Luxury fashion buys into climate finance

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Luxury fashion buys into climate finance

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Iconic brand Chanel has signed a €600 million sustainability-linked bond to reduce carbon emissions.

In recent years, the fashion industry has been rapidly adopting sustainable strategies and practices.  In 2019, 32 companies — including luxury brands Prada, Gucci, and Chanel — signed a global pact to fight climate change. Now, iconic luxury label Chanel has stepped up its commitment by raising an innovative sustainability-linked bond, an impressive €600 million initiative, through banking partner BNP Paribas. 

The transaction is a first in the luxury sector as it links Chanel’s bond terms to the company’s carbon reduction targets through the International Capital Market Association’s Sustainability-Linked Bonds Principles. The deal supports Chanel’s “Mission 1.5°” climate strategy, launched in March 2020, which aims to tackle climate change issues according to the 2015 Paris Agreement. The company added that the terms of the bond state that if the company fails to meet targets, it will have to pay a premium on the bond upon maturation. The progress report on the targets will be assessed regularly by a third-party. 

Chanel reported that their immediate goal is to switch all operations to 100% renewable energy by 2025. 

“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,” explained 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, said that “sustainability-linked bonds can be game changers for accelerating climate action.”Chanel is not the only luxury fashion brand working towards reducing waste and working sustainably through climate finance. Burberry has recently signed a €300m sustainability-linked bond. This activity across the sector looks to be the beginning of a trend that commits major fashion companies to a measurable and binding climate finance solution.

Written by

Maheep Chawla

Maheep is a third-year undergraduate student at the University of British Columbia in Vancouver, Canada. She is pursuing a major in Psychology. Previously, she has interned with a pre-school for children with special needs based in New Delhi. In the past, she has also written for her campus newspaper and the editorial department at UBC’s Psychology Student Association.