That said, Ruttloff believes there is still some investor interest in high-carbon sectors. She says both activist and mainstream investors around the world are looking for corporates to be able to articulate their environmental strategies, and seeking investments with defined environmental, social and green credentials. ‘Investors recognise the importance of transition strategy for companies operating in carbon intensive sectors,’ explains Havard-Williams. Investors are also increasingly powerful, particularly in places where legislative action is yet to take place.
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‘The challenge is to impose those regulated outcomes while still promoting free market activities.’ ‘A regulated market, under threat of commercial disadvantage for those non-compliant, remains the best method for achieving meaningful industry environmental outcomes,’ says Cocker. ‘This remains very important as there is a common divide within industries between those, typically prominent, companies which are within the public eye and feel compelled to take steps to enhance environmental outcomes and those “free riders” who compete on price and avoid such investment,’ Cocker says.
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He says third-party verification programmes could help companies distinguish themselves. Yet, as the S&P decision shows, there can be tangible advantages for corporates in industries likely to benefit from legislative change, or for those that make strategic decisions to boost their environmental credentials.Ĭocker predicts a ‘battle of experts’, with companies increasingly looking for scientific verification of their products’ environmental credentials in order to gain an advantage over their competitors. This is particularly as the package agreed in October is to be followed by the implementation of many more measures that will allow the government to monitor whether targets are being met. He suggests that the transitions the economy, particularly the automotive sector, has to go through might have an additional impact on Germany’s ability to make the necessary changes. A lot of them are currently adapting their business models to follow the new road to electric driving,’ says Ruttloff. ‘Of course, they’re really working to address all the changes, to shift their business model and to develop the whole mindset of their companies accordingly. The industry is a huge contributor to the German economy. Marc Ruttloff, counsel at Gleiss Lutz and an energy and environmental law specialist, points out that one sector in Germany that faces some challenges as well as opportunities due to the new climate law is the automotive industry. The energy transition will create winners and some organisations who are disadvantaged by these changes,’ says Havard-Williams. ‘It will be interesting to see how the changes bed down over a sustained period, after 12 months or more. Vanessa Havard-Williams, Global Head of Environment at Linklaters, says regulators and governments will want to keep under review the impact climate-led policy changes have on the financial markets to minimise the risk of ‘cliff edges or a green bubble’. ‘Government decisions, hard fought by industry, will increasingly curtail corporate competition and consumer choices in an effort to achieve environmental outcomes, including those associated with climate change.’ ‘Secondly, those regulatory choices will have direct consequences in the marketplace, including the example of Deutsche Bahn’s credit rating,’ adds Cocker.
‘The same is starting to happen under circular economy laws,’ he says. He explains that, firstly, the German climate change law expressly recognises that for tangible environmental benefits to be realised, the law must pick winners among competing technologies and activities. Jonathan Cocker, Sustainability Initiatives Officer for the IBA Environment, Health and Safety Law Committee and a partner at Baker McKenzie, believes there are at least two notable developments here. The rating agency’s decision means Deutsche Bahn will be able to access cheaper finance – but it also forms part of a global shift towards rewarding environmentally friendly strategies and recognising that there could be multiple benefits in the fight to prevent further climate chaos. Sustainability Initiatives Officer, IBA Environment, Health and Safety Law Committee Government decisions, hard fought by industry, will increasingly curtail corporate competition and consumer choices in an effort to achieve environmental outcomes, including those associated with climate change
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