Road-testing the electric dream
David May is Global Head of Research at HSBC. He explains why he’s travelling across Europe in an electric car – and how businesses and investors are increasingly focusing on environmental, social and governance issues.
You’re driving from London to Frankfurt in an electric car. Tell us more.
At the beginning of February, my Chief Operating Officer and I are going to be driving about 500 miles from our head office in Canary Wharf, London to an HSBC conference on environmental, social and governance (ESG) issues in Germany.
We recently published a report on how the aviation, shipping and road transport sectors are all taking steps to reduce carbon dioxide emissions. We’ll be talking about that research at the conference, so an electric car seemed like a great way to get there.
But the trip is really about showcasing HSBC Global Research’s expertise on ESG issues. We’ve got more than 350 analysts around the world and ESG is a core part of what we do.
Why is HSBC holding an ESG conference?
This is our 14th ESG conference. It’s an increasingly important topic for investors, with about 40 per cent of the world’s major global companies – including HSBC – now reporting on their performance against significant ESG metrics. Our analysts help clients to understand ESG issues and make informed investment decisions.
Many companies make environmental and social commitments because they believe in doing the right thing. But actually their behaviour can have a material effect on their long-term business performance and share price too.
How have ESG concerns affected the car industry?
Transport is responsible for about 24 per cent of carbon dioxide emissions from fossil fuels. One of the main ways carmakers are seeking to reduce greenhouse gas emissions is by investing heavily in electric batteries. These have the potential to be a low-carbon, low-pollution alternative to combustion engines.
Though electric vehicles represent a small proportion of new cars sold today, we expect that it’s only a matter of time before they become more popular than combustion engines in many places. Some markets will switch to electric faster than others: Norway is the frontrunner, with half of new vehicles sold there in 2018 having electric or hybrid engines.
What are you expecting to learn about electric cars on your journey?
We’ll be testing out first-hand what it’s like to drive one of a new generation of longer-range electric vehicles. With early electric cars, some drivers experienced ‘range anxiety’ – a concern about how far they could drive before having to recharge.
ESG is integral to what we do and how we think
The car we’re using is able to do close to 300 miles on a single charge in test conditions. This is much further than the first generation of electric cars. London to Frankfurt is about 500 miles, or 800 kilometres, however – and we are driving there and back – so we’ll definitely need to recharge.
We also want to see how the car handles. Performance is often cited as a key advantage of electric vehicles, alongside the environmental benefits. They tend to accelerate smoothly and handle well because the average battery is lighter than an engine.
What other ESG issues does HSBC Global Research look at?
Global Research provides regular comment and analysis to clients and employees on topics including economics, currencies, fixed income and equities. We set up a climate team in 2007 and since then we’ve expanded our coverage to include social and governance issues – winning lots of industry awards along the way.
Our ESG analysts in London, Hong Kong and New York produce reports on a range of topics from climate change and green bonds to plastics pollution and corporate governance. But what’s crucial is the way they work with the rest of Global Research. Wherever possible we are incorporating ESG factors into all our reports. ESG is integral to what we do and how we think.
What’s the relationship between the reports that Global Research produces, and HSBC’s reports on its own ESG performance?
HSBC Global Research operates separately from the rest of the bank in key respects. We take a range of steps to secure our independence, including strict rules on how to store and share information, and added security procedures for anyone attempting to access our offices.
It’s not surprising, however, that Global Research is analysing ESG issues at the same time as the HSBC Group is also monitoring and reporting on its ESG performance. It’s a reflection of the rising profile of ESG issues and the increasing emphasis that companies and investors place on them.
Key differences between traditional and electric vehicles
| Aspect | Internal combustion engine car | Battery electric vehicle |
|---|---|---|
| Mechanical complexity | More complex due to around six times more moving parts in the engine's powertrain | Fewer moving parts, especially in engine and transmission |
| Complexity of electronics | Less complex | More complex - 6-10 times more semiconductor content |
| Spare parts | More spare parts required | Around 60% fewer spare parts required |
| After treatment equipment | Catalysts, filters | None |
| Maintenance | More maintenance needed. First service needed after 15,000-20,000km | At least 50% less maintenance. First service probably only after 100,000-200,000 km |
Source: HSBC estimates, FTI Consulting