Shein is launching a €200m (£168m) circularity fund as it looks to tackle fashion waste following criticisms over its supply chain and sustainability standards.

Shein sign

Shein is targeting a London listing after pulling plans for New York

The executive chair of the Chinese fast-fashion retailer, Donald Tang, said the group intends to put the cash into start-ups and more established businesses across the UK and Europe “as soon as possible”.

“Our financial resources, our scale and leverage [mean] we can be, and we will be, a significant guinea pig or applicator of these technologies or processes,” Tang told the Financial Times.

Investment targets could involve early-stage companies working on recycled materials, or the retailer could create deals with more experienced companies whose existing operations use new fabrics in a bid to be more sustainable.

Tang said the fund is a “continuation of the efforts and journey that we have been on for quite some time”, but did not say if it was in response to supply chain criticisms.

He added that fashion waste “needs collaborative efforts” and called on other retailers, sovereign wealth funds, investors, policymakers, non-profit organisations and academics to work together.

The announcement of the fund arrives amid Shein’s aim to publicly list on the London Stock Exchange after it abandoned plans for an IPO in New York.

The online retailer is also said to be exploring a back-up option to list in Hong Kong.

Shein also said this week that it would invest an additional €50m (£42m) in UK and EU brands, designers and artisans that work with Shein, as well as “potential investments” in research and development or a pilot factory in Europe or the UK. 

Speaking about the new fund, associate in the commercial litigation team at Stewarts law firm Francesca Bugg said: “Shein’s announcement of a circularity fund is a positive step in proving their commitment to sustainable fashion, it doesn’t however contribute to or meet any of the UK’s stringent ESG requirements that will be required of Shein if they list on the London Stock Exchange.

“The London Stock Exchange has high standards of due diligence and the rapid upward trajectory of ESG requirements is meant to act as a safeguard for shareholders.  

“Shein wants to avoid being an ESG risk for these investors and shareholders and they need to be alive to the risks and ensure they are prepared to meet the London Stock Exchange requirements for corporate governance standards, working conditions and supply chain transparency so they can ensure they are not subject to any shareholder claims for breaches of these requirements.”