S&P Global — 26 September 2024
Daily Update: September 26, 2024
Auto Sector Looks Toward a Decade of Decarbonization
By Nathan Hunt
Start every business day with our analyses of the most pressing developments affecting markets today, alongside a curated selection of our latest and most important insights on the global economy
In recognition of New York Climate Week, S&P Global Sustainable1 published a special edition of the S&P Global Sustainability Quarterly. This week, the Daily Update will review issues raised in the publication.
Most companies start their decarbonization efforts with Scope 1 emissions, originating from assets they directly own or control. Some move on to tackling Scope 2 emissions, which come from purchasing energy such as electricity. Very few have engaged with Scope 3 emissions, which include indirect emissions from the supply chain and customer use of a product.
But the auto industry is different — it has focused on Scope 3 emissions from customer use. Focusing on customer use makes sense since emissions that occur after a vehicle is sold make up about 70%-80% of automakers' carbon footprint. Researchers from S&P Global Mobility examined automakers' decarbonization efforts in a recent article: “Automakers’ decarbonization efforts in action.”
While some auto industry observers have criticized the slow pace of electrification of the global light-vehicle fleet, S&P Global Mobility forecasts that by the end of 2024, 15% of cars produced globally will be battery-electric vehicles (BEVs). Despite high upfront costs, limited charging infrastructure and inconsistent regulations, this percentage is quite high, although much of the growth so far has come from China, which leads the BEV market in light-vehicle sales. Over the next decade, the electrification of light vehicles is projected to accelerate significantly as battery technology improves, costs decrease, charging infrastructure expands and government policies support BEVs.
By 2035, the global percentage of manufactured electric light vehicles is projected to rise to 63%. S&P Global Mobility projects that the global new light vehicle fleet’s average tailpipe CO2 emissions will drop about 75% from the mid-2010s through 2035.
However, BEVs are not emissions-free. BEVs are charged using the grid, so the emissions from electricity production must be considered. According to forecasts, BEVs will account for 23% of global light-vehicle use-phase emissions in 2035. But reducing emissions in the carbon grid will ultimately lead to BEVs with no use-phase emissions. The projected decarbonization of energy grids varies significantly across different regions. Compared to 2014, China's grid emissions factor will be reduced to 75% in 2035. US markets will drop to 17% of 2014 levels, and EU markets will drop to 37%.
Automakers have set different targets for decarbonizing use-phase emissions. Volvo and Jaguar Land Rover have set ambitious goals for a more than 50% reduction in carbon emissions, while Mercedes Benz, BMW and Ferrari have set slower targets. In the US, Ford and General Motors are targeting the mid-2030s for a 50% reduction in use-phase emissions from the base year of 2018–2019. As usual, China’s auto manufacturers have more ambitious goals for decarbonization, targeting a 30% reduction by 2025.
Today is Thursday, September 26, 2024, and here is today’s essential intelligence.
Listen: Why The World's Largest Asset Owner Is Leaning Into ESG
In this episode of the ESG Insider podcast, we hear from the world’s largest asset owner, Norges Bank Investment Management (NBIM). NBIM is Norway’s $1.7 trillion-dollar sovereign wealth fund and owns almost 1.5% of all shares in the world’s listed companies. To understand how NBIM is exerting that influence, we speak to Chief Governance and Compliance Officer Carine Smith Ihenacho. Carine explains how NBIM is approaching engagement and divestment. She tells us about the climate action plan she helped design and implement. And she explains why NBIM is leaning into its responsible investing ethos amid the ESG backlash occurring in some parts of the world.
—Listen and subscribe to the podcast from S&P Global Sustainable1
Economic Outlook US Q4 2024: Growth And Rates Start Shifting To Neutral
S&P Global Ratings expects the U.S. economy to expand 2.7% in 2024 and 1.8% in 2025 (on an annual average basis). The growth forecasts are 0.2 and 0.1 percentage point higher, respectively, compared with our June forecasts, partly reflecting the impulse from financial conditions that turned more positive and partly on stronger core goods consumption than previously expected.
—Read the article from S&P Global Ratings
European Refinancing Flows Have Flipped As Public Leveraged Debt Replaces Private
This year, issuers have taken advantage of tight interest rate margins in public debt markets to refinance private debt, reversing the refinancing flows of recent years. The refinancing trend should continue so long as public market credit spreads remain attractive and supported by stable economic and geopolitical conditions.
—Read the article from S&P Global Ratings
Trump, Harris Clash On Tariffs, Broader Trade Policies
Trade protectionism has become one point of contention in the US presidential race as former President Donald Trump and Vice President Kamala Harris seek to differentiate their proposed solutions for voters' economic concerns ahead of Election Day. Trump has said, if elected, he would pursue a universal tariff of at least 10% on all US imports with a higher rate on goods from China. The proposal of a "baseline tariff" has been included in the Republican Party's official policy agenda as a solution to "rebalance trade" and "protect American workers and farmers from unfair trade."
—Read the article from S&P Global Market Intelligence
From Flats To Longs: Europe's 'Green' Steel Conversation Expands
When it comes to Europe's nascent "green" steel sector, conversation for the most part has centered on flat products. After all, flats — including hot-rolled coils and sheets — account for the bulk of both the continent's steel production and consumption, and the flats sector was the first to see premiums for material certified with a lower carbon profile than standard steel.
—Read the article from S&P Global Commodity Insights
Your Three Minutes In Cyber Security: Cyber Hygiene Can Affect Creditworthiness
Establishing and embedding good cyber hygiene practices is essential to manage organizational cyber risk. Routinely ensuring the security of systems and data can significantly reduce organizations' exposure to cyber attacks. In its latest Digital Defense Report from October 2023, Microsoft stated that good cyber hygiene can protect against 99% of cyber attacks.
—Read the article from S&P Global Ratings
London: 4th Annual Global Emerging Markets Conference (Oct. 3, 2024)
This in-person event will feature critical discussions on credit and market trends, with thematic panels that bring together senior analysts and external market participants.
—Register for the in-person event from S&P Global Ratings