Impact Blog

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 John Streur, President and CEO, Calvert Research and Management

      Washington - The concept of climate resilience, as developed by the International Panel on Climate Change (IPCC), refers to how well a company has assessed and prepared for its climate-related risks.1 In the wake of the 2017 ravages of hurricanes Maria, Irma and Harvey - with estimated economic impacts upward of $280 billion - climate resilience is seen by many as a "category 5" business problem.2

      A climate-resilient business, according to the IPCC, is one that has established strategies and investments to protect people, profit, assets and supply chains against extreme weather events. As we've seen, a company's climate resilience can become a material factor for investors to consider, and Calvert monitors this closely. Climate action, or strengthening resilience and adaptive capacity to climate-related hazards and natural disasters, is also one of the 17 U.N. Sustainable Development Goals (SDGs).3

      According to one study, while 90% of companies worldwide agreed that they faced climate-related impacts in the past three years, only 30% are actively responding to those threats.4

      Investors need to consider particularly vulnerable industries, such as energy, petrochemicals, and shipping, which may be bound to coastal areas by geography. According to a recent New York Times article, floods are getting worse in the U.S., exposing 2,500 toxic chemical sites and nearby people, animals and ecology to significant risk.5

      In response to climate-related damage and risk, more local governments and companies will need not only to repair existing infrastructure, but envision new solutions and construction. Some of these may include roadways designed to better transport floodwater, reinforced levis to protect cities, and better partnership initiatives with companies at the forefront of solving water issues.

      Social costs of climate change

      Aside from the clear economic and business impacts, climate change has significant social implications as well, with the potential to exacerbate income inequality in the U.S. A pioneering study, published in the journal Science in 2017, claimed that climate change, if left unchecked, could potentially result in the largest transfer of wealth - from the poor to the rich - in the country's history.6

      The role of investors

      At Calvert, we look at a number of factors to assess a company's climate resilience, including board and governance oversight of climate risk, recognition of direct and indirect business vulnerabilities, and U.S. Securities and Exchange Commission (SEC) climate-risk disclosure. From a macro perspective, Calvert seeks to invest in companies developing technologies that can help solve climate-change challenges or protect the environment and communities.

      While assessing individual companies' ESG practices and climate-readiness is essential, investors are increasingly recognizing the power of banding together to address ESG issues. The recently released Investment Stewardship for Positive Societal Impact discusses how large investors can act as "stewards of the commons" by helping build and sustain industry and systems-level collaborations for solving critical, global ESG issues, like climate change.

      Bottom line: Climate change impacts businesses, the environment and communities alike, with vast economic, financial and social consequences. Responsible investors seek companies actively addressing their climate-related risks as well as those developing strategies and technologies to combat climate change.