Harnessing the potential of banks and investors for climate protection in the automotive industry
Integrated, transparent and future-oriented company evaluations necessary / Agora Verkehrswende recommends mandatory reporting requirements on the way to climate neutrality / Thesis paper for politics, companies and the financial sector
Berlin, 22 November 2022. Investors and banks need better information from companies so that they can protect their economic interests and take a leading role in the modernisation of the automotive industry towards climate neutrality. This is pointed out by the think tank Agora Verkehrswende on the basis of a current thesis paper. Rating agencies should therefore further develop their company ratings. The basis for this is that politics formulates binding guidelines for the reporting of automobile companies.
"Only automotive companies whose business model and strategy are compatible with the goals of the Paris Climate Agreement offer investors and financiers protection against climate-related risks," says Christian Hochfeld, Director of Agora Verkehrswende. "The transformation of the automotive sector towards climate neutrality will require significant investments from the financial sector in the coming years. The investment decision will increasingly depend on whether individual companies can prove that their strategy is on a climate course. Therefore, it is in the economic interest of manufacturers and suppliers as well as investors and banks if policy makers define standards for integrated corporate reporting. Rating agencies can build on this."
Climate-related financial risks hardly considered in ratings so far
The thesis paper shows how important the financial sector can be for achieving climate goals in the automotive sector and how this potential can be tapped. The more investors and banks take the transformation capability and willingness of companies into account in their decisions to protect their capital, the more the access of companies to climate protection will depend.
willingness of companies in their decisions, the more companies' access to capital will depend on whether they meet climate-related requirements. The paper was prepared by the NKI - Institute for Sustainable Capital Investment on behalf of Agora Verkehrswende.
In order to be able to assess the risk of a financial commitment, investors and banks need reliable information, emphasises Rolf Häßler, Managing Partner of the NKI: "Classical key financial figures and sustainability-related data and assessments have so far been documented in separate ratings. In future, an integrated company rating must comprehensively and systematically present which climate and other sustainability-related risks a company is exposed to and what financial consequences these may have."
Global warming particularly exposes automotive companies to physical and regulatory risks with significant financial consequences. So far, however, company assessments have focused on past financial years and hardly address climate-related financial risks in the future. As a result, car manufacturers and their suppliers lack the incentive to consistently align their business activities with climate protection requirements. Rating agencies, in turn, lack the basis to give the capital markets a realistic picture of potential investment risks.
The thesis paper "Capital for the transformation of the automotive industry" is available for download at www.agora-verkehrswende.de/veroeffentlichungen.
About Agora Verkehrswende
Agora Verkehrswende is a think tank for climate-neutral mobility based in Berlin. In dialogue with politics, business, science and civil society, the non-partisan and non-profit organisation works to reduce greenhouse gas emissions in the transport sector to zero. To this end, the team develops scientifically sound analyses, strategies and proposals for solutions. Agora Verkehrswende was initiated in early 2016 by the Mercator Foundation and the European Climate Foundation. The two foundations are shareholders. www.agora-verkehrswende.de/en/
About NKI
The NKI - Institute for Sustainable Investment is an independent consulting and research institute. It supports institutional investors, providers of sustainable capital investments as well as banks and insurance companies in all questions concerning sustainable finance and responsible investment. nk-institut.de