M&S links £850m loan to net-zero targets

The new RCF

In September, retailer M&S refreshed its iconic Plan A sustainability strategy to encompass a new commitment to reach net-zero emissions across its entire supply chain and product category by 2040.

That decision was partly made as M&S had committed to net-zero emissions in 2020 as part of a cohort of retailers convened through the British Retail Consortium. M&S will aim to be net-zero across its operations by 2035. The retailer has since confirmed that Plan A will involve a headline commitment to becoming net-zero across Scope 3 emissions by 2040.

According to the retailer, this will require all areas of the business to decarbonise, with emissions needing to fall by 33% by 2025 from a 5.7million tonne 2017 baseline. 

Now M&S has confirmed that it has agreed on a new revolving credit facility (RCF) that is linked to the net-zero ambition. The RCF has been priced at £850m.

The new RCF, developed with BNP Paribas, will run until June 2025 and will see M&S benefit from lower interest rates if it is able to deliver on targets that form part of its net-zero strategy across the value chain.

M&S will benefit from the discount rates if they deliver across four net-zero metrics – namely zero deforestation, sustainable fibre sourcing, packaging reduction and reducing property-based emissions. 

“Sustainable finance is quickly gaining traction as it highlights the financial, as well of societal, benefits, of net-zero adoption…in our case, we worked with the expert sustainability team at BNP Paribas to structure our credit facility to support the rapid decarbonisation required in our business,” M&S’s group treasurer James Rudolph said.

Revolving credits

M&S is the latest corporate to link an RCF to its sustainability 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.

On emissions, RSK Group pledged in March to set 1.5C-aligned science-based climate targets. It has until March 2023 to have such targets approved by the Science-Based Targets Initiative (SBTi) but is striving to have them approved by the end of 2022.

Many businesses have announced the completion of sustainability-linked loan deals during 2021 so far.

Back in January, Asian real estate giant City Developments Limited (CDL) confirmed a new green revolving credit facility totalling $470m that will be used to refinance its ‘the Republic Plaza’ commercial property and future low-carbon projects.

February saw the world’s largest seafood firm, Thai Union, announcing a new $400m loan package with interest payments linked to climate, sustainability and due diligence targets. Within a week, brewer AB InBev had announced what it claims is the world’s largest corporate sustainability-linked loan to date, priced at $10.1bn.

Other companies to have subsequently announced sustainability-linked loan deals include building materials and design giant Kingspan and home improvement and garden retailer Kingfisher. Additionally, supermarket Tesco, which signed for its own £2.5bn revolving credit facility back in 2020, recently began supporting its major suppliers to follow suit.

Commenting on the M&S announcement, BNP Paribas’s UK country head Anne Marie Verstraeten said: “The signalling effect of M&S embedding robust deforestation, emissions and circular economy targets into their financing approach demonstrates how sustainable finance can scale up net zero in a scientifically transparent way.”

Matt Mace