Chanel issues €600m bond linked to its environmental goals

Chanel bag

Parisian luxury house, Chanel has issued a €600m transaction for bonds, linked to the company’s progress against its 1.5C environment based targets.

The €600m inaugural transaction has been supported by BNP Paribas, and is considered the first in the luxury sector to be linked to the International Capital Market Association (ICMA) Sustainability Linked Bonds Principles, which provide guidelines for corporates to improve environmental reporting and disclosure to increase access to capital for projects that can reduce emissions.

Recently, there has been a growing number of fashion retailers publicly announcing their commitment to sustainable and environmental targets, through using planet friendly materials, to introducing recyclable packaging or implementing more energy efficient production and delivery processes.

Some fashion retailers are now seeking new financing avenues to support their environmental goals in areas such as carbon emissions.

“Sustainability-linked bonds” are linked to targets at the business-wide level, in contrast to green bonds, which fund specific projects.

Financial chief at Chanel, Philippe Blondiaux said the five- and 10-year deals issued by Chanel, marks the luxury brand’s very first venture into the bond market.

Some proceeds from the bond may be used for investments including in startups companies which can develop alternatives to plastics or leather.

Chanel will also have to pay a premium when the bonds mature if the brand does not reach certain targets on cutting emissions within the firm and its supply chain, according to the deal structure.

Chanel’s Financial Chief, Philippe Blondiaux said: “The philosophy of Chanel is the creation of long-term value for the business and for society. This financing is entirely in line with these principles. 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.”

“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.”

“It’s a logical step…we’re making (the financing strategy) consistent with the company strategy, which is centred around travelling to a more sustainable model.”

Chanel received €600m of investor demand for the shorter-dated €300m bond, which priced with a yield of 0.548%, and €750m of demand for the longer-dated bond, which priced to yield 1.059%, a lead manager on the deal said.