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Our Fixed Income Investment Team believes that climate factors can represent a financially material risk or opportunity for certain investments. That’s why we incorporate the sustainability expertise of Calvert Research and Management ("Calvert") into our credit analysis, which enables us to effectively embed climate-related factors in our assessment of potential risk and return implications.
Calvert’s expertise stems from its specialized sector research, active engagement, and climate investment solutions, resulting in a research and data-driven framework, focused on the following three components of the low-carbon transition:
We believe investment in issuers that demonstrate strong performance in one or more of the components above can help to tackle climate change and drive a low-carbon shift. However, there are complexities and variability in how companies approach these components and this differentiation is very evident in the autos manufacturing industry. As one of the world’s highest‑emitting industries, the auto sector accounts for over 20% of global greenhouse gas emissions1, making its decarbonization a critical lever for accelerating and delivering the low‑carbon transition.
The current investing landscape in European automakers’ debt is challenging, as companies are facing a number of threats: an expensive and ageing workforce in Europe, uncertainty around the regulatory framework for higher-emission vehicles, rapid growth of Chinese brands in Europe, as well as loss of market share in China. Recent write-downs across several automakers’ EV divisions highlight the financial and competitive pressures influencing these strategic adjustments. The changes are structural and require European car makers to reinvent themselves predominantly via efficiency gains while having their carbon footprint in mind.
We evaluate the environmental performance of autos by looking closely at both their electric vehicle (‘EV’) sales momentum and the credibility of their long-term electrification commitments. Using global battery electric vehicle (‘BEV’) sales data, we track which companies are rapidly increasing the share of electric vehicles in their lineup, and which are achieving meaningful scale in BEV production. Both are seen as key indicators of who is leading the shift toward lower-carbon transport. We also examine how each manufacturer’s public EV targets have evolved over time, finding positive momentum in those that continue to strengthen their ambitions, and penalizing those that weaken or walk back earlier goals. These insights help us analyse and identify autos that are not only accelerating electrification but are building credible pathways to compete in a decarbonizing mobility landscape.
Beyond EV performance, we assess broader environmental factors - such as climate strategy, energy efficiency, investment in low-carbon technologies, supply-chain sustainability, and pollution management. Together, these data points give us a holistic, forward-looking view of which automakers are genuinely aligning their operations and product portfolios with the clean-transportation transition, and which ones face elevated environmental or transition risks. Below we show examples of European automakers ranked – according to our proprietary methodology - by leaders, improvers, and laggards.
Leading the transition to low-carbon mobility
We assessed an issuer as a leader because it pairs iEV sales momentum with some of the strongest decarbonization targets in the sector. The company aims for 50% global BEV sales by 2030ii and is already demonstrating meaningful progress, with BEVs accounting for a notable portion of its 2024 deliveries, surpassing peers.
It has set ambitious and externally validated climate goals, including a science-based target (SBTi) of Scope 1 and 2 emissions per vehicle by 2030 and significant Scope 3 reductions covering both use-phase emissions and purchased goods and servicesiii.
The company also maintains a net-zero commitment for 2050iv and, since 2020, all the energy it has purchased from providers to power its plants worldwide has been sourced from renewablesv, supporting full value-chain decarbonization. While the company has not set a formal end date for internal-combustion vehicle production, its rapidly expanding lineup of fully electric models signals strong commitment toward an electrified future. Furthermore, the automaker has strengthened the sustainability of its battery supply chain by sourcing critical materials from vetted suppliers that meet strict environmental and human rights standardsvi. Overall, these elements - credible targets, measurable progress, lifecycle alignment, and investment in next-generation climate solutions - position the company at the forefront of sector transition.
Positive momentum, although strategic uncertainties remain a challenge
Another company represents an improver - showing meaningful progress in electrification and emissions reduction but still needing greater consistency and target credibility to match sector leaders. The company has set an ambitious Net Zero goal for 2038 across its full value chainvii - earlier than many peers - yet its recent decision to abandon plans for an all-EV lineup raises questions about long-term commitment and strategic clarity. The automaker has achieved a significant reduction in its global carbon footprint from 2021 to 2023viii and is expanding its electrified portfolio rapidly, with multiple new BEV models launched in recent years and nearly half of its European passenger-auto lineup offering an electric variantix.
However, the European automaker's global BEV penetrationx still lags competitors, representing a small percentage of units soldxi, and the company has not articulated a firm BEV sales or production target - making it harder to assess its future trajectory. While the company maintains a solid BEV position in Europe with a significant share in the market, its messaging around regulatory targets and the feasibility of 2035 EU emissions standards reflects a more cautious posture than top-performing peers. To improve its standing, the company can benefit from more transparent, externally validated climate goals, clearer capital-allocation alignment toward EVs, and stronger execution signals around Scope 3 decarbonisation.
Ambitious goals undermined by inconsistent execution
Another company has been categorized as a laggard because, despite having ambitious long-term net-zero commitments, its execution, global EV momentum, and emission-reduction transparency remain unaligned. The company targets a 90% reduction in Scopes 1-3 emissions by 2040 in Europe (2050 globally)xii, and its Scope 1 and 2 goals are SBTi-validatedxiii - yet its overall decarbonisation trajectory lacks the consistency and detail needed to evaluate full value-chain progress. In addition, the company is slightly lagging BEV uptake in Europe compared to peers. While the company plans for 100% electric sales in Europe by 2030xiv, the company has not demonstrated the same scale of investment or global EV acceleration seen in leading peers. The company’s supply-chain and lifecycle transparency also trail best practices, limiting insight into how the issuer intends to decarbonize upstream materials, battery sourcing, and end-of-life management. To improve, the company can demonstrate sustained Scope 3 reductions, accelerate global BEV growth, and strengthen disclosure around capital allocation and lifecycle emissions - steps important to align with a credible low-carbon transition pathway.
Positioning European Automakers for a Low‑Carbon Future
The European auto sector is undergoing a significant transformation, shaped by structural cost pressures, global competition, and accelerating regulation - making credible decarbonisation strategies a core determinant of long‑term resilience. Our analysis, supported by Calvert’s ESG research, shows contrasts in implementation across automakers: leaders’ pair strong BEV momentum with robust emissions‑reduction targets and transparent supply‑chain practices; improvers demonstrate progress but lack strategic consistency; and laggards hold ambitious goals yet fall short in execution and disclosure. For investors, the key takeaway is that climate alignment is a financially material consideration in assessing credit quality, and there is major benefit in analysing automakers through this lens to identify those best positioned to capture value as the sector transitions to low‑carbon.
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