Shein wouldn’t be the first controversial company to list in London

Financial Conduct Authority (FCA) chief Nikhil Rathi appears to have given Shein the green light on its controversial plans to list its shares in London.

Although he didn’t mention the fast fashion brand by name – he might as well have. Talking to the Financial Times, Rathi said decisions on whether companies can join the stock exchange are based on their disclosures and not “on every aspect of their corporate behaviour”.

The watchdog has come under pressure to block Shein from listing, after the retailer was accused of using forced labour in China’s northwestern Xinjiang region, as part of its cotton supply chain. In response, Shein said it suspended orders from the suppliers in question and would halt business with them until they had tackled the issue.

Rathi, however, said plenty of London’s listed companies “find themselves facing legal difficulties” in many parts of the world. His organisation’s job is to make sure they’re transparent about these legal difficulties and scandals when they happen – a fair point.

Don’t get me wrong, I unequivocally condemn the use of forced labour by any business wherever it is based and regardless of whether it is publicly listed or privately owned. But I also abhor the destruction of the planet that my children and their friends will have to live on after I’m gone.

The London Stock Exchange is full of companies engaged in that destruction via the extraction and sale of fossil fuels among other things. And some of its fossil fuel companies have been involved in ugly scandals.

Take BP and the Deepwater Horizon spill off the American coast. The company ultimately paid a high price for that, but I don’t recall anyone arguing for the cancellation of its London shares at the time.

Rathi himself made mention of mining companies – some of which have got into any number of “legal difficulties” around the world.

London has become something of a hub for these companies, despite the ever-present stink of scandal that percolates around the sector. If we want the City to close its doors to any business with a dubious record, that is a debate we can have. But if it is to become the world’s ethical “standards” centre – a perfectly legitimate position to hold if you’re willing to accept a much smaller financial centre paying a lot less tax – then those standards have to be applied equitably.

Shein is far from the only company at risk of being sent packing if the FCA was to be handed the job of ethically screening London Stock Exchange’s constituents. Conversely, if Shein can satisfy the current rules then it must be allowed in if it can find investors to back it.

Rathi was also right to highlight the rules requiring that London listed companies alert their investors if they face legal and/or regulatory difficulties. This could – and should – concentrate minds in Shein’s boardroom and executive suite.

London might be looking a little tatty – a little threadbare. No longer is it the first port of call for whizzy, fast-growing companies. Shein is only coming here after its first choice – New York – said no. But it is still a major market and its constituents are very visible.

Like many markets, a big chunk of the money invested in it is managed passively – by which I mean that it is invested in funds that track the performance of a stock market index rather than having a stock picker choosing which companies to invest in. The FTSE 100 and the FTSE All Share are the most common.

If you have an ISA or a pension, you may very well end up having some exposure to Shein whether you like it or not. Tracker funds are cheap, but the fact that they can’t pick and choose can be a drawback.

However, among those operating this sort of fund are institutions with a proven record of making a fuss when companies behave badly. They have used their votes to register their unhappiness, too.

This is something a publicly listed Shein will want to avoid. A constant drumbeat of negative publicity has the capacity to damage both a company’s brand and its bottom line. The latter is far more likely with a publicly listed Shein than with a privately held Shein.

I’m not planning to open up an account anytime soon – nor do I plan to purchase any of its shares. It isn’t just the allegations that have been made about its corporate behaviour and what may have occurred in its supply chain; this is a risky float.

Shein’s business model, involving small, low-value shipments from China that avoid tax, faces significant challenges from the Trump administration, if the latter presses ahead with the tariffs promised by the president-elect. But that’s my choice. Yours may be different.

One question for Rathi, all that being said, is whether his FCA is up to policing the disclosure requirements he mentioned in the wake of a sharply critical report by MPs accusing the FCA of “incompetence”, while lambasting its internal culture.

If Shein has some work to do to clean up its act, then so does the FCA.