Electric vehicle fleets: An impact opportunity for investors
This report makes the case for electric vehicle fleets as an important opportunity for investors. It outlines the potential financial incentives, risks and benefits, and impact on the environment, economy, and society. The report also includes recommendations for investor engagement with EV adoption.
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OVERVIEW
This report provides an overview of the growing demand and emissions relating to road transport and explains why investors should focus on electric vehicle (EV) fleets. The report also identifies the potential advantages of EV fleets for businesses and outlines the key risks.
Growing demand, growing emissions
Transportation accounts for 23% of global CO2 emissions, of which 74% comes from road vehicles. Despite improvements in vehicle fuel efficiency over the years, emissions have continued to rise due to the rapid growth in GDP, increased ownership of fuel-intensive SUVs, and the proliferation of online commerce. As a result, the report argues that EV fleets, based on cost competitiveness, regulatory support, and the decreasing cost of batteries, should be firmly placed on the investor agenda.
The business case for EV fleets
EV fleets offer several direct benefits for businesses. Cost savings are a significant driver behind the adoption of EVs by businesses, alongside regulatory support through policies such as tax and exemption incentives. Fleet owners also tend to have predictable and repeated journeys, reducing the potential for range anxiety. According to McKinsey, cost parity between electric and ice vehicles, when purchase prices are equal, is expected to occur within the coming decade. This cost competitiveness is being driven by sharp falls in the cost of batteries, which is key to the development of EVs.
Impact opportunities
Corporate fleets are forecast to become a growing share of vehicle ownership in the coming years. As a result, they have the potential to stimulate demand for EVs and charging infrastructure. Encouraging companies to integrate EVs within their fleets and to build out critical EV infrastructure can help cut global emissions and reduce the number of premature deaths caused by pollution. Road transport accounts for 17% of global emissions, and with many businesses having indirect emissions within supply chains, encouraging or requiring the use of EVs upstream and downstream of direct operations will be crucial for cutting Scope 3 emissions.
Social impact
Investors can bring social benefits through their engagement with companies to adapt to the EV transition. Owning and operating businesses with larger fleets on EVs and providing EV charging infrastructure for employees can lead to improved employee satisfaction and retention, as well as lower health costs due to the reduction of air pollution. The report also notes that diesel vehicles account for 50% of the 11% of premature deaths caused by pollution across the global transportation sector each year. Therefore, encouraging or requiring the EV adoption within companies will reduce these premature deaths and encourage better air quality.
Just transition and economic impact
EV adoption also presents a just transition and economic opportunity. According to the European Climate Foundation, analysis shows that a transition to EVs in Europe will create an additional 206,000 jobs by 2030 through the production of EV and related infrastructure. Large cost savings can also be achieved by oil-importing countries, which will result in increased disposable incomes. In the UK, implementing a 2035 ban on conventional vehicle sales would reduce oil imports by 50%, producing £6.6 billion in savings annually.
Investor engagement
The report recommends that investors engage with companies that own and operate large fleets on EV adoptions, and the provision of EV charging infrastructure for employees and customers. Investors are also urged to collaborate with other investors via the Investor Decarbonisation Initiative to manage their engagement efficiently. Moreover, corporations can demonstrate their support of EVs’ adoption by signing up to the EV100 initiative, which commits them to integrate EVs into their fleets, as well as support employees and customers access to EV charging points. Investors are cautioned to consider broader issues relating to EVs beyond just carbon emissions when engaging with corporates, such as social impact, responsible sourcing of EV components, and a just transition.