The ratings agency pointed to mounting scrutiny of the industry’s environmental footprint from consumers, regulators and investors that is likely to force costly changes to fashion’s business model and risks eroding brands’ credit quality. Longer term, the industry is likely to face more financial pressure related to environmental risks, Moody’s Investors Service said in a report published Wednesday.
“The credit impact of environmental risks on the apparel companies we rate has been limited to date,” the report found. “However, in the longer term, the industry’s profitability is at risk because input costs will increase as production practices put increasing strain on material resources.”
The analysis underscores the financial implications of the industry’s sustainability challenges at a time when brands are facing financial pressure in the wake of the coronavirus pandemic as well.