While the carbon footprint of the car rental industry has not been a primary focus of the U.S. government, the pressure is expected to increase in the future and there has been talk among those who follow the industry, Healy said, that President Biden wants the rental car companies to commit to electric vehicle fleets.
"The government push is yet to be determined but it's probably not going away," Healy said.
The car rental agencies have sustainability in their business models, such as Enterprise's carbon offsets program and a longstanding research affiliation it has in the biofuels area. Enterprise has reported on Scope 1 and Scope 2 carbon emissions for years, but not the scope 3 emissions that occur at the tailpipes of its fleet cars. Avis Budget also offers carbon offsets, carbon footprint estimates for corporate clients and cites its acquisition of car-sharing company Zipcar as part of its sustainability initiatives. Avis Budget reports 21,000-plus hybrid vehicles in its fleet globally.
Shareholder advocates focused on ESG have pressed the issue with car rental companies in recent years, asking the major companies to increase EV purchases. A Hertz shareholder climate resolution in 2020 included EVs as part of a broader discussion on climate change. "Hertz' standard rental car business currently has only three hybrid electric vehicle options at select locations for consumer rentals, with no all-electric vehicles. While Hertz has taken steps to improve energy efficiency for its operational facilities, the impact of the company's fleet remains insufficiently addressed," shareholder advocacy group As You Sow wrote in the 2020 measure.
Driss Lembachar, manager of transportation and infrastructure at Morningstar's Sustainalytics ESG risk evaluation business, said car rental companies are less exposed to car emissions than automakers, given that the ultimate responsibility for emissions and meeting fuel economy standards from a regulatory point of view mainly rests with car manufacturers. But the fuel efficiency and age of a car rental company's fleet and its renewal (or lack thereof) is material to investors since these areas impact its attractiveness and customer satisfaction/retention levels.
