As automotive companies start to release their annual reports for FY2022 we take look at how they considered climate in FY2021. 

The energy transition is already underway, as shown by our analysis of the adoption of battery electric vehicles (BEV) [1]. Yet, amazingly, it is still unclear whether original equipment manufacturers (OEMs) are prepared for it. Failure to incorporate the financial impacts of the energy transition - such as the cost of actions to reduce emissions - in financial reporting could lead to overstated assets, understated liabilities, and exaggerated profits.

One way in which companies can demonstrate to investors whether they are actually preparing for the financial impacts of the transition is through disclosures in their audited financial statements [2]. Without such information, investors are left in the dark about the risk hidden in accounts - which could lead to the misallocation of capital. 

 

 1 Carbon Tracker – One in three UK car sales may be fully electric by end ‘23 as S-Curve transforms market 

2 References to financial statements herein include the notes thereto.