Calvert  News & Commentary

Calvert Investments’ Oil and Gas Climate Advocacy Complements Divestment Movement

Oil and gas holdings pushed to address industry’s impacts

12/5/2012

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Calvert Investments understands the impetus behind the 350.org campaign led by Bill McKibben urging college and university endowments along with foundation, union and pension funds to divest from companies producing fossil fuels. We share this campaign's frustration with the slow and uneven progress in addressing the global climate crisis, especially the inability of efforts to set a price on carbon in the United States as a means of curbing emissions.

Yet divestment is not the only valid approach to challenging fossil fuel companies to curb emissions. We believe that responsible investors such as Calvert continue to have a vital role to play alongside this timely movement.

Calvert takes seriously the opportunity we have as a leading sustainable and responsible investor to use the power of our investment decisions and advocacy to play our part and make a difference on climate change.

That is why for  the past four years, Calvert has pushed companies in the oil, gas, and related sectors to report and reduce greenhouse gas (GHG) emissions, expand investments in alternative energy, support constructive climate change public policy protect the human rights of people affected by their operations, and disclose their revenue payments to governments around the world. And we have achieved results even as monumental challenges remain, especially in diminishing the world's dependence on carbon and in turn the climate crisis.

While many of Calvert's funds include energy holdings, relatively few energy companies meet the sustainability criteria for our Signature® funds, which screen companies comprehensively for their environmental, social and governance performance. As this table demonstrates, the Calvert Social Index® has more than four times less exposure to the energy sector than the Russell 1000.

Sector Percentage of Total Holdings: Calvert Social Index and the Russell 1000

Global Industry Classification Standard (GICS®)  Sectors As of 12/4/12  
Calvert Social Index Russell 1000 Difference in Weighting
(%) (%) (%)
Consumer Discretionary 13.49 12.44 1.05
Consumer Staples 10.61 10.13 0.47
Energy 2.24 10.22 -7.97
Financials 16.89 15.83 1.07
Health Care 12.10 11.99 0.11
Industrials 8.31 10.67 -2.37
Information Technology 30.37 18.52 11.85
Materials 1.61 3.84 -2.23
Telecomm Service 3.28 2.90 0.38
Utilities 1.11 3.45 -2.35

When Calvert does have energy holdings we seek to influence the policies and practices of those companies. For example, several of the largest international oil and gas companies in the world are held in Calvert SAGE® portfolios, which apply environmental, social and governance criteria that are less stringent than those applied to the Calvert Signature portfolios. Calvert undertakes "enhanced engagement" with over a dozen SAGE companies, emphasizing intensive dialogue with senior management of companies in the energy sector such as ExxonMobil, Royal Dutch Shell, ConocoPhillips and Marathon Oil.

Shareholder Advocacy and Public Policy

Calvert pushes oil and gas companies held in the Calvert Funds to set and meet greenhouse gas (GHG) emissions reductions targets, invest in alternative energy, and play a constructive role in public policy with the objective of setting a price on carbon. Our advocacy has compelled a number of oil and gas companies across our portfolios to take action to address the causes and impacts of climate change. Here are several examples of progress to which Calvert has contributed directly:

Climate Engagement with Calvert Signature Holdings:

As a member of a Suncor sustainability stakeholder group, Calvert has pushed the company to set emissions reduction targets for several years. In 2009, Suncor set a target to achieve a 10% improvement in energy efficiency from a 2007 baseline to 2015. This goal will force Suncor to manage its oil sands and other oil and gas operations in a way that diminishes GHG emissions.

In 2009, Calvert withdrew a shareholder resolution that called on Denbury to release a sustainability report that outlines "corporate strategies to reduce greenhouse gas emissions" when the company committed to produce such a report. Denbury published a report in 2011 that outlines its climate change programs. These programs include a significant business focused on CO2 storage in Enhanced Oil Recovery (EOR).

 

Calvert Engagement with SAGE Holdings:

At an October 2008 ExxonMobil executive retreat, Calvert pushed the company to clarify publically its position regarding pending climate change legislation in 2009. In January 2009, CEO Rex Tillerson outlined ExxonMobil's most constructive position on climate regulation to date, which included support for a carbon tax.

At an October 2011 sustainable and responsible investing (SRI) conference, Calvert prompted Vice President of Corporate Affairs Ken Cohen to reiterate the company's support for a carbon tax and willingness to work with responsible investors and environmental groups to achieve this end. In September 2012, Calvert organized a meeting between sustainability analysts and ExxonMobil senior executives to clarify statements Tillerson made in June of that year that appeared to prioritize adapting to climate change over taking steps to lessen its impact (including greenhouse gas emissions reductions and alternative energy investments). Cohen took the opportunity to emphasize the steps ExxonMobil has taken to mitigate the impacts of climate change.

Calvert urged Marathon Oil to set and meet GHG emissions reduction targets since 2009, as part of our SAGE Enhanced Engagement with the company. In 2010, the company set a target to reduce its GHG emissions intensity by four percent from a 2008 baseline to 2013. As of 2012, Marathon Oil has made intensity reductions many times higher than the original goal.

 

Climate Public Policy Initiatives

In addition to engaging directly with companies, Calvert has contributed to and defended public policy that requires industry action to reduce GHG emissions and invest in alternative energy.

Calvert has worked with the National Resources Defense Council (NRDC) to preserve Section 526 of the Energy Independence and Security Act, which prohibits the U.S. Department of Defense from buying oil with high carbon content.

Calvert also has worked with the Investor Network on Climate Risk (INCR) to support strong fuel economy standards for automobiles (which the Obama Administration established in August), has vigorously supported the U.S. Environmental Protection Agency (EPA) proposed standard to limit greenhouse gas emissions from electric power plants, and has advocated for renewable energy.

 

Taking on Fossil Fuel Companies Beyond Climate

Calvert has also used its ownership of certain oil, gas and mining companies to challenge the industry to demonstrate higher standards of corporate responsibility and sustainability on other critical environmental and social issues.

Calvert is a leading investor voice and force against irresponsible oil and natural gas development that employs hydraulic fracturing. We have contributed to a set of guidelines for companies employing this practice to disclose its impacts on the environment and local communities (http://www.iehn.org/documents/frackguidance.pdf) (This will open in a new window).

Our advocacy in support of these guidelines has been aggressive and includes filing shareholder resolutions that call on companies to follow this policy and disclosure framework.

Calvert has been the leading investor supporting Section 1504 of the Dodd-Frank Act, which requires oil and mining companies to disclose the payments they make to the governments of the countries where they operate around the world. These disclosures help civil society hold governments and companies accountable and provide investors with material information that can help them to evaluate risk in their portfolios. This reform has become especially important as new oil and gas reserves outside North America are increasingly located in countries with significant corruption.

Calvert also has long played a leading role among investors in pressing oil, gas and mining companies to respect human rights. We have worked to secure the support of companies for the UN Declaration on the Rights of Indigenous Peoples, including the right to Free, Prior and Informed Consent for projects which may threaten their traditional economic and cultural rights. In addition, we have urged companies to implement the UN Guiding Principles on Business and Human Rights, especially its due diligence framework and human rights impact assessments. We have also asked companies to make the global process governing the Voluntary Principles on Security and Human Rights more accountable.

 

The Global Industry Classification Standard ("GICS") was developed by and is the exclusive property and a service mark of MSCI Inc. ("MSCI") and Standard & Poor's, a division of The McGraw-Hill Companies, Inc. ("S&P") and is licensed for use by Calvert Investment Management, Inc. Neither MSCI, S&P nor any third party involved in making or compiling the GICS or any GICS classifications makes any express or implied warranties or representations with respect to such standard or classification (or the results to be obtained by the use thereof), and all such parties hereby expressly disclaim all warranties of originality, accuracy, completeness, merchantability and fitness for a particular purpose with respect to any of such standard or classification. Without limiting any of the foregoing, in no event shall MSCI, S&P, any of their affiliates or any third party involved in making or compiling the GICS or any GICS classifications have any liability for any direct, indirect, special, punitive, consequential or any other damages (including lost profits) even if notified of the possibility of such damages.

Calvert Investment Management, Inc., 4550 Montgomery Avenue, Bethesda, MD 20814.



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