UK government must raise the bar for electric vehicle adoption

15 August 2017

British roads could stand on the verge of a revolution in personal transport, according to a new study. With the UK government becoming the latest to name 2040 as the cut-off point for petrol and diesel fuelled transport, manufacturers are finally beginning to prioritise the next generation of electronic vehicles (EVs), presenting new challenges for companies, governments, and drivers themselves.

With the EU collectively in danger of failing to meet various climate targets at present, a number of the community’s largest member states have announced measures aimed at weaning citizens off the direct consumption of petrol and diesel. Following a ban on petrol and diesel fuelled cars in France recently being scheduled for 2040, the United Kingdom has followed suit.

The governmental pushes away from petrol and diesel mean that large car producers like Volvo have an ultimatum to work toward – create electronic vehicles worth consumers’ whiles, or face becoming by-standers in the future automotive market. Change in public perception had previously pushed large manufacturers, most notably Toyota with their infamous Prius hybrid line, putting their money and brand influence behind partially electronic vehicles, however, with greater public awareness around the environmental impact of petrol and diesel, a growing variety of electric vehicles have come to the fore, enabling governments to put their trust in the industry to continue to profit in spite of their intervention.

However, while the market is moving steadily toward electrified transport, the uptake of electric vehicles could be double government estimates as early as 2020, according to new research by Baringa Partners. Researchers at the consulting firm, who called on policy makers to address issues around the integration of potentially soaring levels of EVs into the energy system, found that 18% of people said they would consider buying an electric vehicle for their next car, well above the governmental projection of a mere 9% of the UK’s road fleet by 2020.

UK government must raise  the bar for electric vehicle adoption

According to the most recent figures published via the Office of Low Emission Vehicles, there are over 100,000 hybrid and pure electric vehicles on UK roads at time of writing. Forecasts vary on how quickly this figure may climb, however distribution network operator Western Power Distribution recently predicted it will hit 1 million by 2020. Thanks to the renewed interest in the technology, high profile firms like Tesla will be rolling out its cheapest model into the UK next year. Meanwhile, Volvo are pledging to produce electric vehicles (EVs) and hybrids only by 2019, and Baringa believes the tide could be turning for electric vehicles in that case. According to a recent statement by the Renewable Energy Association’s Matthew Trevaskis, head of electric vehicles at the organisation, the product cycle for new vehicle from research to launch is generally seven years, which means that soon the automotive industry will collectively be planning for petrol-free vehicles. Experts predict at that point, the pace of change will quicken even further.

However, according to Baringa, this opportunity to grow a new market, as well as to invest in cleaner methods of transport, also presents a unique set of challenges which governments and manufacturers will need to tackle ahead of time. For one example, the huge level of uptake is expected to have a considerable impact on local grids, with some suggesting a purely electric vehicle travelling 10,000 miles a year could double the energy consumption of the home it charges from. With electricity providers British Gas recently having hiked prices by 12.5%, in a move consumer experts warned could kick off a new round of enlarged bills from key competitors, this is probably not something consumers may even be able to afford. Meanwhile, beyond the home, the Highways Agency has had to commit to a £15 million infrastructure programme designed to ensure that drivers are never more than 20 miles from a charging point on the UK’s A roads. Similarly, measures announced in the recent Queen’s Speech will see motorway services compelled to install a number of chargers for electric vehicles to supplement those already in place from Ecotricity with its Electric Highway, and other charging network providers.

The survey also found a number of barriers continue to stand in the way of mass market adoption, particularly around a lack of education within the consumer market. It found that almost a third of people believe EVs will never overtake conventional cars due largely to their perceived cost. The cost of electric vehicles has put drivers off moving away from petrol and diesel from the inception of the EV – however, the new generation of vehicles are set to become much more affordable, and Baringa predict that electric vehicles will become cheaper than diesel cars by 2022 and on a par with petrol ones by 2023, at which point their popularity is likely to increase exponentially. Around half the cost of an EV is currently down to the battery, however a McKinsey & Company report earlier in 2017 found that this integral part of EV machinery has seen prices fall by up to 80% over the course of this decade. Further to the cost, battery-life is also improving. While Baringa also found that over half (55%) of people were still concerned about not being able to travel far enough to reach the next charging point due to poor range – EV mileage is improving with new models every year.

Oliver Rix, Partner at Baringa Partners, said, “To really boost the number of electric vehicles on UK roads, the government will need to produce a convincing long-term road map to demonstrate how it intends to ensure that an acceleration in uptake can lead on to mass deployment.” He went on to state, “Bolder and clearer policies are needed to address issues such as the impact on grids, integration with the energy system on a large scale, and interplay with autonomous vehicles, which could fundamentally change car use. These policies will, in turn, impact on the uptake of electric vehicles and electricity network infrastructure.”



Private equity firms ramp up sustainability focus

19 April 2019

In line with business leaders across the industrial gamut, private equity firms are increasingly on board with sustainability projects. According to a new study, the investment arms for major funds are implementing a number of strategies aimed at supporting sustainable economic development in line with global goals.

While the business world has finally begun to acknowledge the danger of climate change, effective action plans remain difficult to achieve. The Paris Agreement has stipulated a clear target for the decades leading up to 2100, although massively reducing emissions while not crashing the economy could be a tall order.

Businesses that are able to acquire capital can use it to boost productivity and output, thereby creating a virtuous cycle of development. However, some businesses are better able to utilise resources than others, both in terms of their relative productivity, as well as the value of the respective outcomes relative to costs (including environmental harms). Financing can therefore provide an avenue to select businesses that are aligned with various global sustainability goals, while shunning those that drive little or unsustainable social value creation.

Top moves made by investment arms towards responsible investment

Profit has for the longest time been the central criterion for investment decisions. Yet profit at any cost is increasingly seen as creating considerable social harms, while often delivering only marginal value. As a result, the private equity sector, which was initially sluggish to change its ways with regards to sustainability, has started to see the topic as an opportunity as much as a challenge.

A new study from PwC has explored how far sustainability goals have become part of the wider investment strategy for private equity (PE) firms. The report is based on analysis of a survey of 162 firms and includes responses from 145 general partners and 38 limited partners.

Maturing sustainability

Top-line results show that responsible investment has become an issue for 91% of respondents. For 81% of respondents, ESG (environmental, social, and corporate governance) was a board matter at least once a year, while 60% said that they already have implemented measures to address human rights issues. Two-thirds have identified and prioritised Sustainable Development goals that are relevant to their investment segments.

Change in concern and action on climate-related topics over time

While there is increasing concern around key issues, from human rights protections to environmental and biodiversity protection, the study finds there are mismatches between concern and action. For instance, concern among investment vehicles around climate change has increased since 2016.

In terms of risks to the PE firm itself, concern has increased from 46% of respondents in 2016 to 58% in the latest survey. However, the number who have taken action remains far below those concerned, at 9% in 2016 and 20% in 2019. Given the relatively broader scope of investment opportunities, portfolio companies face higher risks – and more concern – from PE professionals, at 83% in the latest survey. However, action is less than half of those concerned, at 31%.

Changing climate

In terms of the climate footprint of the portfolio companies, 77% of respondents state concern in the latest survey. 28% of respondents are taking action through the implementation of measures to mitigate their concerns.

Concern and action taken on ESG issues

In terms of the more pressing issues for emerging responsible investment or ESG issues, governance concern of portfolio companies comes in at number one (92% of respondents), while 60% have taken action on it. Firms have focused on improving awareness – setting up policies and a range of training modules for their professionals around responsible investment decision making. Cybersecurity takes the number two spot, with 89% concerned and 41% implementing strategies to mitigate risks.

Climate risks take the number three spot in terms of concern for portfolio companies (83%), but falls behind in terms of action (31%). Health and safety track records are a key concern at 80% of businesses, with 49% implementing action. Gender imbalance within PE firms themselves ranks at 78%, which is being dealt with by 31%. A recent survey from Oliver Wyman showed that there is gender balance at 13% of GP teams in developed countries.

Biodiversity is also an increasingly pertinent topic, with risks from pollution and chemical use increasingly driving wider systematic risks around environmental outcomes. It featured at number eight on the ranking of most likely global risks for the coming decade, with its impact at number six. As it stands, biodiversity is noted as an issue at 57% of firms, with 15% implementing action.