Client stories

Dunelm’s credit facility linked to retailer's sustainability progress

The home of homes

Founded in 1979 in Leicester, Dunelm Group is the UK’s number one homewares retailer1, providing a variety of home furnishings and other home products in 176 stores across the UK.  

The company’s purpose “To help create the joy of truly feeling at home. Now and for the generations to come” drives and shapes the company’s decisions and priorities – from product, store, service, colleague development, capital allocation, community engagement, and in particular its sustainability ambitions.

Dunelm also helps its customers to choose more sustainable lifestyles by focusing on programmes that help curb waste and minimise environmental impacts across its operations and supply chains, while also working with trusted suppliers to expand its sustainable range of products and introducing schemes for customers to “reduce, reuse, recycle, repair and return”.

Credit facility incentivises progress in circular economy, waste and carbon reduction

Looking to refinance an existing revolving credit facility (RCF) in support of their medium-term capital plan as well as aligning the credit with Dunelm’s sustainability targets, the company approached NatWest – amongst other banks – to discuss the RCF refinance and to integrate a sustainability component into the go-forward RCF facility. NatWest was mandated as Documentation Coordinator.

The RCF incorporates four sustainability-linked performance targets which align with their ambitious sustainability plans, including a commitment to pursue a Net Zero Pathway.

These plans include annual targets which support delivery of the following long-term objectives:

1) 50% reduction in Dunelm’s greenhouse gases by 2030 against a 2019 base, in line with the Science Based Targets Initiative 1.5 degrees scenario
2) All own-brand cotton products to meet Dunelm’s “More Responsibly Sourced” standard by 2025
3) 20% reduction in plastic packaging of own-brand products by 2024; and
4) Provision of a customer take-back service for 50% of their products by 2024.

If these sustainability performance targets are met during the 4-year term of the RCF (which can be extended by two years), Dunelm Group will qualify for a sustainability-linked rebate on the interest rate the company pays for its new £185 million (plus £75 million accordion) credit facility – provided by a five-bank consortium, including NatWest. 

Briefly explained: The concept of ‘sustainability linked’

Sustainability-linked products are most prevalent in the sustainable debt markets. The cornerstone of a sustainability-linked product is that the product’s financial and/or structural characteristics can vary depending on whether the selected Key Performance Indicators (KPIs) reach the predefined Sustainability Performance Targets (SPTs).

By linking the achievement of sustainability targets to a financial incentive or ‘punitive' measure, such as an added fee, the users of sustainability-linked financial products are committing explicitly to future improvements in sustainability outcomes within a predefined timeline. 

Making a real difference towards the UK economy becoming more sustainable

Steve Simpson, NatWest, commented: “We are absolutely delighted to not only have been able to support Dunelm Group with a new credit facility, but to also add a sustainability component to the RCF. Through this innovative approach, we as the credit provider, as well as, of course, Dunelm, are taking steps to support the UK economy become more sustainable. This transaction is another example of our commitment as one of the biggest supporters of UK businesses2 and a major lender to support companies such as Dunelm on their sustainability journey.”

Laura Carr, Chief Financial Officer at Dunelm Group, said: "Our sustainability plans have already taken a big leap forward as we continue to pursue our ambition of being sustainable in everything we do. We are delighted to further demonstrate our commitment with this new sustainability linked revolving credit facility, which is clearly aligned to our net zero pathway. We appreciate the support of our banking partners and their alignment with our sustainability ambitions."


2.      NatWest Group plc Annual Report and Accounts 2020




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