Prada is first in industry to sign sustainability-linked loan

Prada is first in industry to sign sustainability-linked loan.

Prada S.P.A on Tuesday said it had inked a €50 million, 5-year sustainability term loan with Crédit Agricole Group. The agreement allows for the interest rates to be adjusted annually if certain sustainability targets are achieved. For instance, Prada’s rates will be trimmed if a certain number of stores are assigned a LEED Gold or Platinum certification; if employees meet a set number of training or hours; and if it meets targets for using Re-Nylon, a sustainable nylon substitute, for the production of goods.

The three objectives were chosen by Crédit Agricole from a list provided by the Italian company, which prioritised targets that support artisanship, energy savings and circularity. “The novelty is finding a way to measure them in a tangible way,” says Alberto Bezzi, senior banker at Crédit Agricole Corporate and Investment Bank. The parameters against which these targets will be measured are not fixed but will evolve as Prada undertakes more eco-friendly actions.

The initiative is the first of its kind in the luxury industry, but similar loans have been making inroads elsewhere. According to Environmental Finance data, the sustainability-linked loan market has grown from $5 billion in 2017 to $40 billion in 2018. Crédit Agricole, which executed Prada’s 2011 Hong Kong IPO, has previously inked sustainability-linked loans with entities like natural gas distribution company Enel and Hong Kong’s Swire Properties.

“For certain sectors, like oil, gas and mining, the theme of sustainability was a lot more pressing, with greater investor’s risks [associated],” says Mario Ortelli, managing partner of luxury advisory firm Ortelli&Co. “Now that [luxury] consumer and company awareness of sustainability has noticeably increased, a lot of other companies are to be expected to take on sustainability-linked loans.”