Calling each an “industry-first” — in luxury goods, Prada SpA signed with Crédit Agricole Group for a 50 million euro, sustainability, five-year term loan last November, while today VF Corp. formally revealed the close of its first green bond.
In its fiscal year 2019, VF generated $13.8 billion in revenue. The offering includes 500 million euros in financing for projects encompassing sustainable products and materials, sustainable operations and supply chains and “natural carbon sinks” for the likes of its brands: Timberland, Vans, The North Face and Dickies.
Prior to this feat, German retailer Otto Group, which owns Bonprix, Crate and Barrel and Manufactum, was the first known issuer in the “textile sector” of “sustainability bonds.”
“Our inaugural green bond is an important step in advancing our sustainability journey and our business purpose of supporting projects for the betterment of people and the planet,” Jeannie Renne-Malone, VF’s vice president of global sustainability, said in a statement.
As with “sustainability bonds,” just because a company calls it “green,” doesn’t mean it’s always green.
For green bonds, internationally recognized science-based standards such as the Climate Bond Standard and Certification and the Green Bond Principles, as first published by the nonprofit International Capital Market Association in 2014, dictate the efficacy of a green bond.
Third-party sources for identifying ESG risks, like Sustainalytics Inc., offer added assurance as to the credibility of a company’s sustainable finance framework, with both Otto Group’s and VF’s given the green light.
VF established its framework via the four components of the Green Bond Principles for 2018, aligning with the United Nations sustainable development goals. As with any bond, a year out from issuance VF will report how funds are disbursed — alongside reporting the environmental impact of eligible projects.
One area of investment will foster the continued pursuit of natural carbon sinks, tackling regenerative farming, grazing and ranching practices, which the company already spearheaded in pilot with its brand Timberland, in part of its fall 2020 footwear and accessories collections.
Reporting for this category will include the total and percentage reduction of greenhouse gas emissions from carbon sinks, acreage dedicated to regenerative practices, as well as CO2 impact reduction potential for each project.
Why are apparel brands getting into green bonds and sustainability-linked loans?
“It reduces the cost of capital. For brands that are truly committed to sustainable business practices, there is financing available that is better than traditional market rates,” Caroline Brown, managing director of Closed Loop Partners, told WWD.
She added: “Financial markets are rightly starting to view disclosures and commitments to sustainable practice as opportunities to gain additional information about a company’s operations which reduces risk.”
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