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By Suley SaleemESG Senior Research Analyst, Calvert Research and Management

Washington - Climate change has long been a key investment strategy focus for Calvert. Amid all the key factors related to climate change, water stands out as the most nuanced — it is both a symptom and a cure.

In certain regions, water scarcity will likely continue to emerge as a threat to daily life. Specific concerns include access to clean drinking water and adequate wastewater treatment in more agricultural regions and infrastructure and water distribution challenges in cities. But water also has some of the greatest potential to mitigate the effects of climate change by decarbonizing power generation, industry and transport — which, in total, comprise over 65% of global greenhouse gas (GHG) emissions.

We believe that companies that are leaders in water efficiency and water reuse practices, as well as companies offering innovative solutions to global water challenges, may be in a position to outperform their competition over the long term. Investors can play their parts by allocating capital to companies equipped to meet these challenges.

Ways to Look at Water

A multipronged approach to investing in water, such as the one Calvert uses in its Calvert Global Water Fund that tracks the Calvert Global Water Index, is needed to actively address global water challenges as well as to ultimately balance the risk and opportunity. Our ESG research framework identifies water as a scarce resource for the vast majority of industries that comprise the global economy, with a particular focus on companies that limit their own usage or that of others. Four key areas of focus are:

  • Water utilities and distributors: Responsibly deliver and provide clean water at affordable rates, which we view as essential for economic growth and development.
  • Water technology: Have proven or emerging technologies that test, monitor or improve the quality of water, or address the efficient use of water, helping reduce consumption globally.
  • Water infrastructure: Are addressing the growing and urgent need to invest in the rehabilitation of aging infrastructure or expand infrastructure in order to deliver clean water to communities and drive economic growth.
  • Solution providers: Are leading their peers in water efficiency and reuse practices in the most water-intensive industries, effectively reducing overall water demand.

Companies that are low in water intensity and have implemented closed-loop systems, such as those in health care and technology services, may be in better short- and long-term positions to limit water usage. Our approach to solution providers is grounded in understanding the impacts of technology, infrastructure and services limiting the use of our most precious natural resources.

Within this universe of companies, it's also important to consider water usage leaders that provide solutions to other issues. Companies mining metals such as copper and lithium are critical to electrification but often operate in water-stressed regions such as South America and Southeast Asia. Instead of avoiding companies exposed to those regions, we have found many of these companies understand their geographic predicaments and have responded by implementing groundbreaking desalinization and solution mining techniques that close the loop.

Bottom line: Calvert invests in companies and other issuers that we believe balance the needs of financial and nonfinancial stakeholders as well as demonstrate a commitment to the global commons and to the rights of individuals and communities. We believe that driving capital to responsible companies in the water industry will encourage more investment in solutions to global water challenges.