The world’s biggest producer of luxury goods has emerged as a favourite among fund managers marketing themselves as promoters of environmental and social goals.

More than 1,200 ESG funds now hold shares of LVMH Moet Hennessy Louis Vuitton, according to data compiled by Bloomberg. Roughly 500 more are indirectly exposed to the luxury behemoth, the data show. That puts LVMH well ahead of more traditional green names such as Vestas Wind Systems and Tesla on the list of preferred ESG stocks.

The funds, which claim either to “promote” environmental, social and good governance principles, make ESG an outright “objective” or simply put ESG in their names, have amassed a combined LVMH stake worth more than US$17 billion, Bloomberg data show.

The company’s 195 per cent value gain since the early days of the pandemic helped ESG weather a tough 2022, which saw the strategy sag in the face of decades-high inflation, interest-rate hikes, an energy crisis and a slump in technology stocks.

Credit Agricole has the biggest exposure to LVMH via ESG funds, with an investment of roughly US$1.7 billion, Bloomberg data show. Much of that is via funds that under European Union rules “promote” ESG, known as Article 8.

Fabio Di Giansante, head of large-cap European equities at Amundi, which is owned by Credit Agricole, says that when it comes to environmental considerations, LVMH is “ahead of peers.” On the social front, “we have to admit that LVMH has been a bit slower at improving” and “this has been an area of engagement from our side,” he said.

GET BT IN YOUR INBOX DAILY

Start and end each day with the latest news stories and analyses delivered straight to your inbox.

Sign UpVIEW ALL

And Impact Cubed, an ESG data provider, said LVMH has yet to align its revenues with the United Nations’ Sustainable Development Goals. That makes the company’s inclusion in ESG funds “quite paradoxical,” it said in an emailed comment.

According to LVMH’s latest social and environmental responsibility report, the company supports all 17 Sustainable Development Goals. LVMH also pointed to its inclusion this year in Sustainalytics’ list of top-rated ESG companies, which looks at all three E, S, and G metrics. And LVMH has been included in a number of sustainable indexes, including S&P Global ESG and Moody’s ESG.

“On the social side, gender pay is an important part of LVMH’s commitments to gender equity, which include achieving salary equity by 2025 and 50 per cent of women in group key positions by 2025,” the company wrote. Such efforts “have already led to significant progress,” examples of which include the increase in the percentage of women in key positions at LVMH from 23 per cent to 45 per cent between 2007 and 2022. And 65 per cent of LVMH executives and managers are women, while 18 women run the group’s so-called Maisons as chief executives, LVMH said.

“Luxury stocks are investor darlings at the moment,” said Gilles Guibout, a portfolio manager at Axa Investment Managers. “And because they’re eligible to ESG funds, they logically benefit from their defensive growth profile, while valuations aren’t so expensive.”

Shares in LVMH rose as much as 1.2 per cent on Wednesday to 850 euros (S$1,257.5), outperforming the benchmark Stoxx Europe 600 Index.

Jie Zhang, an equity analyst at Alphavalue in Paris, said that when it comes to the “social inequality aspect of the concept of luxury,” it’s not “because of luxury that there is social inequality, and we cannot forget that the original purpose of luxury is the pursuit of beauty, creativity, and quality.”

It’s true that “luxury goods highlight social inequalities,” said Jelena Sokolova, an analyst at Morningstar. “But from an environmental impact and labour point of view, these companies score well,” she said. 

Unlike so-called fast fashion producers, luxury firms tend to produce smaller batches than the mass market, “so the environmental impact is smaller, plus the goods are aimed to last,” Sokolova said. What’s more, production and sourcing is also mainly done in Europe, where strict labour laws apply, she said. BLOOMBERG