Prada Group Secures Luxury’s First Sustainability-Linked Loan — Valued at $55M

Prada Group has secured what is being hailed as the first sustainability-linked loan in the luxury-goods industry.

The Italian luxury house, which also owns Miu Miu, Car Shoe and Church’s, announced Tuesday that it has signed a five-year, 50 million euro ($55 million) financial-assistance plan with Crédit Agricole Group that will reward the “achievement of ambitious targets related to sustainability” with lowered interest rates.

Targets covered by this “annual pricing adjustment,” Prada noted, include the number of stores reaching LEED Gold or Platinum status for eco-friendliness, training hours for employees and the use of Re-Nylon, a regenerated nylon developed in collaboration with fiber producer Aquafil, also from Italy.

“This transaction demonstrates that sustainability is a key element for the development of the Prada Group, increasingly integrated into our strategy,” Alessandra Cozzani, chief financial officer at Prada, said in a statement. “We are confident that this collaboration with Crédit Agricole, a leader in its sector, will help to extend the benefits of a responsible business to the financial world.”

Sustainability-linked loans are a relatively new instrument designed to promote environmentally and socially sustainable economic activity and growth, according to the Loan Market Association, a London-based trade group that launched the Sustainability Linked Loan Principles framework in March with the Asia Pacific Loan Market Association and the Loan Syndications and Trading Association.

The borrower’s sustainability performance is measured using sustainability performance targets — SPTs for short — that include key performance indicators and external ratings to “measure improvements in the borrower’s sustainability profile.”

Common categories of SPTs include energy efficiency, reductions in greenhouse-gas emissions, water savings, renewable energy use and improvements in biodiversity conservation.

BloombergNEF reported in January that the sustainable finance market shot up 26 percent in 2018, with a record $247 billion worth of sustainability-themed debt instruments raised during the year. Sustainability-linked loans accounted for $36.4 billion of them, it said.

Prada’s loan was arranged by Crédit Agricole Corporate and Investment Bank, which executed Prada’s Initial Public Offering on the Hong Kong Stock Market in 2011 and is doubling in the role of sustainability advisor and coordinator. Crédit Agricole Italia is the official lender.

“The luxury sector is being increasingly committed in developing a sustainable business,” Alberto Bezzi, senior banker at Crédit Agricole Corporate and Investment Bank, said. “I am very proud of this collaboration, which confirms Prada’s ongoing efforts for engaging in and cultivating virtuous behaviors that contribute to its sustainable growth.”

Editor’s Note: This story was reported by FN sister magazine Sourcing Journal. For more, visit Sourcingjournal.com.

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