Burberry links £300m loan to sustainability targets

Last year

Burberry has today (17 January) agreed with Lloyds Bank to refinance its RCF to cover a £300m Sustainability Linked Loan. The facility will be linked to performance against a host of sustainability initiatives.

Last year, the company updated its science-based targets in a bid to become “climate positive” by 2040, a move that will aim to decarbonise the value chain and utilise a bespoke carbon insetting fund.

The ambition will see the business attempt to become climate positive by 2040 through a target to reduce emissions across its extended supply chain by 46% by 2030, a move that goes beyond a pre-existing net-zero target.

The new RCF will be linked to performance against these targets which, if met, would see the company go beyond net-zero emissions 10 years ahead of the 1.5°C pathway set out in the Paris Agreement.

Burberry’s chief operating and financial officer Julie Brown said: “At Burberry, we believe our long-term success depends on creating a net-zero future. Linking sources of funding to sustainable initiatives will help drive this, not only in the luxury industry but also across the wider economy.

“We’re grateful for the support of our relationship banks in establishing this funding, which will help us on our journey to decarbonise our own operations and extended supply chain.”

The company issued its first sustainability bond in September which led to the refurbishment of properties that are certified to LEED or BREEAM standards.

In 2019, Burberry set a science-based target aligned to the 1.5C trajectory of the Paris Agreement, committing to reducing its operational emissions by 95% by 2022. The company has revealed it is on track to meet this commitment, which is tracked against a 2016 baseline, having achieved a 92% reduction in emissions since 2016. Burberry believes it will be carbon neutral across its operations and will source 100% renewable electricity this year.

Burberry has also established a “regeneration fund” to support a new portfolio of “carbon insetting projects” and carbon removal projects that aim to deliver regenerative agriculture practices across its supply chain.

Revolving and rising

The fashion giant is the latest to refinance an RCF to account for sustainability performance.

Late last year, M&S signed an £850m RCF with BNP Paribas that will offer discounted interest rates based on performance against four key areas of the retailer’s net-zero strategy.

In October, The John Lewis Partnership signed a five-year revolving credit facility worth £420m that will be linked to environmental targets such as the retailer’s effort to reach net-zero emissions by 2035.

In August, RSK Group signed for a £1bn loan with interest rates tied to its progress against key sustainability targets. Under the terms of the loan, RSK will benefit from lower margins if it delivers its sustainability targets relating to carbon emissions, ethics and health and safety.

Last year also saw Asian real estate giant City Developments Limited (CDL) confirm a new green RCF totalling $470m that will be used to refinance its ‘the Republic Plaza’ commercial property and future low-carbon projects. Elsewhere, Thai Union, announced a $400m loan package with interest payments linked to climate, sustainability and due diligence targets. Brewer AB InBev also announced one of the world’s largest corporate sustainability-linked loans, priced at $10.1bn.

Matt Mace