Nordic Credit Rating (NCR) said today that an unresolved legal dispute over a lime-mining permit for Sweden's biggest cement producer has become a source of uncertainty for the country's construction and real estate sectors.
The agency said the dispute could derail efforts by individual property companies to meet targets on CO2 emissions, effectively suspending widespread hope that most of the country's cement consumption could be carbon-neutral by 2030.
Cementa AB, which generates three-quarters of Sweden's cement output at a site at Slite in Gotland county, initially applied for a 20-year extension of its lime-mining permit, saying it might not be able to meet demand from the domestic construction industry, and that cement exports could also suffer. A court ruled against the application, but the dispute took on a political dimension when the Swedish parliament overrode environmental and judicial objections to extend the current operating licence. Legal objections to the legislation await further court rulings.
NCR said the Cementa dispute affects a wide range of property and construction companies, not only in terms of access to materials, but also in their transition to carbon neutrality through reduction of Scope 3 (indirect) emissions. It also has environmental implications, with the company having satisfactorily failed to prove it is not polluting ground water through its lime-mining activities, the agency said, noting that social factors such as noise pollution are also in play.
"Carbon dioxide emissions from cement production affect most real estate companies, even those that outsource construction and renovation, through their indirect emissions," said NCR credit analyst Ylva Forsberg. "But we can't ignore the governance factors also at play, or the right to clean drinking water."
"In our opinion, the Cementa dispute does not currently warrant any rating revisions in the real estate sector. However, we are monitoring events closely, should the situation drastically change."
NCR said it believes a solution can be reached before significant problems arise for the real estate companies that it rates, mainly because of the importance of cement supply to the wider Swedish economy. But it added that the long-term impact of any solution on real estate companies' environmental efforts remains unclear.