rethink sustainability
Keeping the climate gains as the school gates reopen
Amidst the gloom of the last few months, many of us are trying to get back to a semblance of normality. Schoolchildren, in many parts of the world, have donned their uniforms and returned to the classroom, albeit under different conditions.
It is one sign of positivity in what has been the worst of years for many. Another positive has been the benefits to the environment from our changed travel habits. Daily global CO2 emissions are down sharply – but while the pandemic has led to the greatest drop in emissions in history1, it is but a drop in the ocean compared to what is needed.
Moves by governments to restrict travel and bring the spread of coronavirus under control have led to drastically different patterns in energy consumption and in how people move about in society. This, in turn, has led to short-term drops in emissions, most notably in the US and China.
Views on the long-term effects are mixed. The United Nations published a report highlighting that concentrations of greenhouse gases in the earth’s atmosphere hit a record high this year and that the short-term drop in emissions will have a negligible effect on the climate change crisis. However, the shift in funds towards a “green recovery” should help towards keeping the rise in temperature checks below 1.5°C.
One thing is certain - we cannot go back to where we were before the pandemic took hold. As schools return and the number of cars on the street increase, how do we maintain, and continue the fall in emissions? Which companies are working to make the streets free of carbon emissions?
Bus on demand
As the coronavirus forced people to stay home, buses, trains and trams remained largely empty. In London, just 4% of the usual number of passengers got on board at the beginning of the lockdown2. And while there has been a natural return now that offices are beginning to reopen and schools return, there is still a lack of confidence amongst travellers with many saying they will make fewer journeys once the restrictions are lifted3.
A solution for many who are wary of public transport has been found in new forms of transport. Amongst them is ViaVan, a joint venture between Via and Mercedes Benz Vans, which has been operating in London for over two years. Similar to Uber, and established in the US, it is said to have some 20,000 drivers. Although less environmentally-friendly than public transport, shared mobility can help towards reducing the number of personal vehicles on the street. Volker Mornhinweg, former Head of Mercedes Benz Vans, said that it would reduce emissions and traffic.
In a similar vein, Transport for London launched the Slide minibus service last year in collaboration with bus company RATP and MOIA, a tech company owned by Volkswagen. The service operates every day with customers booking via app or phone with fares set at £3·50 for the first passenger and £2 for everyone else. The new moves in ride sharing are joining a sector that is expected to grow enormously. Goldman Sachs has put the value of the sector at $285bn by 2030, eclipsing the taxi industry.
Micromobility becomes major
It has been a good year for makers of e-scooters. Rental devices were given the green light to ride the streets of Great Britain in June 2020 as the government made a push for greener transport. But the UK is still lagging behind. In the US, Lime and Bird are well established in a number of cities while e-scooters from Berlin-based Flash and Tier are regularly seen around European cities.
The growing interest and success of e-scooter firms comes just as the general public is looking for new ways to get around without using public transport.
Investors have already shown their interest in start-ups. For instance, the Irish start-up Zipp Mobility secured an additional €500,000 investment in advance of several shared e-scooter trials.
Where investors will be wary is in the differing degrees of regulation across countries. Although e-scooters commonly used throughout the UK4, they are illegal outside of rental schemes. In Europe, scooters have amassed huge followings as they are permitted in public in Germany, France, Austria and Switzerland amongst others.
A cheaper electric
Regulation is forcing carmakers to sell more electric vehicles. As battery technology has advanced significantly, prices of electric vehicles have dropped over the last decade. Many expect that it will cost the same to manufacturer an electric as a petrol or diesel cars by 20235.
This is excellent news for manufacturers. The battery cost currently makes up about one third of the total vehicle cost so the reductions mean that car manufacturers can start to breakeven on electric vehicles. From a consumer point of view, in many regions globally, an electric car is already cheaper to own than a comparative combustion engine vehicle on a total cost of ownership basis. Reduced taxation and purchase incentives schemes are also helping to bring down costs.
The growth rate of electric cars is phenomenal6. In 2010, there were just 17,000 electric cars on the world's roads. By 2019, this number had swelled to 7.2 million - almost half of which were on Chinese roads. Evidently, electric vehicles are gaining market share.
The decreasing cost of batteries could soon see car makers sell electric vehicles as profitably as petrol and diesel cars. It has also been estimated that the average driver could save £329 a year in running7 costs compared to a petrol driver.
Building better tomorrow
The impact of the pandemic on society has been devastating. Yet now we have an opportunity to build back better. At Lombard Odier, we believe it is vital to invest in companies that are at the forefront of transitioning to a Circular, Lean, Inclusive and Clean (CLIC™) model. We believe there are significant investable opportunities across the electric vehicle value chain such as micro-mobility and shared transport solutions coupled with infrastructure. By encouraging people move away from cars, that lie dormant 92% of the time, to shared, multi-occupancy vehicles or rented e-scooters, we will see a significant shift to creating a sustainable future.
1 https://www.theguardian.com/environment/2020/jul/10/coronavirus-global-emissions-study
2 https://www.theguardian.com/uk-news/2020/jun/27/what-next-for-the-uks-deserted-public-transport-network
3 http://www.passengertransport.co.uk/2020/06/confidence-in-public-transport-continues-to-decline/
4 https://www.theguardian.com/global/2020/aug/25/uk-rides-the-wave-of-micromobility-by-embracing-e-scooters
5 https://theconversation.com/the-road-to-electric-vehicles-with-lower-sticker-prices-than-gas-cars-battery-costs-explained-137196
6 https://www.iea.org/reports/global-ev-outlook-2020
7 https://www.am-online.com/news/market-insight/2020/09/02/millions-of-drivers-ready-to-switch-to-ev-in-next-two-years
Important information
This document is issued by Bank Lombard Odier & Co Ltd or an entity of the Group (hereinafter “Lombard Odier”). It is not intended for distribution, publication, or use in any jurisdiction where such distribution, publication, or use would be unlawful, nor is it aimed at any person or entity to whom it would be unlawful to address such a document. This document was not prepared by the Financial Research Department of Lombard Odier.
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