PARIS, Sept. 24 (Reuters) – French luxury brand Chanel on Thursday raised a € 600 million ($ 699 million) bond with clauses linked to its environmental goals, as companies in a sector under the control of waste-conscious buyers are multiplying green initiatives.
Fashion companies have made a public effort in recent years to show off their eco-friendly credentials, ditching certain materials used in clothing or handbags or trying to improve their energy supply in stores.
A handful are now exploring new avenues of funding to support their effort toward tougher targets in areas such as carbon emissions. “Sustainability bonds” are tied to company-level goals, unlike green bonds, which fund specific projects.
The five- and ten-year agreements issued by private company Chanel, which only started publishing annual results in 2017, marked its first foray into the bond market, said CFO Philippe Blondiaux.
Some products can be used for investments, including in startups developing alternatives to plastics or leather.
Depending on the structure of the deal, Chanel will also have to pay a premium upon maturity of the bonds if it does not meet certain emission reduction targets within the company and its supply chain.
Chanel could tap the market again, Blondiaux said, adding that the company’s future funding strategy would be in the form of sustainable bonds.
“It’s a logical step … we are making (the funding strategy) consistent with the business strategy, which is focused on the journey to a more sustainable model,” he said.
Chanel received € 600 million in investor demand for the shorter-dated € 300 million bond, priced at 0.548%, and € 750 million in demand for the longer bond term, which was priced at 1.059%, an advance director of the agreement said.
Britain’s Burberry issued a £ 300million sustainability bond earlier in September. ($ 1 = 0.8587 euros) (Reporting by Sarah White, Yoruk Bahceli and Silvia Aloisi; Editing by Kirsten Donovan)