Impact Blog
Should oil and gas be part of ESG?

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 Chris MaddenPortfolio Manager, Calvert Research and Management

      Washington - A recent article from The Wall Street Journal, "ESG Funds Enjoy Record Inflows, Still Back Big Oil and Gas," 1 pointed to the fact that "eight of the 10 biggest U.S. sustainable funds are invested in oil-and-gas companies," a seeming contradiction to their environmental mandates. We believe addressing the world's energy challenges with a lighter carbon footprint is vital to global growth, economic prosperity, and the health and well-being of populations worldwide.

      In our view, exposure to fossil fuels can lead to significant, unmanageable risks for companies. Therefore, it is a material factor we evaluate in our research process. Although we do not own companies with direct fossil fuel assets, we do minimally hold some industry service providers. Across our portfolios, Calvert looks for companies leading the transition to a cleaner global energy system. These types of companies are the particular focus of the Calvert Global Energy Solutions strategy. We believe many factors argue for the growth of renewables from both environmental and economic perspectives.

      Renewable energy outlook

      Investment in renewable energy projects picked up at the end of 2018 and has continued throughout 2019 thus far. We believe this trend will continue as states adopt stronger renewable energy requirements and international governments increase carbon emission and other energy targets.

      In 2018, emissions of carbon dioxide (CO2) by the U.S. electric power sector were 1,763 million metric tons, or about 33% of total U.S. energy-related CO2 emissions.2 In 2019, however, we are seeing a dramatic change in U.S. electricity production. Energy production from coal was down 8% in July 2019 versus July 2018, while solar generation was up 18% and wind generation was up 40% over the same period.3


      Internationally, the European Union has set a renewable energy target of 32% for 2030. Over the next decade, we expect to see a significant shift in the deployment of wind-capacity suppliers from Europe to Asia.

      Calvert's approach

      The companies Calvert invests in with fossil fuel exposure are in peripheral subindustries, such as marketing, storage and transportation. These companies do not own direct assets but instead act as service providers to the industry. Investors can use our "What's Your Impact" tool, available on, to help assess the carbon and toxic emission exposure in many Calvert portfolios relative to an index.

      The Calvert Global Energy Solutions strategy seeks to invest in direct energy suppliers, such as utilities, solar and wind as well as companies developing energy-efficient technologies or significantly reducing their carbon impacts. While ESG strategies need not exclude any single energy category entirely, we believe investors may benefit by focusing on companies involved in creating and delivering clean energy.

      Bottom line: Energy demand is on the rise globally. With lower carbon emissions than other electric energy sources, renewables can play a key role in meeting this demand responsibly.