Legacy Automakers: A Hidden Climate Risk

New emissions analysis compares carmakers with fossil fuel firms

A joint study by Carbon Tracker and Nomisma has challenged how investors assess climate risk in the automotive sector. The analysis suggests that some established carmakers produce emissions on a scale comparable to oil and gas companies. Consequently, investment portfolios may be carrying more climate exposure than conventional ratings indicate.

The report focuses on manufacturers that continue to derive significant revenue from petrol and diesel vehicle sales. It argues that these businesses should be evaluated using similar risk frameworks to those applied to fossil fuel producers. For UK businesses assessing supply chain emissions or investment decisions, the findings raise questions about how carbon intensity is measured and reported across sectors.

The study arrives as pressure builds on UK firms to improve carbon disclosure and align procurement with net zero commitments. Meanwhile, regulatory expectations around Scope 3 reporting continue to tighten. Understanding how emissions are calculated and compared between industries has become increasingly important for compliance and commercial credibility.

Carbon intensity per pound invested exceeds oil majors

The central finding is that investments in traditional internal combustion engine carmakers carry, on average, 18% more emissions per unit of market capitalisation than investments in oil companies. The researchers measured this by comparing total emissions against the market value of each business. Under this methodology, capital allocated to certain automotive manufacturers generates more carbon exposure than an equivalent investment in the oil and gas sector.

Specifically, Ford and Stellantis were identified as more than three times more carbon intensive than ExxonMobil and BP when assessed on this basis. The comparison uses Scope 1, 2, and 3 emissions divided by market capitalisation. Therefore, it captures not just factory emissions but also those generated throughout the supply chain and during vehicle use.

The study also claims that carmakers underestimate the lifetime emissions from the vehicles they sell. According to the analysis, manufacturers’ reported figures do not fully account for real-world driving conditions or the total distance vehicles travel over their lifespan. When these factors are included, emissions per vehicle are on average 27% higher than company disclosures suggest.

This discrepancy matters because Scope 3 emissions now feature heavily in regulatory frameworks and procurement decisions. Businesses relying on manufacturer data for their own carbon accounting may therefore be underestimating their exposure. In addition, the gap between reported and actual emissions complicates efforts to benchmark progress against net zero targets.

Carbon Tracker and Nomisma further argue that when full Scope 3 emissions are included, some automotive companies generate more carbon than entire G7 economies. This comparison highlights the scale of emissions embedded in global vehicle fleets. However, it also underscores the challenge of attributing responsibility across complex value chains where use-phase emissions occur long after the point of sale.

ESG ratings may miss automotive sector climate risk

The report suggests that mainstream ESG scoring systems do not adequately reflect the climate impact of established carmakers. Many ratings focus on governance structures, disclosure quality, and operational emissions rather than the total carbon footprint of products sold. As a result, businesses that perform well on conventional ESG metrics may still carry significant climate risk through their core revenue model.

By contrast, the analysis highlights the EU sustainable finance taxonomy as a more rigorous framework. The taxonomy applies detailed technical criteria to determine whether an economic activity contributes to environmental objectives. Vehicle manufacturing is assessed based on tailpipe emissions thresholds, which means most petrol and diesel production does not qualify as sustainable under the rules.

For UK businesses, this has practical implications. Firms that rely on ESG ratings to guide procurement or investment decisions may not be capturing the full climate profile of their automotive suppliers or holdings. Furthermore, as the UK develops its own green taxonomy, similar technical thresholds are likely to apply. Companies with exposure to high-emission vehicle manufacturing could face reclassification as regulatory definitions tighten.

The study also raises the concept of stranded assets. This refers to investments that lose value because of regulatory change, market shifts, or technological disruption. In the automotive context, stranded asset risk applies to production capacity, tooling, and intellectual property tied to internal combustion engines. As emissions standards become more stringent and electric vehicle adoption accelerates, these assets may depreciate faster than anticipated.

Investors and lenders are beginning to incorporate stranded asset risk into their assessments. However, the report argues that many still underestimate the speed and scale of the transition. For businesses that depend on traditional carmakers as customers, suppliers, or investment holdings, this presents both financial and reputational exposure.

Key findings from the automotive emissions study

• Investments in legacy carmakers are on average 18% more emissions-intensive than investments in oil companies when measured per unit of market capitalisation.
• Ford and Stellantis are each more than three times more carbon intensive than ExxonMobil and BP under the same metric.
• Real-world emissions from petrol and diesel vehicles are on average 27% higher than manufacturers report, once driving conditions and lifetime mileage are factored in.
• Mainstream ESG ratings may not capture the full climate impact of automotive companies that rely heavily on internal combustion engine sales.
• The EU sustainable finance taxonomy provides a more accurate assessment of environmental impact by applying technical emissions thresholds to vehicle production.
• Some automotive companies generate more total emissions than entire G7 economies when Scope 3 use-phase emissions are included.

What this means for UK businesses and supply chains

The findings have several implications for UK firms navigating net zero commitments and procurement compliance. First, businesses reporting Scope 3 emissions need to ensure they are using accurate emissions data from automotive suppliers and fleet operators. If manufacturer figures underestimate real-world emissions by nearly a third, then corporate carbon accounts may also be understated.

Second, companies that procure vehicles or transport services should consider how carbon intensity is calculated and whether current metrics align with regulatory expectations. For example, PPN 06/21 requires suppliers bidding for central government contracts above £5 million to publish a carbon reduction plan. These plans must include Scope 3 emissions where relevant. Businesses that rely on carmaker data without adjustment may struggle to demonstrate accurate baselines or credible reduction pathways.

Third, the report highlights the limitations of relying solely on ESG ratings when assessing suppliers or investments. Firms should evaluate whether their due diligence processes adequately capture product-level emissions and stranded asset exposure. This is particularly relevant for businesses in sectors such as logistics, fleet management, and automotive retail, where legacy vehicle sales remain significant.

There is also a broader question about how businesses communicate their own climate credentials. Companies that depend on high-emission supply chains or revenue streams may face increasing scrutiny from investors, regulators, and customers. Transparency about exposure and transition planning is likely to become more important as disclosure requirements expand.

For businesses already working toward net zero, the analysis reinforces the need to look beyond operational emissions. Scope 3 remains the largest component of most corporate carbon footprints, yet it is also the hardest to measure and influence. Improving data quality and engaging suppliers on emissions reduction are essential steps. However, businesses must also recognise that some suppliers face structural challenges that cannot be addressed through incremental efficiency gains alone.

The automotive sector is not unique in this respect. Many industries are grappling with the tension between short-term commercial imperatives and long-term decarbonisation goals. Nevertheless, the scale of emissions associated with vehicle manufacturing and use makes it a particularly visible test case for how climate risk is assessed and managed across value chains.

Decarbonisation timelines and regulatory pressure increase

The study arrives as regulatory timelines for automotive emissions continue to tighten. The UK government has confirmed that sales of new petrol and diesel cars will end by 2030, with hybrids allowed until 2035. This policy creates a clear deadline for manufacturers to transition production capacity. However, the speed of that transition depends on multiple factors, including battery supply chains, charging infrastructure, and consumer demand.

For businesses that operate vehicle fleets, these timelines have direct commercial consequences. Early adopters of electric vehicles may benefit from lower running costs and improved sustainability credentials. However, businesses that delay transition risk being locked into higher-emission assets as second-hand values for petrol and diesel vehicles decline. In addition, access to certain contracts or markets may become restricted as procurement policies evolve.

There is also a question about how emissions are allocated across the value chain. The report focuses on Scope 3 emissions, which include all indirect emissions from a company’s activities. For carmakers, the largest component is use-phase emissions from vehicles sold. However, responsibility for these emissions is shared between manufacturers, fuel suppliers, and vehicle operators. Regulatory frameworks have not yet settled on a consistent approach to attribution, which complicates efforts to set reduction targets and track progress.

UK businesses should be aware that emissions accounting standards are still developing. Guidance from bodies such as the Greenhouse Gas Protocol provides a framework, but interpretation can vary. Companies that report emissions in good faith today may find that methodologies change as understanding improves. Building flexibility into carbon accounting systems and maintaining detailed records will help businesses adapt as standards evolve.

Finally, the report underscores the importance of considering climate risk as a financial issue, not just an environmental one. Stranded assets, regulatory change, and market shifts all have balance sheet implications. Businesses that integrate climate risk into financial planning and governance are better positioned to navigate the transition. Conversely, those that treat emissions reporting as a compliance exercise may miss emerging risks until they crystallise into losses.

Where to find further information and guidance

The full Carbon Tracker and Nomisma report is available on the Carbon Tracker website. It provides detailed methodology and company-level data for investors and analysts assessing automotive sector emissions.

UK businesses seeking guidance on Scope 3 emissions reporting can refer to the UK government’s greenhouse gas reporting guidance. This includes information on measurement standards and disclosure requirements for different business sizes and sectors.

The Greenhouse Gas Protocol offers technical resources on emissions accounting, including detailed guidance on Scope 3 categories. This is the most widely used international standard for corporate carbon accounting.

Businesses involved in public sector procurement should review PPN 06/21 guidance on carbon reduction plans. This explains the requirements for suppliers bidding on central government contracts and how carbon commitments are evaluated.

For support with carbon reporting compliance and net zero planning, SBS compliance services help UK businesses navigate regulatory requirements and build credible reduction strategies.