Volvo Car Group Freedom to move in a personal, sustainable and safe way - Green Financing Framework Presentation
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Volvo Car Group
Freedom to move in a personal, sustainable and safe way
Green Financing Framework Presentation
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Volvo Car Group: Green Financing Framework Presentation 2
1 2 3 4 5
Introduction to Sustainability It’s time to Green Business
Volvo Cars is key change Financing update
Framework
Volvo Car Group: Green Financing Framework Presentation 3
Volvo Cars in brief 2019
Well positioned to take advantage of industry change
VOLVO CARS
Fast growing premium OEM
705,000 SEK 274
BN SEK 14 BN SEK 69 BN 42,000
Cars sold Revenue EBIT Liquidity Employees STRATEGIC AFFILIATES
+57% +118% >8x SEK 12BN +93% (50%)
since 2011 since 2011 more than 2011 Free Cash Flow since 2011
Moody’s S&P
(30%)
Ba1 BB+
Volvo Car Group: Green Financing Framework Presentation 4
Flexible, global production footprint supports continued growth
Global sales development
80000
US
15% of
Europe
sales
48% of China 60000
sales 22% of
sales
2019
40000
2020
Production Other
14% of
R&D 20000
sales
Assembly / CKD
0
Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Covid-19 effect on production: Volvo Cars 2020 sales development:
• Chinese manufacturing closed after Chinese New Year for four to five weeks • China back to 2019 levels in mid April
• Sweden and Belgium rapidly resumed production already in third week of April • US back at the beginning of June
• US plant resumed production end of July • Europe back since the beginning of July
• Market share gains in all regions
Volvo Car Group: Green Financing Framework Presentation 5
Freedom to move - personal, sustainable and safe
PERSONAL SUSTAINABLE SAFE
CONNECTIVITY MAKING CARS SAFER
KEY ENABLER – SINCE 1927
FOR FUTURE MOBILITY ELECTRIFICATION
THE FUTURE IS NOW AUTONOMOUS DRIVING
SHARED MOBILITY SAFETY IS KEY
NEW CONSUMER SEGMENTS
Volvo Car Group: Green Financing Framework Presentation 6
1 2 3 4 5
Introduction to Sustainability It’s time to Green Business
Volvo Cars is key change Financing update
Framework
Volvo Car Group: Green Financing Framework Presentation 7
Sustainability is as important to Volvo Cars as safety
It’s in our DNA
1959 Three-point 1976 World’s first 3-way catalytic
Safety Belt converter LambdaSond. Removes
90% of noxious exhaust emissions
1972 Rearward-facing
Child Safety Seat 1996 Environmental requirements
on suppliers
1991 Side Impact
Protection System 2011 & 2012 Launched fully electric
vehicle C30 and Plug-In hybrid V60.
2015 & 2017 XC90 and Downsize to 4-3 cylinders in all
XC60 received Best in models
Class safety awards1
2019 An electric motor for all new
2020 Speed limit of models and all models in PHEV
180km/h introduced versions. First full range BEV
launched
1 Best overall performer in the Euro NCAP
Volvo Car Group: Green Financing Framework Presentation 8
Sustainability is key to our future success
Why? Our ambitions
1
Climate change
2
Meet growing
3
Meet
– we must act regulatory consumer Climate neutral Circular business Leader in ethical &
demands expectations company by 2040 by 2040 responsible business
4
Attract employees
5
Increase
2025 ambition: 2025 ambition: 2025 ambition:
40% reduction of Cost savings of SEK 1bn Take the lead in setting a
and responsible profitability
overall CO2 emissions and 2.5m ton annual new global people
business partners
per car emissions reduction standard for the industry
Volvo Car Group: Green Financing Framework Presentation 9
We aim to be a climate neutral company by 2040
Ton CO₂e
2025 ambition: Per car
40 -50%
2018
reduction in
50% tailpipe emission
35 2025
30
reduction in 25
25% operational emissions 20
-25%
36 ton
15
reduction in supply
25% chain emissions
10
18 ton 17 ton
13 ton
-25%
5
3 ton 2 ton
would lead to a 40% 0
Tailpipe emissions Raw materials Total operations
reduction of overall CO2 and suppliers incl. Logistics
emissions per car
Average CO₂e emissions per vehicle over its lifetime
2018-2025
Volvo Car Group: Green Financing Framework Presentation 10We aim to be a circular business by 2040
• Developing sustainable business models
Circular
Design
2025 ambition: • Recycled/bio-based materials
Recycled and bio-
25 % based plastics Component Value Material Value
Retention retention • Maximise resource efficiency
40% Recycled aluminium
• Remanufacture and reuse existing
25% Recycled steel parts
Usage Waste • End of life and eliminating waste
We are aiming for annual models Elimination Currently, 94% of global production waste
savings of SEK 1 Billion and a
recycled
2.5M ton reduction in carbon
emissions by 2025
Volvo Car Group: Green Financing Framework Presentation 11We aim to be a recognised leader in ethical and responsible business
Industry role model for Put sustainability on a par Sustainability criteria in Tackle corruption
global people standards, with quality and cost in debt funding, investments and unethical
equality and labour rights procurement and financial products business practices
Volvo Car Group: Green Financing Framework Presentation 12Collaboration is key
Volvo Cars believes in the importance of engaging with other like-minded companies and
organisations to drive our own sustainability performance and industry change
We are an active Member of: We work with:
Volvo Car Group: Green Financing Framework Presentation 131 2 3 4 5
Introduction to Sustainability It’s time to Green Business
Volvo Cars is key change Financing update
Framework
Volvo Car Group: Green Financing Framework Presentation 14Transitioning into a pure EV group
Investments in new technology and car models support our sustainable transformation
Next generation platforms
and electrification:
Fully flexible platforms in-house design and
prepared for electrification Strategic ownership in Carve out of traditional
Polestar spearheading combustion engine improved energy efficiency
across all models
EV technology operations
One 3-4 cylinder Modern aerodynamic
powertrain family with All models in HEV optimised car designs and
improved fuel economy version light weight materials
First BEV
100%
0%
2014 2019 2025
Conventional technology Electrification – Including BEV and HEV technology
Indicative car project investment split, which is a material part of our total capex and R&D of 32 bn, FY 2019
Volvo Car Group: Green Financing Framework Presentation 15Accelerating the shift, electrifying model line up toward 2025 EV target
Volvo Cars fleet Strong PHEV Leader in premium
Most ambitious EV target in the industry: CO2e decrease sales momentum plug-in sales in H1
50% BEV and 50% HEV Sales by 2025 +80%
-16%
157 38
PHEV units
132 14%
brand sales
Targeting 20% PHEV sales in 2020
EU Fleet
EV% of
21
g/km
6%
One new fully electric car launch every year1
2010 2019 H1 2019 H1 2020 Volvo Peer
average2
Polestar 2 XC40 Recharge (Q4-20) “BEV only” (2021) XC90 BEV (2022) and more...
470km >400km, 408hp
300 kW (408hp) Sold out for 2020
1 In coming years, Volvo Cars aim to launch one new BEV every year
Volvo Car Group: Green Financing Framework Presentation 16
2 Data source: IHS, Peers: Audi, BMW, MercedesConstant focus on reducing global operational emissions
Climate neutral manufacturing operations by 2025
Skövde, Sweden
• Climate neutral manufacturing
Charleston, USA since January 2018
• Opened in 2018 • Uses electricity from
• On site solar energy as renewable sources
one power source • Heating generated by waste
incineration, biomass and
recycled bio-fuels
Ghent, Belgium
• Saving 15,000 ton of CO2 per year
Chengdu, China
since 2018 with solar power • Volvo Cars’ largest plant in China
• Reduced carbon emissions by • Powered by 100% renewable electricity
40% in 2016 by introducing new
heating system • CO2 emissions reduced by over 11,000
ton per year with renewable electricity
We continue to improve our operational footprint by sourcing renewable energy, improving
energy efficiency and adapting our logistics network
Since 2008 all European 45% reduction in CO2 emissions 8% drop in logistical 83% climate-neutral Trucks-to-trains swap cuts
plants have been powered per manufactured car in Europe emissions per vehicle from electricity used in 2020 emissions since 2020
by renewable electricity and Asia since 2015 2018 – 2019
Volvo Car Group: Green Financing Framework Presentation 17Responsible supply chain and sustainable battery management
as we accelerate our EV journey
Action Within the Supply Chain Responsible Battery Strategy
CO2 commitments secured from our battery suppliers and blockchain technology used
• Ambition to achieve 100 per cent throughout our cobalt supply chain
renewable energy at all tier 1
suppliers by 2025 1st life ends
Reuse in car 2nd Life Recycling
• Increasing use of recycled
materials
• Creating closed loops of material
flows
Reuse batteries in Utilise batteries in Recover battery
• Reducing emissions from car after non-aggressive energy materials to enable
materials manufacturing storage applications new batteries to be
outside of vehicle produced
• Third party verified supplier
emission data, already achieved
for 110 key suppliers ✓ Battery assembly line at Ghent manufacturing plant in Belgium
✓ Planned construction of a battery assembly in US plant. expected to start fall 2020
Volvo Car Group: Green Financing Framework Presentation 18Sustainability at Volvo Cars is centrally governed and coordinated
Board of Directors (BoD) Executive Management Team (EMT)
People and Sustainability Commercial &
Committee Product Creation Board Corporate Board
Operations Board
Cluster
Global Sustainability Global Sustainability Green Financing
Management
Team (GST) Committee Committee Teams
Strategic initiatives
Other sustainability issues
Volvo Car Group: Green Financing Framework Presentation 191 2 3 4 5
Introduction to Sustainability It’s time to Green Business
Volvo Cars is key change Financing update
Framework
Volvo Car Group: Green Financing Framework Presentation 20Introduction to the Green Financing Framework
• The Green Financing Framework aligns our sustainability strategy with
financing opportunities that lead to a positive impact on environment
and society
• The Green Financing Framework is aligned with both the ICMA Green
Bond Principles (GBP) and the LMA Green Loan Principles (GLP)
• Cicero have provided a Second Party Opinion with a Dark Green shading
Project
Use of Management
evaluation and Reporting
proceeds of proceeds
selection
Volvo Car Group: Green Financing Framework Presentation 21Use of proceeds:
Strategic projects in Clean Transportation
R&D:
Zero emission vehicles
New electric powertrain
and platform technology
Manufacturing:
Increased BEV production
capacity and battery assembly
Investments into polestar to Expected allocation of proceeds
spearhead electrification
R&D Manufacturing Polestar
Volvo Car Group: Green Financing Framework Presentation 22Other elements from Green Financing Framework
Green Financing Committee (GFC) responsible for the Eligible Green Projects from selection till reporting
Process for
project evaluation Identification Selection Tracking Transparency
and selection potential Green Projects evaluated by GFC business and finance review and reporting
✓ Proceeds will be allocated to ✓ Projects will be tracked and ✓ Unallocated proceeds will be
Management of the Eligible Green Projects adjusted on a semi-annual earmarked and invested, as
proceeds portfolio with a three-year basis via the portfolio per company policy
look-back period approach
Volvo Cars will publish a Green Financing Instrument report annually focusing on transparency and impact
✓ Allocation Reporting, annually ✓ Impact Reporting, where feasible
Reporting • The allocation of the net proceeds • The relevant environmental impact
• The proportion used for financing vs. refinancing metrics and methodology will be
• Unallocated proceeds invested in cash and/or cash equivalents disclosed
Volvo Car Group: Green Financing Framework Presentation 23Second Party Opinion by CICERO Shades of Green
SHADES OF GREEN
Green Financing Framework has received Dark Green
shading by CICERO Shades of Green
GOVERNANCE PROCEDURES
CICERO Shades of Green finds the governance
procedures in Volvo Cars’ framework to be Excellent
GREEN BOND and GREEN LOAN PRINCIPLES
Based on this review, CICERO Shades of Green
confirms that this Framework is in alignment with the
principles
Volvo Car Group: Green Financing Framework Presentation 241 2 3 4 5
Introduction to Sustainability It’s time to Green Business
Volvo Cars is key change Financing update
Framework
Volvo Car Group: Green Financing Framework Presentation 252020 H1 business update – market share gains despite Covid-19 impact
• Market share gains in all regions despite Covid-19 impact, positive y-o-y global sales growth since July
• Liquidity remained strong and cost efficiencies intensified, which partly offset reductions in revenue and EBIT from volume decline
• Accelerated transformation as PHEV sales double, Polestar 2 reaches markets and XC40 production begins in H2
Retail sales Revenue EBIT / margin Cash flow
(K UNITS) (MSEK) (MSEK/%) from operating and investing
activities (MSEK)
-118% -364%
-21% -14% 5,519
341 130,095
111,759 -2,759
270
4.2%
-0.9%
-989 -12,803
2019 2020 2019 2020 2019 2020 2019 2020
H1 H1 H1 H1 H1 H1 H1 H1
Volvo Car Group: Green Financing Framework Presentation 26Strong historical performance paves the way for continuous growth
Retail sales Revenue
+4.4% +9.1%
-9.9% -6.6%
705 253 274 256
642 635 SUV
535 572 209
Estate 181
273 359 445
254 424
Sedan
170 198 185 161 116
69 Other
42 101 98 99 95
2016 2017 2018 2019 2020 June LTM 2016 2017 2018 2019 2020
June LTM
EBITDA Operating cash flow
29.9 32
30 26.2 27.4 15
EBITDA 27
23.4 25 27
21.5 margin, % 22
12.5% 10
12.1% 10.8% 10.9% EBITDA
9.1%
10 5
0 0
2016 2017 2018 2019 2020 June LTM 2016 2017 2018 2019 2020
June LTM
Volvo Car Group: Green Financing Framework Presentation 27Building the future through focused and controlled investments
Annual capital expenditure (bn SEK) Annual research and development
expenses (bn SEK)
11.4 11.5
25.7 10.9
12.3% 10.2 10.2
9.5
20.9 21.0 20.1
19.3 8.7
10.8%
13.9 6.2 7.3 9.2
8.7% 8.3%
9.2 5.9% 5.7%
7.7% 7.9%
4.7 4.3% 4.2% 4.5%
3.6%
17.0
13.1 13.6 11.8
9.2 10.9
2015 2016 2017 2018 2019 2020 2015 2016 2017 2018 2019 2020
June June
LTM LTM
% of Revenue Intangible investments Tangible investments % of Revenue R&D expenses
Volvo Car Group: Green Financing Framework Presentation 28Robust liquidity position with significant positive net cash
2020 maturity profile and split (MSEK)
68,100
24,300
Net cash
500 11,800 32%
32,000
68%
43,300
7,600 7,400 6,650
2,400 450 5,850
4,400 650
2,450 6,200
1,800 5,200 450 5,200
3,000 2,000 200
Liquidity 2020 2021 2022 2023 2024 2025 2026
June 30
2020 Undrawn credit facilities Marketable securities Cash & cash equivalents Loans Bonds Loans Bonds
• Strengthened liquidity with SEK 14.7bn credit facilities (of which SEK 13.2 bn incremental)
• Cash flow positive by the end of the second quarter
All figures are rounded
Volvo Car Group: Green Financing Framework Presentation 29Outlook H2 2020
Ambition to return to sales volume, profit
and cash flow similar to H2 2019 levels.
Committed to continue investments in
new technologies and products.
Volvo Car Group: Green Financing Framework Presentation 30Fastest growing premium auto mobility group with leading ambitions
Leading ambitions Financial strength
Climate action, Circular economy, Ethical & responsible business SEK68bn of liquidity supporting a prudent financial policy
Superior growth Fast-transforming
Track record of outperformance set to continue Well positioned to take advantage of industry change
Value creation
Truly global Market share gains and premium profitability
Balanced global commercial and industrial footprint and leveraging synergies through collaboration with
strategic affiliates and Geely group
Volvo Car Group: Green Financing Framework Presentation 31volvocars.investors.com investors@volvocars.com
Appendix 1:
Green Financing Framework
Volvo Car Group: Green Financing Framework Presentation 33Use of Proceeds
An amount at least equivalent to the net proceeds from the issuance of the Green Financing Instrument, will be used to finance or refinance,
in whole or in part, new or existing, projects, assets or activities that meet the Eligibility Criteria defined below:
Eligible Categories EU Environmental
Description
(ICMA GBP/ LMA GLP) Objectives
Investments and expenditures (incl. acquisition costs, research & development and licensing
cost) for the design, development and manufacturing of Zero Emission Vehicles that is Battery
Electric Vehicles (BEV):
• Research & Development dedicated to Zero Emission Vehicles, (including powertrains)
Climate Change
Clean Transportation and technology which include testing, development of facilities, tooling and
manufacturing of Zero Emission Vehicles Mitigation
• Manufacturing Facilities, including new facilities and upgrading or modifying of current
manufacturing facilities to produce Zero Emission Vehicles or related components such
as EV Batteries and powertrains, as well as remanufacturing and/or recycling of
batteries
For avoidance of doubt, we have not included any costs, investments and expenditures related to Hybrid Electric Vehicles (HEV) and Plug-In
Hybrid Vehicles (PHEV).
Volvo Car Group: Green Financing Framework Presentation 34Process for Project Evaluation and Selection
A cross-departmental Green Financing Committee (the “GFC”) has been established as an important structure within its overall governance
framework. The GFC will be responsible for:
• Reviewing and validating the portfolio of Eligible Green Projects
• Monitoring the Eligible Green Projects pool during the life of the instruments
• Preparing and recommending changes or updates to the Green Financing Framework
• Reviewing and approving of the Green Financing Instruments report
• Monitor on-going evolution related to the sustainable financing bond market
The process for the evaluation and selection of Eligible Green Projects will be as follows:
Identification Selection Tracking Transparency
by the relevant business submitted Eligible on each Eligible Green the GFC will review
functions and the Global Green Projects for Project by Business the register of
Sustainability Team potential validation with the Control Team and Eligible Green
Eligible Green Projects Eligibility Criteria maintain a register by Projects on semi-
Treasury Team annual basis
Volvo Car Group: Green Financing Framework Presentation 35Management of proceeds
Efficient tracking of the proceeds
• The net proceeds from Green Financing Instruments will be deposited in Volvo Cars general account and an amount equivalent to the
net proceeds will be earmarked for allocation to the Eligible Green Projects portfolio, in accordance with Volvo Cars Green Financing
Framework
• The Eligible Green Projects consist of recent and new projects with expenditures incurred within a three-year look-back period before
their inclusion in portfolio
• All relevant information regarding the issuance and projects (re)financed will be monitored and documented. The balance of the tracked
proceeds will be periodically adjusted on a semi-annual basis. In case of divestments or if an Eligible Green Project no longer meets the
Eligibility Criteria, the proceeds will be reallocated to other Eligible Green Projects
• The payment of principal and interest on the Green Financing Instruments will be made from Volvo Cars’ general funds and will not be
linked to the performance of any Eligible Green Projects
• Until the full allocation of the Green Financing Instrument proceeds to Eligible Green Projects, the balance of unallocated net proceeds
will be earmarked and invested in cash and/or cash equivalent and/or other liquid marketable instruments, as per Volvo Cars’ cash
management policy
Volvo Car Group: Green Financing Framework Presentation 36Reporting & Verification
Focused on Transparency & Impact
Volvo Cars is committed to transparent reporting and will publish a Green Financing Instrument report within one year from the date of
issuance of each Green Financing Instrument and annually thereafter until full allocation of the proceeds.
Allocation Reporting, disclose on an annual basis
▪ The aggregated amount of allocation of the net proceeds to the Eligible Green Projects at category level
▪ The proportion of net proceeds used for financing versus refinancing
▪ The balance of any unallocated proceeds invested in cash and/or cash equivalents
Impact Reporting, disclose where feasible, the relevant environmental impact metrics and measurement methodology for
quantitative indicators. Below are examples of impact indicators that may be reported:
Eligible Category Potential Quantitative Performance Indicators
▪ Absolute CO2 tailpipe emissions avoided
▪ Percentage reduction in CO2 tailpipe emissions per vehicle
Clean Transportation
▪ Number of BEV cars sold
▪ Percentage of BEV cars in the overall fleet mix
Volvo Car Group: Green Financing Framework Presentation 37Appendix 2: Volvo Car Group: Green Financing Framework Presentation 38
The Volvo Car Group – a set-up for the future
VOLVO CARS STRATEGIC AFFILIATES
Fast growing premium OEM
(50%) (30%)
New youthful brand
Spearheading going global to
electrification with address 65 M
DIRECT CONSUMER BUSINESSES pure progressive mass market
performance cars
Direct online
Care by Volvo sales ADAS / AD full
My car always My car sometimes software stack
Stay Home Store
developer1
Designers Choice
Strategic affiliates – Non-consolidated
Volvo Cars – Consolidated
1In April 2020, it was announced that Volvo Cars and Veoneer would split the JV and Volvo Cars would continue to
Volvo Car Group: Green Financing Framework Presentation develop AD / ADAS software under a separate wholly owned entity 39Strong portfolio and a leader in premium plug-in
2020 H1 sales by market, carline and powertrain
+80%
38
S90
21
S60 PHEV sales (k units)
6% 14%
14%
XC60
V60 H1 2019 H1 2020
17%
CAGR
69% +4.7%
V90 705
642 635
Europe 535 572
504
XC40 China
XC US
V XC90 Other
S
2015 2016 2017 2018 2019 LTM
Volvo Car Group: Green Financing Framework Presentation 40Commitment to energy efficiency in all aspects of product development
...2019 2020...
Fully flexible platforms One powertrain family – improved fuel
Next generation platforms and electrification Aerodynamic top hats and
prepared for electrification economy of up to 35%, same lines
in-house design & improved energy efficiency light weight materials
across series and assets production for economies of scale
Scalable Product
Architecture (SPA) Diesel 4 cyl Mild
Last generation
90 series diesel engines hybrid
60 series
SPA 2 – Designed for Modern aerodynamic
Polestar 1 Electrification optimized car designs
Petrol Plug-in
3-4 cyl hybrid
Compact Modular
Architecture (CMA)
40 series
PHEV Fully
Lynk & Co
Twin Engine electric Lightweight and
MEP2-4 sustainable materials
Polestar 2
Volvo Car Group: Green Financing Framework Presentation 41First carmaker to introduce Blockchain for global traceability
Volvo Cars has been the first carmaker to
Supply chain
implement global traceability of cobalt used
in its batteries by applying blockchain
technology.
Blockchain technology, which establishes a
transparent and reliable shared data
network, significantly boosts transparency
of the raw material supply chain as the
information about the material’s origin
cannot be changed undetected.
This ensures that customers can drive “We have always been committed to an ethical supply chain for our raw
electrified Volvo vehicles knowing the materials. With blockchain technology we can take the next step towards
material for the batteries has been sourced ensuring full traceability of our supply chain and minimising any related
responsibly. risks, in close collaboration with our suppliers.”
Martina Buchhauser, Head of procurement at Volvo Cars
Volvo Car Group: Green Financing Framework Presentation 42You can also read
