From 2014 to 2019, the Green Bond business succeeded in quintuplicating its own turnover. In 2020, due to the pandemic outbreak, it enjoyed a booming expansion indeed. The fashion system, of course, has not stayed on the side-lines to watch as players have been matching, to a (very) remarkable extent, the need for capital assets with sustainable goals
They call them Green Bond. In other words, we are talking about financial loans granted by banks in favour of brands and fashion houses while aiming at specific developmental goals in terms of sustainability. From 2014 to 2019 (according to a report drawn up by University Cattolica of Milan), this business enjoyed a booming expansion indeed: in fact, it succeeded in quintuplicating its own turnover as revenues moved from less than 50 billion dollars up to over 250 billion dollars. Moody’s Investors Service estimated that figures would reach even 400 billion dollars by the end of 2020. Due to the pandemic outbreak, which urged a number of fashion system’s top players to find cash assets, such estimate is likely to be quite plausible. We are about to introduce, in the next few paragraphs, some examples, which evidence that in a peculiar and effective way.
In February 2021, Prada got by Unicredit a five-year-long environmental loan. Let us focus on it: it is worth 90 million euros, and its rate of interest is going to get lower as the brand achieves the goals previously set. Green goals, of course. First: Prada is supposed to augment the amount of self-produced energy by installing some photovoltaic systems on the group’s corporate and industrial plants and buildings. Second: they will have to arrange for recovery and transformation of production scraps to be implemented. Such activity and, consequently, the achievement (or the missed one) of their goals, previously set, will be certified, on annual basis, by a third and independent party. For the records, Prada formerly made investments, in the past, to reduce production scraps from apparel, leather goods and footwear. Yet, they have now committed to handing over such waste materials to third parties.
In January 2021, a group of banks, led by Intesa Sanpaolo, signed with Tod’s Group a financing deal: the overall loan amount was, at most, 500 million euros, to be invested to achieve sustainability goals. The name is Sustainability Linked Loan. It is composed of a 250-million-euro Term Facility and an additional 250-million-euro Revolving Credit Facility. Length of the loan: 5 years. “Such deal is going to further enhance the group’s financial framework, which already rests on stability”, commented the group in a press release. According to the agreement, the loan rate of interest is due to get lower as the fashion brand progressively achieves a few goals, previously set, in terms of environmental and social sustainability, and governance as well.
In June 2021, Furla joined the group of businesses which had obtained a green loan while matching it with sustainability targets. The leather goods brand got by Unicredit 25 million euros to walk faster along its sustainability path. “Such deal (which is supposed to last for three years, editor’s note) is going to further strengthen the group’s financial framework – commented Chief Executive Officer Mauro Sabatini –, and will soften its risk profile, due to the current market overall scenario”.
300 million pounds. In September 2020, Burberry signed an agreement to get such sustainable loan, whose amount is quite considerable. In other words, a bond issue to financially support or re-finance the green projects planned by the brand. Allegedly, they issued the loan bond in compliance with the company’s Sustainability Bond Framework.
In July 2021, Aeffe Group got by Intesa Sanpaolo a 5-million-euro financing loan. The credit line has been bound to ESG goals. In other terms, the group is supposed to match those capital assets with specific sustainable targets, in terms of environment, corporation and governance. The Italian holding company, which controls Pollini and Moschino brands, among others, aims at “promoting women’s role in the social framework” and strives to implement “a policy to foster gender equality”.
They got a 400-million-euro loan. In other words, a revolving-like credit line bound to the achievement of specific goals: namely, to reduce environmental footprint. Moncler Group successfully got such financial support, issued by Intesa Sanpaolo, in July 2020. “Thanks to this credit line – commented the company led by Remo Ruffini –, our business can reinforce its current assets standard, formerly high, therefore further softening its risk profile, due to the current market overall scenario”. The credit line will expire in 2023; they can renew it for two more years though.
In July 2020, Salvatore Ferragamo made a public statement to announce a loan deal signed with Intesa Sanpaolo to finance sustainability and support capital assets. The project is composed of two parts. The former: a term-loan credit line, 125 million euros, which is due in 2025 (length: 5 years). Latter: a revolving credit line, which will expire in 2024, 125 more million euros; they can renew it for one more year. Total loan amount: 250 million euros. As pointed out by the fashion brand, those assets will be invested “to support specific ESG goals (Environmental, Social, and Governance)”. Yet, in addition, they will also “finance the company’s general need for cash availability, estimating a rewarding scheme once the business achieves specific sustainability standards and parameters”.
At the end of 2020, Chanel’s green commitment took stage as the brand made two public statements, one right after the other. First, the French fashion house allocated on the market bonds worth 600 million euros: such bonds are bound to the successful achievement of specific green targets. They subsequently announced a 35-million-euro investment for clean energy in California.