PitchBook News - ESG's fast-fashion test

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The Weekend Pitch

April 17, 2022

Presented by DealCloud

British media personality Georgia Toffolo at a Shein event in London. (Antony Jones/Getty Images)

Memo to ESG investors: Buy into opportunities in the fashion industry at your own peril.

If you're seeking a portfolio of companies that manage risk around issues like environmental degradation and treatment of workers, you may want to look elsewhere. The global fashion and apparel industry isn't exactly a poster child for business sustainability.

Fast fashion, the segment that rapidly pumps out low-priced trendy clothing, is under fire for production practices linked to water pollution and worker exploitation. Now, the industry is getting fresh attention amid word that one of its biggest stars, China's Shein, is raising new capital at a reported $100 billion valuation.

I'm Alexander Davis, and in this edition of The Weekend Pitch we'll look at why the fast-fashion industry poses hazards, but also opportunities, for ESG-focused investors. You can reach me at alec.davis@pitchbook.com or @alecdavis on Twitter.

Quote/Unquote

(oatawa/Getty Images)

"The deadline I set was over, but if I get a good offer, I might accept it, I might never sell it."

—Crypto entrepreneur Sina Estavi told CoinDesk after his NFT of Twitter founder Jack Dorsey's first-ever tweet received a top bid of just under $280. Estavi purchased the NFT for $2.9 million last year.

Deal Flow

(Pekic/Getty Images)

Last year saw a significant rebound in investment in the hospitality and leisure sector, with $55.14 billion transacted across 342 deals, including Blackstone's buyout of UK holiday group Bourne Leisure.

By comparison, 2020 saw only $35 billion across 223 deals, a big drop from a pre-pandemic peak of $59.75 billion across 363 deals in 2019.

Read more about leisure and hospitality's rebound from pandemic lows.

Did you know ...

... That after a blistering 2021, PE dealmaking activity got off to a lukewarm start in 2022. During Q1, PE dealmakers closed 2,166 deals for a combined $330.8 billion, still representing an increase in deal count and value from Q1 2021's figures.

The threat of further escalations, sanctions and supply chain disruptions due to Russia's invasion of Ukraine pushed dealmakers to hit pause for several weeks.

Our US PE Breakdown also explores how the invasion wreaked havoc in lending markets, with tens of billions of dollars in syndicated loans for LBOs left parked on bank balance sheets in the US and Europe.

Datapoints

Private equity firms were first granted access to stakes in NBA teams in January 2021, following an initiative led by league commissioner Adam Silver. Previously, individuals associated with a firm could own stakes or entire teams, but whole PE firms couldn't take part.

Under the new league rules, PE firms can own up to 20% of a single NBA franchise, and no team can collectively have greater than 30% of its ownership in the hands of multiple firms.

Check out our visualization of the NBA's private investment ties.

Recommended reads

As mainstream venture firms focus their time and dollars on the most profitable customers and overlook emerging founders, is a great disruption overdue in venture capital? [Fast Company]

The world's biggest tech companies may be serious about carbon removal, but the necessary tech is yet to be developed, signaling a large market opportunity to entrepreneurs and investors. [The Atlantic]

Soaring numbers of entrepreneurs and students seeking career skills are creating a global boom in digital learning. [Financial Times]

Many small businesses have been left with years of monthly lease payments for equipment they couldn't use during the pandemic. [The Wall Street Journal]

Why the US government is turning to antitrust suits to protect workers' pay. [The New York Times]

The world's farms produce only a handful of varieties of bananas, coffee and other foods, leaving them more vulnerable to the climate crisis. [The Guardian]

This edition of The Weekend Pitch was written by Alexander Davis and Ryan Prete. It was edited by Chris Noble and Sam Steele.

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