Germany's railway service has already established its credit rating score raised in reaction to a different climate law that will levy air and road travel, while cutting VAT for train journeys.
Deutsche Bahn (DB), a nationally-owned company which owns and manages Germany's rail network, can borrow money more cheaply after the S&P Global Ratings agency bumped its score from AA- to AA and confirmed its stable outlook.
The package, which was adopted by Germany’s cabinet on Wednesday, includes significant funding for that rail network within the next decade.
“In Europe it's the first time that we have increased the loan rating of a large company due to climate action,” Beata Sperling-Tyler, senior credit analyst at S&P Global Ratings, told Climate Home News.
Sperling-Tyler said companies have previously had their rating score lowered because of the higher costs of emitting greenhouse gases, but the recognition of climate action as a source of financial health was significant.
“I believe it is really an on-going shift of focus in the financial system,” she said. “Investors attempting to purchase infrastructure typically need to look at the long-term and it is extremely important on their behalf the company it's still operating but still generating cash flows over a long term horizon.”
The alternation in ratings was prompted by a $12 billion support package from the German government to create rail a far more efficient and cheaper way of travel for passengers and freight.
The package was presented alongside a raft of other policy measures underneath the government's Climate Action Programme 2030 which it hopes will put the country on track to lessen emissions by 55% from 1990s levels by 2030.
Spent over 11 years, the cash will support investment on expanding, modernising and electrifying the rail network. The federal government will also reduce value-added tax (VAT) to create long-distance rail tickets cheaper, raise airline travel surcharges and increase vehicle tax in line with CO2 emissions per kilometre, in efforts to create rail Germans’ preferred means of transport.
S&P Global said the federal government package “demonstrates stronger-than-ever support” for DB with government considering the company “instrumental in achieving Germany’s climate targets”. The measures are required to translate into “noticeable additional earnings” for DB from 2023, it added.
Steven Tebbe, md of CDP Europe, a charity that helps companies disclose climate risks, told Climate Home News the move was “very encouraging” along with a reflection that companies ready to adjust to global warming are thought “a secure investment”.
“Some information mill better ready for the future than the others. The ones that are less ready risk being downgraded, those better prepared will see a better rating,” he said, adding that while companies might have once considered climate action a cost burden, the reverse has become true.
“Climate action and financial sustainability are absolutely linked and also the marketplace is really beginning to integrate that in the model. It’s only the beginning of a virtuous circle.”
