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Commentary

The road to sustainable mobility

March 31, 2022

Mobility is essential to our daily life and economic growth, yet moving people or goods from place to place has a great impact on the environment. In the United States (U.S.), the transportation sector is the largest emitter of greenhouse gas (GHG), accounting for 27% of total emissions in 2020, with the largest contributors being passenger vehicles (41%), followed by freight trucks (26%), and light-duty trucks (17%).

Globally, the transportation sector accounts for around a quarter of CO2 emissions, with road transportation, including cars, trucks, buses and motorbikes alone accounting for nearly 18%.[1] From 1990 to 2019, emissions increased by 20.9%. Although emissions declined 13.7% from 2019 to 2020 due to less travel caused by the COVID-19 pandemic,[2] it has rebounded almost to 2019 levels in 2021.

Transport demand is expected to continue to grow across the world in the coming decades as the global population grows and travel demand increases. In the Energy Technology Perspective report[3], the International Energy Agency (IEA) predicts that global transport demand will double, car ownership rates will increase by 60%, and demand for passenger and freight aviation will triple by 2070. This is expected to result in a significant increase in transport emissions. To achieve carbon neutrality by 2050[4], technological innovations are needed to offset this rise in carbon footprint.

Road freight contributes about a quarter of the transportation sector emissions, and heavy-duty trucks emit 20 times the amount of emissions in comparison to passenger cars. Companies are tackling the problem by modifying their fleet of vehicles. Renewable Natural Gas (RNG) is currently one of the most economical and impactful ways to achieve this objective. It is the only available renewable energy source that is carbon negative. GHG emissions from the production and use of RNG are 90% less than diesel.  

Clean Energy Fuel (CLNE US)

Clean Energy Fuel, a holding in our portfolios, is a leading renewable energy company focused on the procurement and distribution of RNG and conventional natural gas. Of its natural gas sold, 74% is from renewable sources. The company has been in the alternative vehicle fuels industry for over 20 years and is the largest U.S. provider of RNG for commercial transportation. Sales of its RNG has increased from 13 million gasoline gallon equivalents in 2013 to 153 million in 2020. In 2020, the company provided fuels to over 4,000 heavy-duty trucks in the U.S. and provided 45% of the RNG used for transportation fuel in the country. The importance of RNG is being recognized by big players in the energy and logistics industries, and Clean Energy Fuel has secured multiple partnerships, including with Amazon.

Hexagon Composites (HEX NO)

Another holding in our  portfolio, Hexagon Composites is a global leading provider of natural (renewable) gas vehicle fuel systems and gas transport modules, with an 80% market share in North America and 50% market share in Europe. The company also owns 75% of Hexagon Purus (HPUR NO), a world-leading provider of Type 4 high-pressure hydrogen cylinders, battery packs and drivetrains for fuel cell electric and battery electric vehicles. In 2020, Hexagon’s solutions avoided the release of 730,000 metric tons of CO2 equivalent. To put that in perspective, it equates to removing 158,000 petroleum cars from the road for a year or planting 960,000 acres of forest.[5]

Passenger vehicles account for over 40% of emissions in the transportation sector, so it’s no wonder the automotive industry has been under pressure from governments and societies to pursue more sustainable growth. Electric vehicles (EV) have emerged as a key area to boost the sustainability efforts of automakers. Volkswagen targets half of its sales to be electric by 2030. Ford aims for 40%-50% of its sales to be electric by the end of the decade. The EV market has been growing rapidly, though from a small base. In 2019, 2.2 million electric cars were sold, representing 2.5% of global car sales. In 2020, electric car sales rose to 3 million, representing 4.1% of total car sales. In 2021, electric car sales more than doubled to 6.6 million, close to 9% of the global car market.[6]

Except for electrification, many other solutions help reduce the emissions of the automotive industry.

Motorcar Part of America (MPAA US)

Motorcar Part of America, a holding in our portfolios, remanufactures and distributes aftermarket automotive parts by reusing and reconditioning previously used core units that would otherwise end up recycled or disposed. With the potential to cut material and energy consumption by up to 95%, remanufacturing is the most efficient and sustainable process for producing aftermarket replacement parts. MPAA sells over 36,000 stock-keeping units (SKUs) in over 25,000 retail outlets in the U.S. and Canada. The current population of light-duty vehicles in the U.S. is approximately 281 million. The average age of these vehicles is around 12 years and is expected to continue to grow, in particular during recession years. The aged vehicle population provides favourable opportunities for MPAA.

Although the sustainability focus is primarily on fuel and exterior components, the interior cannot be neglected either.

Seiren (3569 JP)

Seiren, another holding in our portfolios, manufactures advanced materials mainly for automotive, electronics, high fashion, building and medical industries. It is the global leader of car seat materials, with a 17% market share. Synthetic leather car seat materials have been taking market share from genuine leather, as consumers and carmakers favour cruelty-free materials. Seiren’s superior synthetic leather product, Quole, feels like leather, but is only one-third or half the price of genuine leather; it is also 50% lighter, reducing the weight of a car by around 2kg. Production of the materials cuts CO2 emission by two-thirds, and the material is four times more durable than genuine leather. Thus, it has been increasingly adopted by automakers, especially electric car manufacturers.

At Global Alpha, meeting companies and on the ground research are important parts of our investment process. Being conscious of the environmental impact, we have started offsetting our own carbon footprint from corporate travels since late last year. We will provide more details in future updates.


[1] https://www.bbc.com/future/article/20200317-climate-change-cut-carbon-emissions-from-your-commute

[2] Inventory of U.S. Greenhouse Gas Emissions and Sinks: 1990-2020

[3] Energy Technology Perspective 2020, IEA

[4] https://www.un.org/sg/en/content/sg/articles/2020-12-11/carbon-neutrality-2050-the-world’s-most-urgent-mission

[5] Hexagon Composites Annual Report 2020

[6]https://www.iea.org/commentaries/electric-cars-fend-off-supply-challenges-to-more-than-double-global-sales?utm_source=SendGrid&utm_medium=Email&utm_campaign=IEA+newsletters