Luxury Giant Louis Vuitton Becomes ESG Funds’ Favorite, Garnering Over $17 Billion Investment

The combined stake of these ESG funds in Louis Vuitton is now valued at over $17 billion, thanks in part to the company’s remarkable 190% value gain since the onset of the pandemic.

LVMH Moet Hennessy Louis Vuitton SE, the world’s leading producer of luxury goods, has become a favorite among fund managers promoting environmental and social goals. With more than 1,200 ESG funds holding shares of LVMH and an additional 500 indirectly exposed to the luxury behemoth, it has surpassed traditional green names like Vestas Wind Systems A/S and Tesla Inc. on the list of preferred ESG stocks.

The combined stake of these ESG funds in LVMH is now valued at over $17 billion, thanks in part to the company’s remarkable 190% value gain since the onset of the pandemic. This growth has helped the ESG sector weather a challenging year marked by high inflation, interest-rate hikes, an energy crisis, and a technology stock slump.

Among the asset managers with the largest exposure to LVMH through ESG funds is Credit Agricole SA, with an investment of approximately $1.7 billion. Much of this investment is facilitated through funds that, under European Union rules, actively promote ESG principles, known as Article 8 funds.

Fabio Di Giansante, Head of Large-Cap European Equities at Amundi, a subsidiary of Credit Agricole, acknowledges LVMH’s progress in environmental considerations, stating that the company is “ahead of peers”. However, he notes that there is room for improvement in social aspects, which has been an area of engagement for Amundi.

Louis Vuitton’s commitment to environmental, social, and governance factors has been recognized by independent rating agencies. The company was included in Sustainalytics’ list of top-rated ESG companies, which evaluates performance across all three metrics: environmental, social, and governance. Louis Vuitton has also been featured in sustainable indexes such as S&P Global ESG and Moody’s ESG.

In terms of social initiatives, Louis Vuitton emphasizes gender equity, aiming to achieve salary equity by 2025 and increase the representation of women in key positions to 50% by the same year. Significant progress has already been made, with the percentage of women in key positions rising from 23% to 45% between 2007 and 2022. Furthermore, 65% of LVMH executives and managers are women, and the group is led by 18 female chief executives.

The growing popularity of luxury stocks among investors can be attributed to their defensive growth profile and relatively attractive valuations. ESG funds in Europe have delivered an average return of 10% this year, outperforming the Stoxx Europe 600 Index, while tech-focused funds have achieved returns exceeding 40%, propelled by advancements in artificial intelligence.

ESG funds are not only building exposure to the luxury sector but also outperforming their benchmarks. For instance, the Palatine Europe Sustainable Employment fund, registered as Article 9 in the EU, counts Louis Vuitton as its largest holding. The fund has achieved a 14% return this year, surpassing 94% of its peers.

Similarly, the Candriam Sustainable Equity EMU and the Amundi Europe Climate Transition CTB funds, both registered as Article 9, have allocated significant portions of their holdings to LVMH. These funds have achieved returns of 11% and are actively contributing to sustainable investing in Europe.

While LVMH faces challenges such as market fluctuations and price increases, its commitment to sustainability and recognition by ESG funds underscore its appeal to investors. Luxury goods highlight social inequalities, but the industry’s smaller production batches, focus on longevity, and adherence to strict labor laws in Europe contribute to a positive environmental and labor impact.

As ESG investing gains momentum globally, Louis Vuitton’s prominence among fund managers dedicated to environmental and social causes reinforces the importance of sustainable practices in the luxury sector. With its ongoing commitment to ESG principles, LVMH sets an example for the industry, demonstrating that luxury and sustainability can go hand in hand.