Oversubscribed yet somewhat unambitious, sustainability-linked bonds (SLBs) are intended to drive improvement across environmental, social and governance (ESG) indicators. But, the misplaced incentives for KPIs on sustainable materials could be leading the industry down a dangerous path, distracting brands and retailers from true climate progress.
From luxury conglomerates to high-street names, all segments of the fashion industry face increasing stakeholder pressure to clean up their act. The destruction of natural capital for raw material extraction, high water and chemical footprints, and the seismic scope 1, 2 and 3 emissions embedded across supply chains have made investors wary of the direct financial and environmental risks.
Heightened adoption of an ESG lens from investors has led to the upsurge of sustainability pledges and targets, which has run alongside a new trend: the issuance of loans, green bonds, sustainability bonds and sustainability-linked bonds (SLBs). These are orchestrated to spur tangible action that tries to offset the industry’s negative impact.