French luxury fashion label has raised a €600m bond whose terms are linked to its sustainability goals
Leading luxury goods firm Chanel last week raised its first sustainability-linked bond in a pioneering €600m transaction undertaken with banking giant BNP Paribas.
The bond's terms are linked to the French company's environmental objectives, contained in its Mission 1.5C strategy. These include carbon reduction targets that would slash Chanel's internal and energy-related emissions - known as Scope 1 and 2 - by 50 per cent by 2030, and decrease its supply chain or Scope 3 emissions by 10 per cent by the same date.
The firm also committed to shift to 100 per cent renewable electricity for its operations by 2025, adding that all its targets had been approved by the independent Science Based Targets initiative. Progress towards the targets will be assessed regularly by a third-party verifier, the firm said.
Chanel will have to pay a premium on the bonds when they mature if the firm fails to meet certain targets related to its green goals, the company explained.
"In launching these bonds, Chanel hopes to support the development of the sustainable financing market and the wider social and environmental progress that this type of financing can advance," said the company's chief financial officer Philippe Blondiaux.
"There is a growing recognition amongst investors that they have a role to play in helping to tackle climate change, and we look forward to engaging with them."
Jean-Laurent Bonnafé, CEO at BNP Paribas, which advised Chanel on structuring the bond, said that "sustainability-linked Bonds can be game changers for accelerating climate action".
The move is the latest sign that fashion firms are seeking to bolster their environmental credentials in an industry that has been frequently criticised for wasteful practices. A number of leading firms have recently pledged to switch to more sustainable fabrics and materials and to cut back the carbon impact of their energy use.
Chanel's approach is also part of a growing trend that has seen fashion firms use financing mechanisms to support their sustainability goals. It follows a similar move by British firm Burberry, which issued a £300m sustainability bond earlier in September.
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