Politique Internationale — The ecological transition has become a key issue. To what extent has it been taken on board by financial players? Do they now see it as an essential waymark?
Léa Dunand-Chatellet — It all depends on which continent you’re on. In Europe, the Paris agreements are a cornerstone. They have the merit of outlining a trajectory for the fight against global warming, with precise targets. Charting a course does not, however, mean that we have sufficient resources to reach our destination. For example, there is no set method for companies – or organizations in general – to reduce their CO2 footprint. Each is proceeding somewhat empirically. Countries are not aligned over tools, and policies are not harmonized. While data is accumulating, it still lacks transparency. Put plainly, how can we be sure that a company claiming to be on a virtuous path is telling the truth? We still need to make progress in verifying information. Over the coming months, it will be interesting to see how the CSRD (Corporate Sustainability Reporting Directive) is implemented in the countries of the European Union (EU). Implementation is complex but challenging.
P. I. — Can this emerging trend be described as encouraging?
L. D.-C. — Of course. The role of Ademe (Agence de l’environnement et de la maîtrise de l’énergie – editor’s note) is to be commended: its work has led to the calculation of a carbon footprint, which applies to everyone. At the European level, even if it does not cover all business sectors, a transition plan is under way. It should be remembered that three scopes have been defined: scope 1, the emissions that companies produce on a day-to-day basis; scope 2, the CO2 emitted by their energy operations; and scope 3, the carbon emitted by the use of products and/or services provided by these same companies. Scope 3 also includes upstream emissions, i.e. emissions resulting from the extraction and transportation of the materials needed to manufacture the company’s products. This grid may seem a little artificial, in the sense that the scopes sometimes overlap, but it does provide a framework. And let’s not forget that the Paris agreements are ultra-ambitious in the light of current achievements. By way of illustration, to limit the rise in temperature to 2°, carbon intensity (the ratio of CO2 emissions to a company’s production – editor’s note) must fall by 2.5% per year. And in order not to exceed 1.5°, this reduction is quantified at 7.6%. We’re still a long way from these performance thresholds. Experience shows that the first gestures are always the most effective against carbon. On the other hand, the longer the approach is in place, the more you have to look into the interstices to identify possible environmental gains, with less spectacular results.
P. I. — You mentioned Europe. What about other continents – or other major countries – in terms of the perception of climate urgency and possible action?
L. D.-C. — We sometimes hear that the United States is at the antipodes of the climate emergency, citing as proof the uninterrupted growth of combustion-powered vehicles. Not true: take a stroll through any major American city, and you’ll see a clear increase in the number of electric cars. And there are even more striking examples, such as Washington, where electric cars can be seen on every street corner. The United States has passed a law to underpin its ecological approach: the IRA (Inflation Reduction Act, adopted in 2022 – editor’s note) plans in particular to promote clean energy. On this issue, the Biden administration has shown itself to be pragmatic: we’re not turning our backs on the energy transition, as long as the country finds ways to exploit it economically. In Latin America, the situation is very different: no progress has been made in the climate field. In Asia, China is a special case: whether it’s electric vehicles or critical materials, the country is well ahead of the West. In Singapore, early last year, a taxonomy was instituted to penalize eight sectors considered the most polluting. Africa has ideas, but it has a long way to go. Above all, since it is lagging behind and will have to give up fossil fuel sources in favor of solutions that are both more virtuous and more costly, the transition promises to be very costly for that continent. How can we help? A compensation scheme is currently being studied.
P. I. — Generally speaking, are investors and financial markets experiencing this ecological transition as a constraint, in the sense that the required adaptations tend to reduce margins? Or do they see this revolution as a source of new opportunities?
L. D.-C. — As is often the case, feelings are divided. It’s true that, until 2015, the fight against global warming was far from the preoccupation of most investors, who didn’t take kindly to the arrival of the first major regulations: they saw them above all as rigidities. Nevertheless, financial players are listening: they have a good understanding of the aspirations of the new generation, as well as the growing expectations of the end customer. It’s counterproductive to ignore the climate debate, as we run the risk of cutting ourselves off from young people altogether. In financial services institutions and companies, young graduates are quick to challenge you on the directions you are taking to preserve the planet. Even if it means using a slightly “ayatollesque” tone! On the subject of new opportunities, here again, opinions are not set in stone: the Green Deal (the Green Pact for Europe – editor’s note) has certainly been launched, but this series of political initiatives is not really backed up by concrete measures. As for greentech, the model is far from mature. Investors were put off by the emergence of a green bubble, triggered by the addition of young start-ups with promising prospects, but which soon came up against the reality principle. Many of these companies have had to scale back their ambitions, or even cease trading.
P. I. — Most manufacturers are currently experiencing significant difficulties. Are they likely to slow investors down? Generally speaking, how do you assess the sector?
L. D.-C. — We are often tempted to compare the crises, but the first thing is to avoid analogies. In the not-too-distant past, the last major turmoil in the automotive sector coincided with the 2008 financial crisis. On that occasion, the sector’s solidity was directly tested: certain assets, such as factories, which weighed heavily on companies’ balance sheets, were suddenly worth nothing, or a negligible amount. The current situation is quite different: not only did the automotive industry prove resilient during the health crisis, but it has since taken off again. Even better, several groups have stepped up their efforts to be at the cutting edge of technology: BMW in particular in the efficiency of combustion engines, Toyota in hybrids and Renault in electric vehicles. But standards inflation, out-of-reach targets for electric vehicles and cost pressures, among other factors, have all proved obstacles. Let’s take electric vehicles: the transition can’t be made at a snail’s pace, as implied by the EU’s timetable (100% new electric cars by 2035, notwithstanding a few adjustments – editor’s note); you can’t simply replace one production line with another; the whole layout of a factory has to be changed. As for cost pressures, this has been hit hard by soaring prices for certain materials – affected by difficulties in several supply chains. The difficult situation we’re talking about in the automotive industry today didn’t just spring up out of the blue: 18 months ago, there were already warning signs, such as product recalls on a massive scale at Stellantis. When it reaches this level, the phenomenon is easy to explain: the vehicles were delivered too quickly, without first being checked in minute detail. We must never forget that a car is first and foremost a product, exposed to consumer satisfaction. Needless to say, these multiple pitfalls have not improved the climate of social relations within companies – a factor that must also be taken into account in today’s environment.
P. I. — The difficulties facing the European automotive industry are clear for all to see. When can we expect an upturn? Do investors already have a deadline in mind that could restore their confidence in the sector?
L. D.-C. — For the moment, Europe is caught in a vice, victim of the combined pressure of the United States and China. Washington plays on its protectionist attitude, even if this protectionism is variable in nature: for example, it does not apply to South Korea in order to preserve component imports. As for Beijing, its offensive strategy is not lost on anyone: Chinese electric cars are already widely sold in Europe, where a recovery in the automotive sector is not expected in the short term: most manufacturers even consider that the low point has not yet been reached. In the meantime, the electric sector remains largely on life support: efforts are focused primarily on increasing supply, in the hope that this will generate demand. That said, manufacturers are very clear-sighted. In their discussions with the financial community, they make no secret of the fact that it will be necessary to stretch the deadlines in order to establish a reasonable timetable for the development of “made in Europe” electric vehicles.
P. I. — From the outset, infrastructure management has been cited as a thorny issue for the development of electric vehicles. A problem that is also of concern to public authorities. Do financial players expect political support?
L. D.-C. — The question of infrastructure is part of a global problem. There’s a lot of talk about the need to install charging stations on a large scale, and rightly so, but the power supply issue goes beyond that: in the background, there’s the question of the robustness of the electricity distribution network. Is it capable of meeting the very high demand generated by a massive fleet of vehicles? This is a question of industrial quality, energy policy and regional planning. In this context, the commitment of the public authorities is eagerly awaited. Is there a need for a “Marshall Plan” for electric cars, along the lines of the programs that have been deployed in Europe in the past to boost this or that sector? Why not? All the more so as some manufacturers, like cable companies, are already benefiting from the rise in electric power, with the need to strengthen distribution networks.
P. I. — Does the inflation of standards discourage investment in certain technologies?
L. D.-C. — Is there any market today that is not regulated? The automotive industry is no exception. Investors have learned to cope with this acceleration in new standards. What’s trickier to grasp, however, are the battles waged by a number of lobbies. For example, when a factory has to be converted or a new one set up, the path is strewn with pitfalls, with procedures that drag on and on.
