The Chinese-founded online retailer has spent years trying to address concerns that previously derailed or complicated plans to list in New York and London. However, several of the issues that have followed Shein through its IPO journey remain unresolved, potentially affecting investor confidence and the company's valuation once trading begins.
Fast Fashion Faces Growing Regulatory Pressure
Shein has faced criticism from politicians, investors and regulators over its environmental footprint, labour practices and corporate governance. The company is currently under investigation by the European Commission and the U.S. Federal Trade Commission, while previous regulatory action has resulted in fines in France over alleged misleading discounts and in Italy over greenwashing claims.
The scrutiny comes as regulators around the world intensify their focus on the fast-fashion industry, particularly companies accused of encouraging excessive consumption through low prices, rapid product launches and short production cycles.
In response, Shein has increased its focus on sustainability reporting and corporate responsibility. The company hired outside consultants and established an external ESG advisory board in 2024. Its annual ESG report expanded to 118 pages last year, compared with just 28 pages in 2021, reflecting a broader effort to demonstrate progress to regulators and investors.
Despite these measures, some European and Asian investors say significant concerns remain, particularly around labour conditions, governance, regulatory exposure and the company's efforts to cut carbon emissions.
"The company continues to face serious ESG controversies, particularly around working conditions and labour rights in its supply chain, supply chain traceability, environmental impacts and the broader sustainability implications of its high-volume, ultra-fast-fashion business model," said Janina Bartkewitz, ESG analyst at Union Investment in Frankfurt, which managed €569 billion ($664 billion) in assets at the end of June.
A Shein spokesperson said: "Shein is committed to maintaining high standards of corporate governance, transparency and accountability. We operate in compliance with applicable laws, regulations and listing requirements, and continue to review and strengthen our governance practices as the business evolves."
Shein's 2025 sustainability report highlighted some progress in its supply chain. According to the report, 53% of its suppliers received the highest grades in company audits, up from 47% in 2024.
Still, the investigations in Europe and the United States could expose Shein to potentially significant fines. The European Commission recently fined Alibaba-owned AliExpress €550 million and PDD-owned Temu €200 million over illegal products, highlighting the scale of financial penalties that major e-commerce platforms can face.
For investors, however, the concern extends beyond possible fines. Continued regulatory attention can raise questions about a company's internal controls, compliance systems and the ability of its board to effectively oversee management, Bartkewitz said.
Concentrated Voting Power Raises Governance Questions
Another major issue for prospective Shein investors is the company's dual-class share structure.
Under the structure outlined in its latest stock market filing, Class A shares carry 10 votes each, while Class B shares carry one vote. Following the IPO, Shein's four co-founders are expected to hold 59.6% of the company's shares but retain 90% of its voting rights.
That arrangement would give the founders substantial influence over major shareholder decisions, potentially limiting the ability of minority investors to challenge management or influence corporate strategy.
Kiran Aziz, head of responsible investments at Norway's KLP pension fund, which manages more than €80 billion, said the lack of a fixed expiry for the enhanced voting rights was a particular concern.
Shein also combines the positions of chief executive and chairman. All four co-founders remain on the board while occupying executive roles, while only three of the company's seven directors are independent.
"Taken together with the concentrated voting control, this risks weakening independent oversight and increasing potential misalignment between management and controlling shareholders on the one hand, and minority shareholders on the other," said Aziz.
The governance concerns reflect a broader debate among investors about the growing influence founders can maintain at some of the world's largest technology and consumer companies after going public.
Shein's Emissions Remain a Major Concern
Shein has argued that its business model can be less wasteful than traditional fast-fashion operations because it initially produces small quantities of new designs and increases production only when demand becomes clear.
The approach allows the company to limit unsold inventory, one of the major environmental criticisms levelled at traditional fashion retailers.
Critics, however, argue that Shein's extremely low prices and aggressive digital marketing encourage consumers to purchase more frequently and replace clothing more quickly. In their view, reducing unsold inventory does not necessarily make the broader business model sustainable if the overall volume of clothing produced and consumed continues to rise.
Shein's website lists thousands of new products every day. Its filing said the platform introduces about 4,700 new styles daily and carries more than two million apparel styles overall.
"Shein is making garments primarily from plastic and selling them at nearly half the prices of H&M and Zara. So the fact that there's no 'excess' ... well, everything they make is more disposable, just based on price alone," said Ken Pucker, professor of the practice in sustainability at the Fletcher School at Tufts University.
The company's carbon footprint is another area attracting investor attention. Shein reported greenhouse gas emissions in 2025 that were roughly twice those reported by Zara owner Inditex, despite Shein reporting annual sales of $41.8 billion compared with Inditex's €39.9 billion ($46.54 billion).
That comparison raises questions about whether Shein's rapid-growth model can be reconciled with meaningful reductions in environmental impact.
"The central question for investors is whether Shein's growth strategy is compatible with a credible long-term sustainability transition," said an ESG-focused Asia-based investor who asked not to be named because she was not planning to invest in the IPO.
As Shein approaches its Hong Kong listing, the company therefore faces a delicate balancing act. Its IPO could provide a major milestone after years of uncertainty, but investors will also be assessing whether the retailer can maintain its extraordinary growth while addressing concerns over regulation, governance, labour practices and environmental sustainability.
The outcome could determine not only how Shein is valued by public-market investors, but also whether the company can convince sceptics that its ultra-fast-fashion model can evolve in a more sustainable and accountable direction.