ESG Feature – Electric vehicles
of which is the high cost of battery-powered cars, which is deterring 59% of those questioned by Ofgem from buying one. “It is costly to switch to an electric vehicle,” White says. “Lower income individuals will be priced out of the market because, outside of China, there are no low priced EVs.” However, as part of the government’s 10 Point Plan for the Green Revolution, £500m of the £2.8bn package has been ear- marked to reduce the asking prices of some electric vehicles. This means covering £3,000 for vehicles worth less than £50,000. Yet, is this discount deep enough to drive higher sales?
Indeed, a SEAT e-Mii will set you back £16,000 for what is a small car that only has the capacity to drive 135 miles before needing to be re-charged. At the other end of the price spec- trum, you can expect to part with almost £120,000 for a Tesla Model S.
A short battery life was a reason behind why 38% of respond- ents may not buy a new car after 2030. Who can blame them? The RAC are unlikely to rescue you on the hard shoulder of a motorway with a fresh supply of electricity. Or perhaps one day they will have vans designed to do just that. Part of what White calls “range anxiety” is the slow speed of vehicle charging, which can take from 30 minutes to 12 hours, but this “will improve going forward”, she says. Before working on improving the speed of charging a car bat- tery, governments need to build charge point networks to en- sure that there is one close to every household, in town centres, rural areas and along motorways. Having nowhere to charge their vehicle close to their home was noted by 36% of the driv- ers the regulator spoke to. This is a big job. Accountancy giant Deloitte estimates that by 2030 the charging infrastructure needs to be 10 times greater than it is today and could cost between £8bn to £18bn.
The UK Committee on Climate Change, an independent body that advises the government on emissions targets, estimates that 280,000 charging points are needed in the next nine years to avoid a decline in the sale of new vehicles.
Sin stocks Yet the biggest challenge for auto companies could be convinc- ing investors and consumers that their green products are as green as they say they are. They want to show that “dieselgate”, where Volkswagen’s green cars were programmed to activate their emissions controls only when tested, was a one off. This is important as it is not just about selling cars but attract- ing investment, too.
It is costly to switch to an electric vehicle.
Rebecca White, Newton Investment Management
“Legacy issues such as EV infrastructure and charging speed need to be watched closely,” White says. This is not just a reference to the Volkswagen scandal. “The au- to sector, it is fair to say, often lags other sectors on ESG. This is not just a hangover from ‘dieselgate’,” White says. Auto is the worst-performing sector in the Corporate Human Rights Benchmark, where two-thirds of companies score zero on due diligence indicators. The sector also does not perform particularly well on the World Benchmarking Alliance, which compares performance on the UN’s Sustainable Development Goals. “It is a sector where ESG improvements and the need to demonstrate sustainability is apparent,” White says. “There is a significant runway for improvement.” And there is plenty of room for that with electric vehicles. In- vestors should not fall into the trap of believing that they pro- duce no carbon footprint and are examples of sustainable ex- cellence. The weak link here is the battery supply chain. Many of the components in these batteries are made from nickel, lithium and cobalt. There are significant environmental impacts of mining those materials as well as the social chal- lenges of child labour and human rights abuses. There have been efforts by institutional investors through engagement strategies to make developing world miners more responsible, but there is still a lot of work to do. “The social impacts of the transition will be a challenge if we want to shift to a greener economy,” White says.
Hard targets To meet political targets and an expected rise in demand from sustainably-conscience consumers, auto-makers have set some steep targets. Volkswagen, for example, wants 20% of its sales to be electric cars, up from 3% in just four years. White believes there is the capacity in the industry to meet demand. She is seeing companies retrofitting existing plants, while some are constructing purpose-built factories, which are designed for one aim. “The ultimate goal now is that we have the technology to decarbonise vehicles, and scale up facilities
28 | portfolio institutional | November 2021 | issue 108
Page 1 |
Page 2 |
Page 3 |
Page 4 |
Page 5 |
Page 6 |
Page 7 |
Page 8 |
Page 9 |
Page 10 |
Page 11 |
Page 12 |
Page 13 |
Page 14 |
Page 15 |
Page 16 |
Page 17 |
Page 18 |
Page 19 |
Page 20 |
Page 21 |
Page 22 |
Page 23 |
Page 24 |
Page 25 |
Page 26 |
Page 27 |
Page 28 |
Page 29 |
Page 30 |
Page 31 |
Page 32 |
Page 33 |
Page 34 |
Page 35 |
Page 36 |
Page 37 |
Page 38 |
Page 39 |
Page 40 |
Page 41 |
Page 42 |
Page 43 |
Page 44 |
Page 45 |
Page 46 |
Page 47 |
Page 48 |
Page 49 |
Page 50 |
Page 51 |
Page 52 |
Page 53 |
Page 54 |
Page 55 |
Page 56 |
Page 57 |
Page 58 |
Page 59 |
Page 60
