E for electric?There is compelling evidence which suggests that e-commerce compares favourably with traditional retailing as a low carbon model on a number of different metrics. Firstly, online retailers have a much lower direct energy and emission footprint, as they operate a few centralised distribution warehouses, compared to a traditional retailer which operates distribution facilities as well as expensively lit, air-conditioned and heated stores. Secondly and more significantly, it is important to consider how the goods are transported to customers. Here too, most journey types result in lower carbon emissions from the online delivery model. This is because each delivery vehicle will be responsible for multiple packages ordered online, whereas in the traditional retail model people tend to drive to and from stores and retail parks in their cars.
E-commerce firms such as Amazon are deploying highly sophisticated technology to optimise delivery density and route planning, and will be faster to adopt electric vehicles than consumers (as delivery vehicles return to depot for charging frequently so are ideally suited to EV technology). Companies with large delivery fleets, such as the DHL, Fedex and the US Postal Service are starting to convert their vans and trucks to electric, and this will happen much more quickly than in the consumer vehicle market. This is partly because of rapidly tightening emission regulations. In April, London introduced the world’s toughest emission standard in the centre of the city to cut toxic air pollution and protect public health. However, it’s also because electric vehicles are becoming cheaper to run and this matters more when a vehicle is in constant use, as for delivery vehicles. One good example of this is Germany’s DHL, who have committed to having 70% of their last mile delivery services from low emission vehicles in just six years time. Although Amazon’s own delivery fleet is comparatively small, the emissions associated with their deliveries will be reduced by this electric transition in delivery networks. Although it remains unclear how Amazon will achieve its ambitious new plan to make 50% of its shipments carbon neutral by 2030, the pace of conversion away from combustion engine vehicles can and will happen fastest in the professional and e-commerce industry. What’s more, companies such as Amazon, which adapt to global challenges such as climate change, put themselves on a far better footing. As investors in climate change trends, we aim to look beyond the headlines to identify the companies actively engaging with climate change, and to imagine what the future will look like in a low carbon world. Amazon’s approach puts it on the front foot to negotiate the disruption that could destabilise a number of its peers. 1. Source: AWS average power mix carbon intensity of 393 grams/kWh for June 2015 and 2014 Global Energy Mix data from the International Energy Agency for on-premises assumptions. Important Information: The views and opinions contained herein are of those named in the article and may not necessarily represent views expressed or reflected in other Schroders communications, strategies or funds. The sectors and securities shown above are for illustrative purposes only and are not to be considered a recommendation to buy or sell. This communication is marketing material. This material is intended to be for information purposes only and is not intended as promotional material in any respect. The material is not intended as an offer or solicitation for the purchase or sale of any financial instrument. The material is not intended to provide and should not be relied on for accounting, legal or tax advice, or investment recommendations. Reliance should not be placed on the views and information in this document when taking individual investment and/or strategic decisions. Past performance is not a guide to future performance and may not be repeated. The value of investments and the income from them may go down as well as up and investors may not get back the amounts originally invested. All investments involve risks including the risk of possible loss of principal. Information herein is believed to be reliable but Schroders does not warrant its completeness or accuracy. Reliance should not be placed on the views and information in this document when taking individual investment and/or strategic decisions. The opinions in this document include some forecasted views. We believe we are basing our expectations and beliefs on reasonable assumptions within the bounds of what we currently know. However, there is no guarantee than any forecasts or opinions will be realised. These views and opinions may change. Issued by Schroder Investment Management Limited, 1 London Wall Place, London, EC2Y 5AU. Registration No. 1893220 England. Authorised and regulated by the Financial Conduct Authority.