Calvert Identifies Water Risk and Opportunity as Matters of Strategic Importance
While water management has been a focus of our environmental research and advocacy for many years, we have sharpened our focus since launching the Calvert Global Water Fund at a time of interest in water as both a sustainability challenge and investment opportunity.
In addition to evaluating the overall financial performance of a company before we choose to add a company to one of our traditional sustainable and responsible funds, Calvert goes a step further by evaluating the company's position on a number of issues such as the environment and human rights. This process includes determining whether a company can plan for and manage long–term water needs and minimize the effect of its operations on water quality. We also expect companies to respect the human right to water and be transparent about their involvement in policy matters that affect water pricing, water provision and water rights. We assess whether companies in which we may invest have in place strategies for sustainable water management and that they have mapped their water risks, and set goals and benchmarks to measure water impacts. We believe that both industrial suppliers and users of water will face growing scrutiny—with their social license to operate at risk in many communities and regions around the world—as the global water crisis intensifies. At the same time, we believe that companies demonstrating responsible policies and practices can benefit their customers and investors alike while contributing solutions to this global sustainability challenge.
Corporate Engagement Advocacy and Public Policy:
At Calvert, we also leverage our position as a shareholder to promote sustainable water management. We exercise leadership in various multistakeholder forums to help define, advance, educate and communicate about water risk and opportunity. Among the groups with whom we collaborate are United Nations Principles for Responsible Investment (PRI), CEO Water Mandate, Ceres, Interfaith Center for Corporate Responsibility, Social Investment Forum, Investor Environmental Health Network, Business for Social Responsibility, Global Reporting Initiative, Carbon Disclosure Project.
Furthermore, Calvert was the first investment company to endorse the UN’s CEO Water Mandate. Launched in 2007, this seminal, private–public initiative helps corporations develop, implement, and disclose their water sustainability practices and policies in six critical areas: direction operations, supply chain and watershed management, collective engagement, public policy, community engagement and transparency.
Here are some highlights of our water work during the past year:
Water–Related Business Risks:
In the last year we have focused on the link between climate impacts and water risk, recognizing that climate change may complicate and exacerbate water scarcity, flooding, competition for water resources, water pricing, insurance costs and other issues that affect small and large companies alike. We have integrated water issues in our work with the Investor Network on Climate Risk, Carbon Disclosure Project, and UN Environment Programme Finance Initiative (UNEPFI) and we explicitly incorporated water risk into our 2012 Special Report (written together with Ceres and Oxfam America), The Physical Risks from Climate Change: A guide for companies and investors on disclosure and management of climate impacts.
We filed three shareholder resolutions related to water availability and quality. We asked companies to conduct water risk mapping exercises and disclose complete information about water–related supply chain risks. Calvert’s resolution with apparel company Fossil Inc. went to a vote and we received 31 percent in favor of our proposal, while our proposal with the electric utility Cleco earned 34 percent of the votes cast. Our engagement with both companies continues. A resolution filed with Hanesbrands Inc., grew into a productive dialogue leading the company to agree to conduct many improvements including employing a water risk mapping tool, improving disclosure of water indicators, updating the public sustainability website, and reaching out to environmental and community groups to explore working partnerships.
We have engaged in dialogues with ten companies on water risk identification, human rights and water, cleaning up legacy pollution, supply chain and disclosure. For example, for several years, we have been in dialogue with Coca–Cola Company and PepsiCo around issues such as sustainable agriculture, water footprint and impact of key crops, performance metrics and disclosure, and creating partnerships with small farmers and stakeholders. In October 2012, Coca–Cola announced that it developed a set of Sustainable Agriculture Guiding Principles. The principles encourage suppliers to address important sustainability issues such as pesticide use; soil health, water quality and biodiversity. Calvert has also encouraged PepsiCo to find tangible ways to operationalize its stated commitment to the human right to water, engaging the company both through direct dialogue and the CEO Water Mandate.
We also promote greater understanding of water risk by both companies and investors through our involvement with the Carbon Disclosure Project (CDP) Water information request. Calvert is a signatory to the annual request that is distributed to the world’s largest, most water intensive companies.
Water–related Business Opportunities
Calvert’s Global Water Fund continues to gain attention. Water stocks “make a wave” on Wall Street due to at least four key drivers: growing demand for water globally, limited supply, tightening regulations and the wide availability of technology.
We developed a series of company snapshots to tell the story of leading companies held in the Global Water Fund. These companies are creating shareholder value while helping to solve the global water crisis. Whether it’s variable speed pumps for water utilities, fiber optic cables to detect leaking pipes or UV disinfection to treat wastewater, these companies are positioned for sustainable growth.
Calvert’s Appearances at High Profile Water Events Demonstrate Leadership:
Calvert has spoken at a number of high profile events and conferences including the U.S. Environmental Protection Agency’s (EPA’s) Importance of Water Symposium in Washington DC in December, the Carbon Disclosure Project’s (CDP) Global Water Forum in New York City in October, the SRI Conference on Sustainable, Responsible and Impact Investment in Connecticut in October and the Financial Times Investing in a Sustainable Future in New York City in March.
From investing in companies that are contributing to solutions to speaking publicly on the materiality of water risk, Calvert is committed to using its position to advance sustainable use, management and goverance.