Fleet Financing

James Squires explains why NS is “in the business of a better planet”. Information for railway career professionals from Progressive Railroading magazine



The environmental advantage of steel wheels over their 18-wheel equivalents is well known. Our fuel-efficient locomotives move a ton of freight over 440 miles on just one gallon of fuel. This is one of the reasons our customers can reduce their carbon emissions by up to 75% when they choose the train over the truck.

Managing modes of transport is one of the most powerful tools shippers can use to reduce their carbon footprint. Our customers are increasingly asking us to help us make their supply chains greener. Over 25% of our clients have set public carbon reduction targets through CDP’s global disclosure system.

With the growing demand for sustainable transportation solutions from our customers and the prospect of self-driving, all-electric or even hydrogen trucks on the horizon, the rail industry cannot rely on our natural efficiency advantage. We must do more.

Regular precision rail transport is certainly an answer. Longer, heavier trains and a fluid network improve efficiency and allow us to remove older, less efficient locomotives from the fleet, as we did in the first quarter of 2020. Operational efficiency and sustainability are closely related, which is one of the reasons we say Norfolk Southern is working for a better planet.

For us, the answer also lies in additional targeted investments in sustainable operations. In the rail sector first, we recently issued $ 500 million in 10-year green bonds to fund investments that advance our business and improve our environmental footprint.

Green bonds are not new. According to the Climate Bonds Initiative, $ 270 billion in green bonds were issued globally in 2020. These bonds typically sell for a lower coupon rate than traditional bonds – a premium that has been referred to as “greenium.” in industry. The response from the financial community to our offer has been substantial. The interest of buyers greatly exceeded the size of our offering.

We started discussing the idea of ​​green bonds almost a year ago. An interesting aspect of the process is that we have worked with an independent party to ensure that the projects identified for funding comply with green principles. This is an important validation for investors, knowing that their funds are intended for projects with a positive environmental impact.

The exercise turned into an in-depth assessment of the rail industry’s capital spending – which investments would qualify and which would not. While other railways are following our lead on green bonds, as we hope, we’ve essentially ‘mapped’ the industry, making the process much easier for those who follow.

Bond proceeds can be allocated to projects that improve the fuel efficiency of locomotives, such as converting more locomotives to AC power and maximizing energy management technologies. Other uses may include investments in new and expanded intermodal terminals, supporting the modal shift of freight from truck to rail. Renewable energy projects, green buildings, energy efficiency initiatives and other investments in reforestation projects are also possible.

Our recent funding was remarkable not only because of our industry-leading green bonds, but also because we simultaneously issued $ 600 million in 100-year bonds. Only a handful of companies have the capacity to earn this kind of investor confidence, and it’s part of our sustainability story as well. More than most industries, we take a long-term view.

This is another reason why it’s important to build sustainability into our day-to-day operations, to help our customers reduce emissions from their supply chain, and to deliver on our commitments to be a responsible corporate citizen. Projects funded by our green bonds are an important way to meet these commitments.

James Squires is President, President and CEO of Norfolk Southern Corp.



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