I have been looking for macro signs that the so-called “green” car revolution is actually upon us. That is, I have been looking for developments that suggest a societal shift in consumer sentiment and taste — other than the surge in Tesla’s share price or the inevitable headline about “electrification” atop the latest legacy automaker press release.
As always, the best advice is to follow the money for signs of a sea change in society and the economy. In this case I mean money not as in what consumers are buying today – the latest sales tallies – but money as in where investors think consumers plan to spend in the future.
This brings me to Henry M. Paulson Jr., the former U.S. treasury secretary in the twilight of a long career in finance. As The New York Times reports, Paulson, a lifelong Republican, former Goldman Sachs boss and committed capitalist, has answered Bono’s call to get into the fight against climate change.
The Times refers to Bono – Paul David Hewson – as a “musician-activist-investor” and catalyst in a broader effort to recruit Paulson to run a massive investment fund focused “exclusively on combating climate change.” By massive, we’re talking in excess of $5.0 billion (all figures in US dollars).
I’d suggest that we are now looking at a merger of pop culture with high finance and social activism. Bono has gone down this road before, by the way.
In 2017, as Environmental Finance notes, he co-founded The Rise Fund with internet entrepreneur, engineer, and eBay’s first employee and president, Jeff Skoll – a Canadian, by the way. The Rise Fund, part of U.S.-based private equity firm TPG, is the capitalist version of a do-gooder effort. Its purpose is to make piles of money for investors with a save-the-world twist: deliver “positive and sustainable impacts and help achieve the UN’s Sustainable Development Goals (SDGs). Capitalism with a heart and soul.
It’s been very successful. Revenue growth is targeted at 25 per cent a year and today the fund has some $5.0 billion under management.
Bono apparently wants to recreate The Rise Fund’s success with Paulson, but with a specific target: climate change. And people with more money than the Irish singer are on board.
Paulson told The Times that he sees this move as an opportunity to make a difference in a “hurry.” Andrew Ross Sorkin, who is well hooked into the zeitgeist, notes in The Times that we may be looking at “a turning point for the weight and seriousness given to climate-related investments. Sorkin is a Times columnist, financial TV host, author of Too Big to Fail and co-creator of the Wall Street melodrama Billions on Showtime and Crave.
Alas, Sorkin seems a little late to the game. I’d say the “turning point” signal actually happened last summer when former Bank of Canada and Bank of England governor Mark Carney joined the giant Canadian firm Brookfield Asset Management as vice-chair and head of environment, social and governance, known as ESG, as well as impact fund investing.
Carney is at least as big a name in global finance, perhaps bigger, given the 74-year-old Paulson has mostly been running his own foundation since he left politics and Carney relatively recently left his Bank of England post. Carney, long an advocate for action on climate change, could likely have become Canada’s finance minister last summer, but instead eschewed politicos in favor of a very specific role at Brookfield – ESG investing. Brookfield has $550 billion of assets under management.
So, let’s tie together these various threads. Some of the very biggest names in global finance are now on board with pop culture icons like Bono to advance ESG investing, in particular around climate change action. (ESG investors look for companies which focus on clean technologies (environmental), healthy workplaces with an eye on corporate responsibility (social) and good governance reflected in ethical practices, fair compensation and diversity).
Forbes reports that some $20 trillion is professionally managed under an ESG mandate. In real company terms, we’re talking about companies like Canadian Solar and Brookfield Renewable Partners. In the car business, at least part of Tesla’s rise can be attributed to investors looking for an ESG automotive platform. (Yes, Tesla CEO Elon Musk presents some issues on the S and G side of things, but they are outweighed by Tesla’s leadership in EVs.)
Note, too, that while Ford Motor has received plenty of positive press about its looming battery car investment in Oakville, Ont., the far more interesting Canadian EV story lies in what auto parts giants Magna and Linamar are doing. Magna is busy developing EV architectures with a number of partners. Linamar, as far back as 2018, was touting its growing business in driveline products for EVs.
The big picture, then, tells me that the EV moment is here. Even Rolling Stone, a left-leaning rock ‘n roll that also focuses on social issues and politics, is on board. The Stone is now touting a “tidal wave” of EVs set to arrive this year.
“Plug-in power is here to stay,” says Rolling Stone, touting the impending arrival of these EVs among others: Ford’s Mustang Mach-E; Tesla’s promised Cybertruck; Volvos Polestar 2; Nissan’s Ariya; Mercedes-Benz’s EQC; Volkswagen ID.4; Volvo’s XC40 Recharge; Hyundai’s IONIQ electric sedan; BMW iNext.
EVs have now reached nearly 6.0% per cent market share in Europe and 3.8% globally. Apple is reportedly looking at launching an EV in 2024. Tesla is in the S&P 500 and is the worlds most valuable car company. Daimler plans to spend $85 billion on EV through 2025. BMW expects 20% of its vehicles to be electric by 2023. GM has made a $27 billion bet on electric, with 30 models due by 2025.
In a recent analyst note, Goldman Sachs predicts that EV adoption will accelerate quickly, with “EVs to comprise 18% of sales globally in 2030 and 29% in 2035 (with 50% adoption in 2035 in both the US and in Western Europe).”
With Bono, Goldman Sachs and Rolling Stone on board (helped by the likes of Hank Paulson and Mark Carney) – not to mention President-elect Joe Biden’s $2 trillion climate plan — it’s easy to say we’ve reached critical mass — that the EV moment has arrived.