The five-year sustainability loan, which is reportedly the first of its kind in the luxury industry, allows for the Italian fashion house to alter its interest rates on an annual basis if it achieves certain eco-friendly objectives.
These three objectives, as chosen by Crédit Agricole, are if Prada employees train or work for a certain amount of time, if the fashion house uses an adequate quantity of sustainable nylon substitute Re-Nylon, and if a certain number of Prada stores receive LEED (Leadership in Energy and Environmental Design) gold or platinum certifications.
Alessandra Cozzani, chief financial officer at Prada, explained the significance of the sustainability loan.
“This transaction demonstrates that sustainability is a key element for the development of the Prada Group, increasingly integrated into our strategy,” Cozzani said in a statement sent to Vogue Business.
While Prada’s loan is a novel deal within the luxury industry, according to data accumulated by news and analysis service Environmental Finance, sustainability-linked loans have been gaining traction in recent years.
The firm states that the sustainability-linked loan market increased in value from $5bn (£3.88bn) in 2017 to $40bn (£31.05bn) the following year.
“For certain sectors, like oil, gas and mining, the theme of sustainability was a lot more pressing, with greater investor’s risks [associated],” said Mario Ortello, managing partner of luxury goods advisor Ortelli and Co.
Alberto Bezzi, senior banker at Crédit Agricole Corporate and Investment Bank, said that the “novelty” of the deal with Prada is finding a way to “measure” the fashion house’s efforts to be more sustainability “in a tangible way”.
The way in which the objectives being met by Prada are to be measured have not yet been conclusively confirmed.
The sustainability-linked loan is just one of several eco-friendly initiatives the brand has promoted in recent times.
Earlier this year, the luxury label launched a collection of nylon bags made from recycled plastic.
The six bags in the range were made from the synthetic fabric created by recycling ocean plastic, fishing nets and textile fibre waste.
In May, Prada announced plans to ban fur from its women’s collections from February 2020.
“Focusing on innovative materials will allow the company to explore new boundaries of creative design while meeting the demand for ethical products,” said Miuccia Prada, head designer of the fashion house.
On Friday 8 November, Prada is hosting its third "Shaping a Future" conference in New York to discuss ethical issues within the workplace.