Calvert News & Commentary

Calvert Supports President Obama’s Climate Agenda in State of the Union

Calvert has a legacy of considering climate-related risk and opportunity in its Equity and Fixed Income strategies and therefore a stake in a more supportive public policy framework to encourage investment.

2/15/2013

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Calvert Investments welcomes the sharp focus President Obama placed on climate change in his recent State of the Union address setting forth his agenda for his second term. We support the President’s call for action at a time when the climate crisis presents continuing risks to the global environment, the economy and our portfolio companies. Moreover, the investments necessary to accelerate the transition to a more resilient and lower carbon economy will create jobs and spur growth that will benefit shareholders and all Americans alike.

Those investments depend partly on regulatory and legislative initiatives to raise emissions standards, support clean technologies, provide reasonable incentives and offer price signals. That is why for over a decade Calvert has played a leading role within the Investor Network on Climate Risk (a coalition of 100 institutional investors $11 trillion in assets) in pushing for the key elements of this broad policy framework in order to create a virtuous circle of even more investment in a cleaner economy.

President Obama made clear that his Administration is prepared to build on the progress made in his first four years in office. Key accomplishments include expanded support for research and development of clean technology, deployment of renewable energy, stronger fuel economy standards for cars and light trucks, and greater incentives for energy efficiency and renewable energy use. These policies and regulations, together with the increasing displacement of coal by natural gas, have kept alive the possibility that the U.S. can meet its stated goal of a 17% reduction of greenhouse gas emissions from 2005 levels by 2020.

But progress is not being made quickly enough as the risks of climate change have become all too tangible with devastated communities and billions in losses to business. Last year alone saw the hottest year in the contiguous U.S., drought in 65% of the country, the devastation of Hurricane Sandy, the lowest water levels on record in the Great Lakes, and soaring soybean and corn prices. This pattern of extreme weather has significant business implications, particularly for the insurance, food and beverage, apparel, shipping, and other industries.

While many in Congress remain complacent, investors have not had the luxury to ignore the costs of climate change. We understand the potential of companies in these industries to incur significant losses given the exposure to climate-related factors both directly and indirectly through their external value chains. That is why Calvert’s internal investment sustainability team uses a framework to measure the impact on companies’ intrinsic value.

We look both to government and the private sector to drive the transition to a lower-carbon economy. The private sector must be the source of the investment and innovation required to meet our global sustainability challenges, including climate change. At the same time, public policy must provide the signal to market players and effectively put a price on carbon so that investors and business can efficiently allocate the trillions of dollars of capital necessary to unleash the clean energy revolution.

We are pleased that the President made clear his support for these specific actions:

  • Cutting the energy Americans use in buildings and homes in half by 2030 is consistent with a recent proposal put forward by the Alliance Commission on National Energy Efficiency Policy. We see significant investment opportunities by enhancing energy efficiency in this way.
  • The “Partnership to Rebuild America” would provide funding for new infrastructure projects, some of which may be used to build climate resilience, an initiative that could benefit our fixed income and water sector investments. We also support other important measures that could support businesses and vulnerable communities, such as building sea walls, restoring wetlands, and improving electric grid resiliency. Calvert and its partners have already outlined these vulnerabilities in two reports.
  • The proposed “energy security trust,” funded by oil and gas revenues is necessary to expand investment in new clean-vehicle technology and R&D. We think that support for energy efficiency, water solutions, and other technologies is essential , especially tax credits for alternative energy projects.

In our view, investors would benefit from additional measures the President could take.

  • First, subject existing US power plants to carbon emissions standards, one of the most effective and sought-after changes to power plant regulations by environmentalists. Existing power plants produce a third of U.S. carbon emissions and are the largest single source of emissions. This action will close the loop on power plant emissions – as EPA proposed emission standards for new power plants in 2012 under the Clean Air Act Rule – standards that were supported by investors.
  • Second, subsidies for fossil fuel companies should be ended; as a mature industry that is a major driver of climate change, these companies should not benefit from taxpayer dollars. Major corporations are already signaling strong support for alternative energy through public commitments. With the extension of the Wind Production Tax Credit in January 2013, Congress signaled strong bi-partisan support for wind energy and support of clean-tech through tax vehicles.
  • Third, open new federal land to alternative energy project development. These projects, such as for solar thermal electricity, are welcome to investors, renewable energy industries, and conservation groups that have brokered deals in the past that protect endangered species.

Calvert looks forward to working with our investor allies, the companies in which we invest and others to move this agenda forward. While the private sector must continue to lead, now is the time for government to do more to create that virtuous circle of investment and further progress within a more comprehensive and certain policy environment.

Calvert Investments, Inc., 4550 Montgomery Avenue, Bethesda, MD 20814



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