LONDON – Chanel makes its public market debut with a new durable bond that will trade on the Luxembourg Stock Exchange.
The company announced on Thursday that it had successfully raised 600 million euros through the bond issue. Executives said the money would help Chanel transform its business model and meet a series of ambitious sustainability goals set out in its Mission 1.5 ° report, released earlier this year.
The bond issue was “significantly oversubscribed,” Chanel said.
Chanel is the first private luxury firm to issue a publicly traded sustainability bond.
The company follows in the wake of peers such as Burberry, Moncler, Prada and Salvatore Ferragamo, who have raised funds in private and public, to accelerate their green efforts and show their commitment to making change on the sustainability front.
Chanel said the bond would allow it to diversify its funding sources, while underscoring its commitment to sustainability.
This is the first time that outside investors have had the chance to own a stake in Chanel, which is privately owned and managed by the Wertheimer family. HSBC and BNP Paribas acted as joint structuring advisers and joint bookkeepers.
The terms of the obligations are explicitly linked to the achievement of the sustainable development commitments made at the start of the year as part of Chanel Mission 1.5 °, the company’s climate strategy.
Chanel said progress against targets will be released annually, while third-party audits will be obtained on relevant performance dates.
The terms of the bonds will also see Chanel held to account for the achievement of the objectives, and penalized “heavily” if they are not met.
The bonds are made up of two tranches. The first tranche of 300 million euros matures in July 2026 and will carry an annual coupon of 0.5%, with a cash premium payment of 50 basis points to be paid at maturity if Chanel does not reach its goal of switching to 100% renewable electricity. in its operations by 2025.
The second tranche of 300 million euros matures in July 2031 and will carry an annual coupon of 1.0%. A cash bonus of 75 basis points will be paid at maturity if Chanel does not meet its targets for reducing its carbon emissions by 2030.
As reported, Chanel has pledged to help limit the global average temperature rise to 1.5 degrees Celsius, a number spelled out in the Paris Climate Change Agreement, and to tackle litter across the board. ‘business.
Chanel said the money raised would support her goals by investing in start-ups focused on developing sustainable materials, incentivizing suppliers to convert to renewables and providing direct financial support for new energy projects. renewable at community level in key regions.
Philippe Blondiaux, chief financial officer of Chanel, said in an interview Thursday that the bond issuance underscored the company’s pride and commitment to achieving the goals set earlier this year.
He said Chanel turned to government procurement, rather than making a deal with a bank, for various reasons.
“By launching these bonds, Chanel hopes to support the development of the sustainable financing market and the broader social and environmental progress that this type of financing can advance. Investors increasingly recognize that they have a role to play in the fight against climate change, and we look forward to working with them, ”he said.
Asked whether these new bonds would be a precursor to greater public activity, and in particular to an initial public offering, which would undoubtedly be a blockbuster, he said: “It’s not up to the agenda. We are satisfied with the funding we have put in place. “
The brand has stepped up its sustainability efforts in recent years.
In 2019, Chanel took a minority stake in the green chemistry company Evolved by Nature as part of its strategy to develop sustainable materials.
Evolved by Nature is focused on the design and development of products based on biomaterials, and its activated silk technology, composed of natural silk in liquid form, offers a non-toxic alternative to chemicals.
It aims to do more and also seeks to invest in alternatives to plastic, silicone and animal leather.
Andrea D’Avack, Director of Sustainability at Chanel, said that with the launch of Chanel Mission 1.5 °, the company is clearly committed to accelerating the shift to a lower carbon economy.
“We believe that all businesses must take meaningful action within their own operations and work alongside governments and civil society to help protect the world’s most vulnerable communities and ecosystems from the impact of climate change. climate change. Today’s announcement represents a strengthening of that engagement and we hope to leverage our influence to engage with the investment community and be part of the solution, ”said D’Avack.
He added that creating a long-term bond was in step with the seriousness of his commitments to the environment.
“This is not a series of projects, but a complete and in-depth transformation of the business model,” he said, highlighting the radical changes Chanel wants to make when it comes to mining. of raw materials, regenerative agriculture and innovation in its supply. chain.
Chanel’s impactful lenses have been endorsed by the Science Based Targets initiative. They include reducing its emissions by 50 percent by 2030; reduce greenhouse gas emissions from its supply chain by 10% by 2030 and switch to 100% renewable electricity by 2025.
Earlier this month, Burberry, which is listed on the London Stock Exchange, revealed the price of its first sustainability bond. Final terms are for 300 million pounds, 1.125 percent bond due September 21, 2025.
Burberry’s was the first to label bond to be issued by a luxury fashion company on public markets.
The British company said it had issued the bond in order to diversify its sources of financing and introduce long-term financing into the company’s capital structure. The proceeds will be used to finance and / or refinance eligible sustainable projects as described by BurberrySustainability of Bonding Frame.
Fashion groups have rushed over the past year to tie their fundraising efforts to sustainability standards. Last November, Prada SpA signed the first loan linked to sustainable development in the luxury industry with the Crédit Agricole group. Prada will receive 50 million euros over five years, with an annual price adjustment based on how effectively it meets its sustainability goals.