Investment and financing in terms of sustainable development will become an important reference for the capital market to examine the financial status of fashion enterprises from 2022.
On 17 January, Burberry officially secured a £300 million sustainability loan from Lloyds Bank. Burberry described the loan as a revolving credit facility related to the achievement of its ESG goals, which will be earmarked to meet Burberry's previously announced "2040 targets," such as accelerating emissions reductions of 46 percent in its supply chain systems by 2030 and achieving net zero emissions by 2040.
The loan arrives less than 18 months after Burberry issued sustainability bonds and raised £300 million. According to public disclosures, the funds raised from the bonds have been used by Burberry to include sustainable practices such as renovating properties in its portfolio to meet strict certification standards, ensuring the source of natural resources is sustainable, and preventing pollution caused by packaging.
Julie Brown, Burberry's chief operating and financial officer, said the company's "long-term success depends on creating a net-zero future." Not only in the luxury industry, but also within the broader economic sphere, linking sources of funding to sustainable initiatives will help drive this. Thanks to our banking partners for their financial support, this will help us on our journey to decarbonise our operations and expand our supply chain. ”
The opinion of the critics is that Burberry's finances are getting greener.
This loan will be earmarked for realization
Previously, Burberry's "2040 Goals"
So far, luxury brands that have received investment support with special loans for sustainable development have included Prada, Hugo Boss, Moncler, Salvatore Ferragamo, and Save the Duck, an Italian clothing company that uses sustainable materials and refuses to use animal materials. In addition, Chanel raised €600 million through the issuance of sustainability bonds.
The investment community's interest in sustainable fashion financing is not only reflected in the volume of the amount, but also in the conditional fringe benefits.
The bank and Moncler separately signed a foreign exchange risk hedging agreement that set up additional provisions that allow Moncler to reduce the cost of foreign exchange hedging by meeting certain environmental protection goals. Of the €633 million syndicated loans received by Hugo Boss, the interest rate will also be adjusted annually to meet Hugo Boss's goals in four ESG areas: reducing CO2 emissions, the proportion of female executives, a fair working environment and the use of sustainable cotton.
It is not difficult to see that investment and financing actions through special funds for sustainable development have become the latest two-love between the fashion industry and the investment community.
Launching sustainable specialty products, raising the banner of sustainability in marketing campaigns, and actively participating in social welfare practices can help fashion brands build goodwill among consumers. In a recent consumer survey conducted by accounting firm Deloitte, 68% of people showed greater enthusiasm for brands and products with distinct sustainability attributes. Consumer enthusiasm and direct means the income of the enterprise.
However, for the investment community with large amounts of money, they are more concerned about whether the company is carrying out sustainable development transformation at a deeper level such as system and model, and thus obtaining long-term development momentum, which in turn brings expected returns to special investment.
Hugo Boss's loan interest rate will be
Adjust to the achievement of the Group's ESG objectives
Diana Verde Nieto, co-founder and CEO of Positive Luxury, a certified sustainable company, said in an interview with WWD that the most attractive to investors at the moment are those that have ambition and action in ESG goals: "For investors, companies with ambitious ESG goals are the ones with the most investment value. Companies that provide investors with integrated financial and ESG reporting and enhance the involvement of middle management in ESG matters are the winners of the future. If companies don't take sustainability seriously, they will become 'stranded assets' in the eyes of the investment community. ”
So far, the most active institutions and companies on both sides have come from the European continent. Investments from Italy are far ahead of their peers.
Back in 2019, Crédit Agricole has already placed a sustainability loan of €50 million to Prada, in 2020, Mizuho Bank, Ltd. Milan Branch has placed a second sustainability loan totaling €75 million to Prada, and in 2021 UniCredit, also from Italy, signed a five-year agreement with Prada for a total of €90 million.
Prada Garden Factory
In July 2021, Italy's Intesa Sanpaolo signed an agreement with Gucci to enable SMEs in Gucci's supply chain to access loans on better terms to achieve sustainable reform goals.
Nicolas Bargi, founder and CEO of the Save the Duck brand, which applied for a €3 million sustainability loan from Intesa Sanpaolo Bank in Italy, said italian banks are starting to offer more and more sustainability-related loan services because they want to be able to play an active role in driving businesses to focus on ESG issues and develop long-term plans. At the same time, he also said that "the long-term development of many Italian brands will benefit from these investments, and long-term growth cannot be possible without sustainable development." "
The Plumtech material developed by Save the Duck is
The perfect alternative to natural duck down and goose down
While acting aggressively, the investment community is also becoming more savvy and cautious.
BlackRock, the world's largest asset manager, has embraced sustainability as its new benchmark for evaluating investments. According to the company, sustainable earmarking is an integral part of investors' risk management, expected returns, portfolio building and subsequent investment management, and is extremely important for optimizing investment outcomes. As a result, BlackRock has set up a series of detailed inspections for the portfolio companies, requiring companies to give corresponding business plans for targets such as "keeping global warming below 2°C" and "achieving net zero global greenhouse gas emissions by 2050".
Lloyds Bank also said it has formed a new Sustainability and ESG Finance team last year to provide funding and strategic insights into corporate clients' sustainability initiatives.
Francesca Diviccaro, Head of Industry Retail and Luxury goods at Intesa Sanpaolo Group and Head of International Monetary and Investment Banking, commented: "Brands should see sustainability as a way to create maximum value and enhance their brand power, as well as an opportunity for brands to break through global markets and achieve revenue and profit growth. Brands that are not involved are at risk of being eliminated by the market in the long run. ”
Achieving sustained growth in a difficult environment is ultimately nothing more than open source and throttling. Getting a high-quality investment is one of the best options for open source.
According to auditor Sustainalytics, there were 41 sustainability-related loan transactions worldwide in the first two months of 2021 alone, the largest of which came from Anheuser-Busch InBev, a multinational beverage and brewing company based in Belgium, with a transaction size of $10.1 billion. BlackRock also noted in an annual report that from January to November 2020, public and exchange-traded open-ended index funds worldwide invested $288 billion in sustainable products, a 96% increase from 2019.
In November 2021, VIA Outlets completed a €600 million green financing
A lot of hot money is still looking around, and the cake that the fashion industry can get is by no means a small piece.
Savvy capital will only support companies that truly value ESG, not companies that simply use sustainability as a marketing gimmick. "Go green, or go home", for fashion companies that need to effectively solve sustainable development problems, but also can invest large amounts and have long return periods, it is time to seriously examine how they can use the tool of sustainable development special investment and financing. WWD
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