The mobility ecosystem encompasses companies in electric vehicle (EV) manufacturing, mineral extraction, batteries, charging, optimization and connectivity software, data collection, and autonomous driving, among others. Significant amounts of capital are flowing into this sector, bolstered by burgeoning climate change awareness and actions such as the recent infrastructure bill and California’s proposed rule to phase out the sale of new fossil fuel cars by 2035.

These companies are also receiving increasingly frequent attention from plaintiffs, especially for de-SPAC transactions, although companies that underwent a traditional initial public offering (IPO) and mature companies are not immune. Heightened SEC attention, oversight and enforcement, as well as investor lawsuits, continue to pressure this sector from multiple angles.

Underlying allegations in the investor lawsuits include, but are not limited to, misrepresentations, misstatements, or omissions related to production capabilities and progress, product design proficiencies, safety, supply chains, human capital management, use of metrics, capital resource usage or requirements, and adequacy of internal controls. Additional themes include departures of key individuals and conflicts of interest.

Recent equity market volatility and related macro factors have resulted in increased rates of redemption, termination of SPAC merger deals, or the need to raise additional capital shortly after going public. Some EV companies are being forced to declare bankruptcy, while others have been acquired for a fraction of their initial valuation.

Aligning directors and officers (D&O) policy language and tower structure to maximize risk transfer is paramount for this sector. Selecting a broker with an integrated and experienced legal and claims team is also crucial as claims can be highly complex. Claims involving de-SPAC transactions often trigger multiple insurance towers (e.g., the private company, SPAC, sponsor, and public company) by alleging pre- and post-public wrongful acts and targeting executives in various capacities.

Companies in the mobility sector are also facing immense internal and external pressure to address Environmental, Social, and Governance (ESG) factors, especially with respect to climate considerations. While it is not clear if or when the SEC’s proposed climate change disclosure rules will be effective, companies should consider preparing or refining their ESG strategy now, as the interested audience goes beyond regulators and includes shareholders, customers, environmental groups, politicians, employees, local communities, and proxy advisors, among others. In the D&O insurance context, missteps around ESG initiatives may lead to D&O claims.

For more information about how Aon can help companies navigate their ESG journey, read about Aon’s ESG Maturity Diagnostic here.

Contact

Discuss this article with Aon professionals Cruz Parsons, Adam Furmansky, Laura Wanlass and Michael Stankard.



Cruz Parsons
Vice President
Los Angeles

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Adam Furmansky
Senior Vice President, Deputy D&O Product Leader - East
New York

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Laura Wanlass
Partner, Corporate Governance & ESG Advisory
Virtual

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Michael Stankard
Industry Practice Leader - Industrial & Materials Practice Group
Virtual