Deutsche Bahn’s credit rating boosted thanks to German climate law

(EurActiv, 11 Oct 2019) Germany’s railway service has had its credit rating score raised in response to a new climate law that will levy air and road travel, while cutting VAT for train journeys, in what has been hailed as a first in Europe. EURACTIV’s partner Climate Home News reports.

Deutsche Bahn (DB), a nationally-owned company which owns and manages Germany’s rail network, will be able to 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 the rail network in the next decade.

“In Europe it’s the first time that we have increased the credit rating of a large company because of 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 this is an on-going shift of focus in the financial system,” she said. “Investors wanting to invest in infrastructure typically need to look at the long term and it’s very important for them that the company will still be operating and still generating cash flows over a long term horizon.”

The change in ratings was prompted by a $12 billion support package from the German government to make rail a more efficient and cheaper means of travel for passengers and freight.

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EurActiv, 11 Oct 2019: Deutsche Bahn’s credit rating boosted thanks to German climate law