Impact Blog
Davos concerns reflect Responsible Investing principles

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      By Dan DormanESG Senior Research Analyst, Calvert Research and Management

      Washington -- The 50th convening of the World Economic Forum (WEF) takes place in Davos, Switzerland this week, touting the theme "Stakeholders for a Cohesive and Sustainable World."

      In advance of the event, the WEF released its annual Global Risk Report, which is dominated by environmental, sustainability, and other societal and governance-related risks. The conversation about what risks are most relevant to the global economy and society has shifted considerably in just the last few years. The alignment of the topics addressed in the WEF's 2020 Global Risk Report and environmental, social and governance (ESG) considerations Calvert assesses in its investment process is more relevant than ever.

      Climate change takes center stage

      The 2020 Global Risk Report measures the top 10 risks by likelihood and impact over the next decade. The top five cited in the 2020 report are all climate change-related: extreme weather, biodiversity loss, climate action failure, natural disasters and human-made environmental disasters. Water-related crises are also noted and placed in the social risk category by the WEF, but are exacerbated by other climate change impacts. Other risks highlighted include technology-related issues such as data security, cyberattacks and infrastructure information breakdown, as well as global governance challenges.

      These topics are not new, but the worldwide realization of the magnitude of these challenges and the severity of risk they pose to the global economy -- and all stakeholders -- has grown exponentially in a relatively short period of time. As a global society, we've acknowledged these challenges for some time, but have failed to take adequate action toward implementing real solutions, which has only served to exacerbate the significance of the risk. The disconnect between the recognized need to take decisive action and the inadequate response to date makes it more necessary than ever for all of us to do what we can to drive positive change.

      Emphasize positive change

      Given the growing significance of climate change and societal risks to the global economy, it would make sense that all investment strategies incorporate ESG factors into portfolio management decisions. By doing so, investors are better positioned to align their financial interests with the realities of a rapidly changing global economy.

      At Calvert, we drive positive change through our innovative research system that incorporates material ESG inputs into our investment decisions. We conduct structured engagement with companies where our research indicates that our engagement team may have the greatest impact. Furthermore, we use our proxy voting role as shareholders to encourage companies to take positive steps toward managing their preparedness for the effects of climate change, their relationship with the customers and communities they serve, and a broader global society.

      Bottom line: The WEF's 2020 Global Risk Report is yet another indicator that key decision-makers and influencers recognize the impact of environmental, social and governance factors on the strength and resiliency of the global economy.