Can Luxury’s Turn To Sustainable Finance Make A Difference?
Sustainability, a buzzword that has bounced around the fashion world for years, now touches every aspect of the industry, from design and supply chains to marketing and consumer awareness. Yet, there is one area that is rarely talked about: sustainable finance.
Facing an international goal of capping global warming at the 1.5°C danger line, companies — including luxury players — have created a new approach to finance that will contribute to this cause. And smaller luxury entities like Prada, Ferragamo, Moncler, and Chanel have been quick to tie environmental goals together with financial instruments.
Sustainability-linked loans (SLLs) and sustainability-linked bonds (SLBs) belong to a broader spectrum of financing tools that have recently been rising. While the former instrument was created in 2017, the latter category saw the Sustainability-Linked Bond Principles issued by the International Capital Market Association (ICMA) in June 2020. But why are brands eager to launch these nascent financial instruments? And how does it benefit the participating companies?
Here, Jing Daily looks at recent examples of companies that have chosen to go down this path and what it means to tie environmental goals to finance.
The ascent of sustainable finance
In the last couple of years, the luxury industry began to see a trend of sustainable finance come out of Europe. Though this trend hasn’t attracted the same media attention as green marketing campaigns, it speaks to the growing needs of institutional and retail investors that want to make Environmental, Social, and Corporate Governance (ESG) investments, amplified by COVID-19.
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