Sustainability bonds become fashionable among fashion brands

Hong Kong property developer New World Development (NWD), owner of the K11 properties, became the first real estate developer in the world to sell a US dollar-based sustainability-linked bond (SLB) last Friday. 

In doing so the company raised US$200 million and also committed itself to achieving 100% renewable energy for its Greater Bay Area rental properties in the coming five years. So, K11 in the future will be using more solar panels and wind turbines to generate power. The move will also benefit those fashion brands that commit to sustainability in their operation and help fashion brands to achieve their renewable energy mission in the stores. 

NWD has maintained a 5-star rating (the highest) on the Global Real Estate Sustainability Benchmark (GRESB) in 2019 and 2020. “Businesses must take timely action to combat climate change," CEO Adrian Cheng said.

Green branding is nothing new, but cooperation between brands and developers is on the rise because fashion brands are the most prominent tenants of these shopping malls, and fashion brands appear to value sustainability more than ever before. They are looking for greener venues to set up their stores.

The action is connected to the industry being labeled as the second-most polluting industry by the UN Conference on Trade and Development (UNCTAD) in 2019. Within a year, global fashion brands rushed into the fashion of issuing fashionable and greener bonds. 

Chanel announced in September 2020 that it raised €600 million via an SLB, the first-ever among fashion brands. Thus, Chanel needs to use 100% renewable electricity by 2025 in all its shops, which pushes it to look for venues with high tech and renewable energy missions to help achieve the goal.

Its UK rival Burberry announced its own SLB the same month, and is aiming at a goal to produce climate-neutrality by 2022. 

In an era of pandemic and financial troubles, ESG (environmental, sustainability and governance) commitments injected not only greener energy but real money into the fashion industry. Ferragamo got a €250 million sustainability loan for its ESG targets in June 2020. Moncler got a €400 million loan commitment in July 2020. And Prada signed a contract with Credit Agricole for a sustainability loan in November 2019.