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.
Kamesh is an experienced credit derivatives and bond trader who leads the development of AFII’s portfolio analytics tool, Co₂liseum. He was previously a market maker and credit analyst at NatWest Markets, and holds a PhD in deep learning.
Based in London, Jo leads AFII’s research and a global team supporting fixed income investors as they align their portfolios with climate and sustainability goals. She joined AFII after 18 years in fixed income markets at JPMorgan.
