Calvert  News & Commentary

Important New Study Shows Even Greater Investor Opportunities, Risks from Climate Change

Climate change is a financial risk that must be addressed with actionable solutions

4/1/2014

The Intergovernmental Panel on Climate Change (IPCC) released a major new report yesterday, warning of greater impacts to human and natural systems than in earlier reports, and stressing the need to invest urgently in mitigation and adaptation to climate change.

The report concludes that greenhouse gas emissions from deforestation, fossil fuel use, agriculture and other human activities continue to pose global risks – particularly to the most vulnerable populations in poor communities, low–lying areas and the developing world. Life for many in these communities could evolve into a dystopia of food shortages or food price volatility, degradation of public health and freshwater reserves, loss of rural livelihoods, political instability, and other major disruptions. The report stresses however that many of these systems – like a pandemic – are global in nature, affecting wealthy countries as well, and many are “pervasive and irreversible.” And ecosystems and animals are also at risk; in all likelihood we face the tragedy of mass extinctions.

Climate change, then, is even more urgent challenge for corporations – both in terms of the physical risks they face in their operations and supply chains, and higher cost of resources like energy, water, and raw materials. The responsibility to act, however, extends beyond corporations – to investors, governments, international institutions and communities – to make accelerated commitments to mitigate climate change through carbon emissions reductions, support of alternative energy technologies, resiliency planning and adaptation.

Calvert is doing its part to support this effort by investing in companies that have embedded climate change risks and solutions into their corporate DNA, by pressing companies for disclosure and aggressive targets to reduce greenhouse gas emissions, and asking them to take public positions in support of climate policy. We also work in concert with other investors, forming coalitions to leverage greater pressure on companies and policymakers. In addition, we recognize the enormous business opportunity and potential to effect positive change by investing in solutions to the global systemic problems detailed in the IPCC report – solutions like alternative energy and more efficient water technologies.

Finally, climate change is as much a challenge of human capital as an environmental one. We think corporations that stress diverse boards and leadership, and involve vulnerable communities in planning for climate impacts, are much more likely to be a good investment bet – both for shareholders and the planet.

Ellen Kennedy, Manager, Environment, Water and Climate Change, Calvert Investments.

Gabriel Thoumi, CFA, Sr. Sustainability Analyst, Calvert Investments. Mr. Thoumi is also an Expert Reviewer to the InterGovernmental Panel on Climate Change Working Group 3.



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