Danish pension provider, PKA, is cracking down on car manufacturers, with one firm excluded and other big names on its watch list.

It has set out climate requirements for the 15 carmakers it invests in as it believes more electricity and hydrogen cars are needed on the roads if the goals of the Paris Agreement are to be met. Chinese firm, Brilliance China Automotive, has been excluded from its investment universe.

In addition, five companies have been placed under observation, including Suzuki, Hyundai, Fiat Chrysler, Subaru and Mahindra & Mahindra.

PKA said the companies either did not have a good enough climate strategy or were unwilling to enter into a dialogue with PKA about their climate ambitions. At the end of 2020, PKA will review the companies' efforts.

“It is crucial for us that car manufacturers consider how they will contribute to the green transition. It is not only sensible with regard to the climate, but also for investment purposes. In the long term, a lack of climate strategy will pose an investment risk to our members. If the companies are not aware of this, they are not interesting investments for us,” PKA vice president and head of responsible investment, Dewi Dylander, said.

The new focus on the automotive industry is an addition to PKA's work on responsible investments and active ownership of oil, gas and coal companies. Since 2015, PKA has excluded more than 100 companies that were unwilling to discuss a greener direction and contribute to meeting the goals of the Paris Agreement. The same requirements now apply to the automotive industry.

"We ask, among other things, for the companies' handling of climate-related risks, whether they are actively dealing with the Paris Agreement and if not, if they are prepared to discuss our concerns and how their business can become more sustainable in the future," Dylander stated.

The International Energy Agency estimates that by 2040 there needs to be 600 million electric and hybrid vehicles on the roads if we are to meet the goals of the Paris Agreement. Vehicles alone account for almost three-quarters of the entire transport sector's CO2 emissions, PKA said.

“The requirements for the automotive industry are PKA's first initiative towards those companies that use fossil fuels. Among the OECD countries, the transport sector accounts for over half of global oil consumption. The transport sector in particular must therefore switch from gasoline and diesel to electricity before the consumption of oil can seriously decline,” Dylander concluded.

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