Climate Change Strategy Focuses on Low-Carbon Emission Companies

The Volkswagen Group is the largest car manufacturer in Europe for vehicle sales. However, recent news is that the carbon emissions of Volkswagen’s total car sales in 2020 may still not meet the EU’s carbon emission standards. It is currently estimated that Volkswagen may face a carbon tax fine of at least 100 million euros in the EU. Schroder Investment Letter stated that the focus of the climate change investment theme is energy conservation and carbon reduction, that is, how to reduce carbon emissions to control environmental warming and thereby slow or improve climate change. The corresponding climate change strategy fund also focuses on low-carbon companies as its main investment direction, and it is believed that it will continue to gain market attention.

The recent news is that Volkswagen may face huge carbon tax fines. The Volkswagen Group is the largest car manufacturer in Europe for vehicle sales. Although many electric vehicles such as ID.3 and ID.4 are selling well, the average carbon emission of Volkswagen’s total car sales in 2020 is 99.8 g/km, which is relative to 2019. At 124 g/km per kilometer, carbon emissions have been greatly reduced by about 20%, but in the end it still fails to meet the EU’s carbon emission standards.

The EU is an early establishment of a carbon trading market, and will implement the 95 grams of carbon dioxide per kilometer car emission standard from 2021. If the car factory does not meet this carbon emission standard, for every 1 gram exceeding the standard, the actual sales volume of the car factory will be reclassified. Multiplied by the 95 euro fine, it is estimated that Volkswagen will face a carbon tax fine of at least 100 million euros in the EU.

In contrast, the BMW Group in Europe has global sales of 2.3 million vehicles in 2020, of which 193,000 are electric vehicles, an increase of 32% over 2019; Daimler’s sales of 2.2 million vehicles in 2020, of which 160,000 are electric vehicles, are compared to the previous year. A growth of 228%, and the two European automakers’ carbon emissions in 2020 have reached the EU’s target, so there is no need to pay fines or purchase carbon rights on the market.

The EU has gradually strengthened the control of exhaust emissions, forcing the auto industry to introduce more electric or petrol cars, otherwise it will face huge fines. Due to the strict EU carbon emission standards, Japan’s Honda had to buy carbon credits from Tesla in the carbon trading market last year to avoid huge fines from the EU. Later, it was even more straightforward to announce that it will stop sales in Europe in 2022. Fuel vehicles to avoid violating EU carbon emission regulations.

Schroder Investment believes that 2021 is a critical year for climate change investment. Lin Liangjun, product manager of Schroder’s global climate change strategy, explained that because Europe has already offered a large-scale fiscal stimulus of 1.8 trillion euros, Biden is arguably the US president with the most climate change strategy. The leaders of the 27 EU member states have passed a budget bill totaling 1.8 trillion euros to promote economic recovery and larger-scale carbon reductions to improve climate change. The goal is to reduce carbon emissions by 55% in 2030 compared to 1990.

Against this background, Lin Liangjun believes that the climate change theme fund that uses “carbon reduction” as the target of corporate screening has great potential in the future.

Taking the Schroder (Circle) Global Climate Change Strategy Fund as an example, it focuses on the five themes of renewable energy, environmental resources, energy efficiency, low-carbon leader, and sustainable transportation. In particular, continue to be optimistic about the renewable energy industry such as wind power and solar energy, and also focus on the layout of the electric vehicle industry supply chain, including automotive IC semiconductor plants, electric vehicle batteries, vehicle testing equipment, and European electric vehicle manufacturers, etc., and are optimistic about the overall electric vehicle industry Potential for sustained high-speed growth.

Although the current stock market has seen a relatively strong rise in energy and finance this year due to the rotation of industrial stocks, looking forward to the future, we are still optimistic about the long-term trend of global climate change investment.

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