A study by environmental NGO Transport & Environment shows that lifetime carbon emissions of a car are so high that investing in carmakers funds almost as much as carbon dioxide per euro as investing in an oil company.
A million euros invested in oil giants Shell, BP, and Exxon Mobil finances around 5,000 tonnes of carbon dioxide. The same amount finances an average 4,500 tonnes in the car sector, the NGO’s calculation based on 2020 data suggested.
Researchers used data from the world's top nine largest automakers on the average carbon emissions generated by their vehicles throughout their lifetimes, as well as the size and composition of their fleets, compared to their market capitalization.
The findings have significant implications for financial institutions in the European Union, which will soon to disclose the lifetime emissions, or Scope 3, of their investments, in accordance with new EU regulations taking effect in 2023.
Currently, financial institutions are only required to disclose the Scope 1 and Scope 2 emissions of their investments, known as emissions generated during the production process.
But for cars, 98% of emissions are produced over the lifecycle of the product from the fuel used to power the vehicle, as revealed by carmakers' own calculations in their sustainability reports.
Researchers warm that adding Scope 3 into the mix will make auto stocks appear far “dirtier” at a time when investors are under increasing pressure to prove the environmental credentials of their investments.