Auto manufacturers: Climate performance and the cost of capital

23 minute read

Road vehicles are a significant source of emissions but also a source of a feasible green transition due to ongoing developments in Electric Vehicle (EV) technology.

57 countries have made commitments to end the sale of Internal Combustion Engines (ICE) by 2050 at the latest, and so business transition is a clear strategy for auto manufacturers that want to maintain their creditworthiness, which will drive emissions reductions.

In this note, we create a regression framework to understand the drivers of bond spreads in the automobile sector. Specifically, we analyse the effects on pricing from sustainability factors, such as implied temperature rise, emissions, or a general environmental score.