appropriate as responsible stewards of our clients’ capital and aligned to our goal of investing for better outcomes,” said Duncan. 

Boohoo shares had nose-dived earlier this week when the scandal broke, but have been rising steadily over the past couple of days, rebounding more than 27% yesterday. 

Big Issue Invest, the impact investment arm of poverty reduction social enterprise Big Issue, acts as social advisory partner for the ASI UK Impact Employment Opportunities fund. It said it was now working closely with ASI on the allegations surrounding Boohoo. 

The Good Economy Partnership does impact measurement for the fund, with impact criteria including companies paying above average wage rates, being located in deprived areas, offering training and/or employing young people, and also in general having more than 50% of their employees in the UK.

The fund’s annual impact report in 2019 rated Boohoo highly on environmental impact and supply chain transparency from a self-reported questionnaire. 

In a statement, Danyal Sattar, CEO of Big Issue Invest, said: “We understand that an Aberdeen Standard Investments (ASI) Fund that invests in UK companies which create jobs in the UK, is one of four responsible investment funds that hold Boohoo, which now is under investigation for slavery in its supply chain…….The findings, outlined in the recent Labour Behind the Label Report are deeply concerning and the type of practices adopted by Boohoo or its supply chain companies are unacceptable. 

“This Fund aims to promote best practice for UK employers to generate good jobs for people across the UK, particularly in areas of the country that have been traditionally marginalised from the chance to develop economically. We will continue to monitor the situation by working closely with ASI.”