Neil Brown

Are we nearing ‘peak car’?

Neil Brown

Traffic congestion

As sustainable investors, we focus on the biggest issues of our time, hunt for companies that can solve them and invest in the opportunities of maximum impact for maximum returns – and one of the key issues of this era is transport.

Short-term problems in our auto industry are well known but we look beyond the profit warnings of 2018 and trade war tweets of 2019 to the underlying drivers. Emissions controls have been an issue for decades but we believe something more fundamental is at work: the problem is not should we buy a diesel, petrol, hybrid or full electric but rather whether to own a car at all.


Evidence for the underlying theme abounds but we are particularly interested in Marchetti's constant. This analysis from a World Bank economist spanned from ancient Greece to modern-day Berlin and concluded that humans will travel around 30 minutes to their place of work and 30 minutes back. Anything beyond that, over thousands of years of evidence, has proved unsustainable.

 

As we all know, 30 minutes to get anywhere in a modern city is ambitious and we need to recognise how fast urbanisation is happening: globally, half the world’s population already live in cities and the UN estimates more than two thirds of us will do so by 2050.


The congestion that so many of us face on a daily basis is not only unsustainable from a human tolerance perspective, it is also an economic waste. A 2013 study from the Centre for Economics and Business Research estimated the fuel costs, unnecessary expense and lost time from city congestion cost the US, UK, France and Germany 0.8% of GDP a year.


Where, then, is the opportunity? If driving is too energy and time intensive and dangerous, what is the solution? This is driving the notion of ‘peak car’ and we feel analysts are missing what the public is increasingly realising – driving is no longer fun or convenient. We have gone from half of Americans obtaining their driving licenses as soon as they were able in the 1990s to just over a quarter doing so in 2017. We are moving beyond car ownership to new mobility solutions.

 

The next global car-free day is 22 September so keep an eye out for people championing everything from cycle lanes to railroads and even changing where you work to bring it within micro scooter range.

 

We are investing in a wide range of solutions, from battery recycling that works to close the loop across electrified transport solutions to braking systems that will encourage high speed rail. In future articles, we will talk about our holdings in Knorr-Bremse, Umicore and Trainline and how we believe they can make money for our clients by having positive impacts on our transport system.


Sustainable investment is often about freedom: to eat without consuming harmful chemicals, to build and manufacture without warming the planet, to shop for clothes without contributing to modern slavery or plastics in our oceans. In transport, while the freedom of the open road is vanishing fast, the freedom to move is just beginning.

 

Key Risks

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Disclaimer

The information and opinions provided should not be construed as advice for investment in any product or security mentioned, an offer to buy or sell units/shares of Funds mentioned, or a solicitation to purchase securities in any company or investment product. Always research your own investments and (if you are not a professional or a financial adviser) consult suitability with a regulated financial adviser before investing.
Thursday, September 12, 2019, 9:39 AM