An article published on March 15, 2018 on Morningstar covered four of the 10 risks outlined in a recent report by Sustainalytics entitled, “10 for 2018: ESG Risks on the Horizon.” These are:
- Risk for Oil and Gas Firms: The Transition to Low-Carbon Energy
- Risk for Food and Beverage Firms: Growing Health Concerns Over Sugar Consumption
- Risk for Software and Services Firms: Increased Scrutiny Over Anticompetitive Practices
- Risk for Apparel Firms: Supply-Chain Oversight
The fourth risk is especially material in emerging markets.
“Growing public scrutiny of the apparel industry’s supply chain is increasing firms’ exposure to financial risks linked to sourcing disruptions, legal action, and negative reputational impact from poor pay and working conditions. As apparel firms extend their operations to new locations, supply-chain risks follow. Recently, for example, some apparel firms have been shifting production from Bangladesh to countries like Myanmar and Ethiopia, where wages are lower. Western governments are ramping up pressure on oversight. France, for example, passed a law in 2017 imposing fines for companies that cannot demonstrate appropriate due diligence in their supply-chain monitoring.”
You may read the article on the Morningstar internet site.