As the dust settles on the COP21 climate change summit, held in Paris last December, Standard & Poor’s latest edition of Infrastructure Outlook – a monthly newsletter rounding up all the key ratings updates, news and commentaries relevant to infrastructure and project finance – asks whether we are seeing a new dawn for tackling climate change, or is it just more of the same?
In the front page feature, Michael Wilkins, Managing Director of Infrastructure Finance Ratings and Head of Environmental Research, says the resulting COP21 ‘Paris Agreement’ will most likely speed up the global energy transition, from carbon-intensive fossil fuel energy projects to cleaner, greener alternatives and improved energy efficiency equipment. That said, serious doubts linger over the agreed strategies and whether they will be enough to reach the ambitious targets set; to decarbonise all economies by the end of the century and limit global warming rises to the critical 2 degree Celsius benchmark.
Of course, the energy transition will need considerable financing. As such, another prominent feature of this month’s issue focusses on the “Capital Market Solutions For Climate Finance” event, which was held alongside COP21. The industry experts in attendance stressed that understanding how climate risks will be integrated into sovereign, corporate and insurer creditworthiness is key to unlocking the necessary capital for low-carbon project investment.
In other news, Sarah Harkins examines how U.K. water regulator Ofwat’s continuing focus on affordability in its proposed regulatory framework for 2020-2025 could see utilities displaying lower profitability and weaker credit metrics.
The transport sector, in particular, saw significant rating action recently. European low-cost airline easyJet was rated ‘BBB+’ at the start of the year – the first ever airline rating by S&P. In addition, U.K.-based limited company High Speed Rail Finance (1) and Irish Limerick Tunnel Operator ratings were affirmed at ‘BB-’ and ‘A’ respectively.