Impact Blog
Climate change: Evidence, costs and consequences

The views expressed in these posts are those of the authors and are current only through the date stated. These views are subject to change at any time based upon market or other conditions, and Calvert disclaims any responsibility to update such views. These views may not be relied upon as investment advice and, because investment decisions for Calvert are based on many factors, may not be relied upon as an indication of trading intent on behalf of any Calvert fund. References to individual companies for Engagement or Research purposes are provided for illustrative purposes only and may not be representative of the results of all of Calvert’s engagement efforts. The discussion herein is general in nature and is provided for informational purposes only. There is no guarantee as to its accuracy or completeness. Past performance is no guarantee of future results.

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      By Jade Huang, Portfolio Manager, Calvert Research and Management and Chris Madden, Portfolio Manager, Calvert Research and Management

      Washington - A new scientific report on climate change, released by the U.S. government last month, issued stern, evidence-based warnings about its potentially devastating social, environmental and economic consequences. If left unchecked, the report claims that the cost of climate change could reach hundreds of billions of dollars annually - or more than 10% of U.S. GDP by 2100.1

      The fourth National Climate Assessment, produced by 13 federal agencies as part of a mandate by Congress, clearly lays out the far-reaching effects of climate change across all economic sectors and regions of the country. Manufacturing, trade, agriculture, transportation and infrastructure — all of which intersect with other U.S. economic sectors - will be severely impacted. The report joins a large body of evidence, including findings from the Intergovernmental Panel on Climate Change (IPCC) and UN SDGs, sounding the alarm on global warming.

      Wide-ranging implications

      Beyond the economic toll, climate change will wreak havoc with ocean health, water quality, agricultural productivity and the biodiversity of our ecosystems, according to the report. There will be a large toll on human health and well-being as higher temperatures lead to more extreme weather, respiratory stress and food and waterborne diseases. Already vulnerable populations, such as the elderly, sick and children, will feel the effects the most.

      The report hangs a precise price tag on some of the costs of climate change: $141 billion from heat-related deaths, $118 billion from sea-level rise and $32 billion from infrastructure damage by the end of the century, among others. The report concludes there is no convincing alternative explanation for the changing climate other than human activities, especially emissions of greenhouse gases (GHG). These conclusions stand in stark contrast to the current administration's premise that environmental regulations to curb GHG emissions will hurt U.S. economic growth.

      Asset manager perspectives

      In our view, this report confirms the need for asset owners like Calvert to understand the full range of risks companies face, not only in their home operations -- but across their value chains -- and what they are doing to proactively manage those risks. Through the Calvert Principles for Responsible Investment, Calvert's research focuses on how well a company manages its natural capital, as well as its financial resources. Investors like Calvert also engage with companies that fall short in managing their resources and impacts in order to encourage improvement.

      As the report emphasizes the need for more adaptive measures, we are happy to note that U.S. states, cities and businesses are moving forward with climate action, despite recent setbacks at the federal level. The recently released "Fulfilling America's Pledge" shows a growing coalition of nonfederal actors determined to implement climate solutions.

      Other studies highlight the economic value of taking bold climate action. The 2018 "New Climate Economy" report found, for example, that a move to low-carbon growth, rather than "business as usual," could generate $26 trillion in value globally through 2030.2 As an investor, we view these opportunities as worthwhile not only for their investment potential, but also for their ability to mitigate the impacts of climate change.

      As the findings throughout this report highlight, if Earth's warming continues unabated, the consequences may be irreversible. We believe timing is critical and we, as shareowners, need to join with others around the world, acting to reverse the course of climate change.

      Bottom line: The recent U.S. government report on climate change joins a large body of scientific evidence pointing to the huge economic and human toll of inaction. As an asset owner, Calvert evaluates how well companies manage their natural resource risks and supply chains, and we engage where necessary to improve action and outcomes.