Shein Launches €200M Fund to Tackle Fashion Waste, Eyes London IPO

Shein, the online fast-fashion giant preparing for a London listing, is launching a €200 million “circularity fund” to address fashion waste. Executive Chair Donald Tang announced that the China-founded company aims to inject funds into start-ups and established businesses in the UK and Europe “as soon as possible.” Tang highlighted Shein’s financial resources and scale, emphasizing their potential role in pioneering new technologies and processes in sustainability.

This investment represents a small portion of Shein’s projected $2 billion profits for 2023. The ecommerce group, which has thrived during the pandemic and is closing in on competitors like Zara and H&M, was valued at $66 billion in its last funding round. Potential investments could include early-stage companies specializing in recycled materials or partnerships with mature businesses utilizing innovative fabrics.

The launch of the fund coincides with Shein’s ambitions to list its shares publicly in London. The company abandoned earlier plans for a New York IPO due to US-China tensions and allegations of forced labor in China’s Xinjiang region, claims Shein has denied, asserting a “zero-tolerance policy for forced labor.” Although based in Singapore, Shein retains most operations and its supply chain in China. The company is also considering a Hong Kong listing as a backup plan.

Tang refrained from commenting on the listing process, which requires approval from the Chinese securities regulator. When asked if the fund was a response to criticism about its supply chain, Tang described it as part of an ongoing journey toward sustainability.

Fast-fashion brands like Shein have faced scrutiny from campaigners concerned about the environmental impact of cheap, low-quality fashion that swiftly ends up in landfills. Over half of all fast fashion is discarded within a year, per the Ellen MacArthur Foundation. Shein claims its on-demand model results in less inventory compared to traditional retailers.

Tang argued that addressing fashion waste requires collaborative efforts beyond financial investment. He called on competitors, sovereign wealth funds, investors, policymakers, non-profits, and academics to join in the circularity initiative.

Shein recently filed confidential paperwork with the UK’s markets regulator, moving closer to what could be a major listing for London’s stock market. The company met with new business secretary Jonathan Reynolds before the Labour party’s landslide election victory. Labour has indicated London should support a Shein flotation to enforce stricter regulatory standards.

In addition to the circularity fund, Shein announced another €50 million investment in UK and EU brands, designers, and artisans, hinting at potential research and development investments or a pilot factory in Europe or the UK. In 2022, Shein launched a resale platform in the US, now available in the UK and Europe, featuring over 115,000 pre-owned items.