Prada is the first in the industry to sign a sustainability loan
Prada SPA announced on Tuesday that it had taken out a sustainable term loan of 50 million euros over 5 years with the Crédit Agricole group. The agreement allows for an annual adjustment of interest rates if certain sustainability goals are met. For example, Prada’s prices will be reduced if a number of stores are assigned a LEED Gold or Platinum Certification; whether employees meet a certain number of hours of training or training; and if it achieves the usage objectives Re-Nylon, a durable nylon substitute, for the production of goods.
The three goals were chosen by Crédit Agricole from a list provided by the Italian company, which prioritized targets that support craftsmanship, energy savings and circularity. “The novelty is to find a way to measure them in a tangible way”, explains Alberto Bezzi, senior banker at Crédit Agricole Corporate and Investment Bank. The parameters against which these goals will be measured are not fixed but will evolve as Prada undertakes more environmentally friendly actions.
The initiative is the first of its kind in the luxury industry, but similar loans have made inroads elsewhere. According to Environmental finance data, the sustainability loan market grew from $ 5 billion in 2017 to $ 40 billion in 2018. Crédit Agricole, which executed the Prada IPO in Hong Kong in 2011, has already signed sustainability-related loans with entities such as natural gas distribution company Enel and Hong Kong Properties of Wire.
“For some sectors, like oil, gas and mining, the issue of sustainability was much more pressing, with heightened risks for investors. [associated]», Says Mario Ortelli, Managing Partner of luxury consulting firm Ortelli & Co. “Now that [luxury]consumer and business awareness of sustainability has increased significantly, many more businesses are expected to take sustainability related loans.
“This transaction demonstrates that sustainability is a key element for the development of the Prada Group, which is increasingly integrated into our strategy,” Prada Chief Financial Officer Alessandra Cozzani said in a statement.
The loan is the latest of a number of sustainable initiatives undertaken in 2019 by the Italian luxury house, which also owns Miu Miu, Church’s and Car Shoe. In May, Prada announced that it would stop using fur in its collections, joining brands like Chanel, Burberry and Gucci. A month later, the brand launched Re-Nylon, a collection of six bags made from Econyl reclaimed yarn – created with recycled plastic waste from the oceans, fishing nets and waste textile fibers. The company has also committed to converting all virgin nylon used in its products to Re-Nylon by the end of 2021.
Despite Prada’s recent sustainability commitments, there appears to be nothing specific that makes the company a more suitable candidate than others for sustainability loans. “Any luxury company can aspire to take out sustainability-related loans,” says Ortelli, adding that these companies tend to have the same operating model.
This article has been updated with additional reports. (November 5, 2019)
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