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Issue Brief: Climate Change
Introduction
We at Calvert believe that human-caused emissions of carbon dioxide and other greenhouse gases (GHGs) are contributing to a general warming of the earth's surface and other climate changes, such as:
- a rise in sea level;
- increased severity of storms, floods, fires, and droughts; and
- a fundamental shift in the distribution of diseases and pests.
Therefore, this pressing issue of climate change is now at the forefront of Calvert's environmental advocacy and company analysis. Calvert believes climate change is a global threat that corporations need to recognize, manage, and mitigate.
Calvert's Approach
In order to evaluate companies in this area of growing concern, Calvert regularly consults outside experts, including representatives from NGOs, government, and corporations, to inform our climate change priorities. Calvert examines companies' greenhouse gas (GHG) emissions and energy efficiency, as well as how the companies manage climate change exposure in order to avoid risks and embrace the opportunities posed by climate change.
Until recently, much of our climate change analysis focused on companies with significant emissions of GHGs, due to their more direct impact on climate change. We also saw these companies as more likely to face litigation or tighter regulations. Over time, however, our analysis has come to encompass a broader framework that includes more of the risks and opportunities associated with climate change. For example, we now examine the policies of financial services firms to see if they account for climate change impacts in their lending decisions. Calvert also seeks companies that embrace opportunities such as energy efficiency and GHG emissions reductions.
Criteria in Practice
Many companies have already positioned themselves to take advantage of the competitive opportunities presented by climate change. For example, semiconductor manufacturer Intel (INTC) has instituted climate change programs that permeate the organization. Key departments must now explore outside opportunities for partnering on climate change programs and, to the extent possible, incorporate energy efficiency into new products. For example, Intel's Instantly Available PC (IAPC) technology allows a computer to go into "sleep" mode, greatly reducing the amount of power the machine needs to stay on, yet making it available as soon as the user requires it. The company tracks and reports data from its greenhouse gas (GHG) emissions worldwide, and hopes to achieve a 30% reduction in GHG emissions by 2010.
Although investment firm Goldman Sachs (GS) has minimal GHG emissions, it has taken steps to address climate change. The firm has pledged $1 billion to seek and develop alternative energy sources. Goldman Sachs also supports a national policy to reduce GHG emissions. And Hawaiian Electric (HE), which provides electric service to about 95% of Hawaii's population, is aggressively pursuing the use of renewable fuels, with a current fuel mix that includes wind, biomass, geothermal, and other resources. The company has investigated technologies to make wind energy a more reliable resource and to improve the overall stability of the resulting electricity transmissions. Hawaiian Electric is also participating in a multi-phase, multi-state collaborative project studying the feasibility of using power generated by ocean waves.
Advocacy
Calvert plays a key role in the work of the United Nations Environment Programme Finance Initiative (UNEP FI) working groups, especially the Climate Change Working Group and the Asset Management Working Group, which are engaged in making the case for improved corporate disclosure and management of climate change impacts. In addition, both UNEP FI working groups are working to assess the financial and investment implications of climate change. We will address the risks and opportunities that companies face as a result of climate change through direct company dialogue and involvement in coalitions such as CERES and the Carbon Disclosure Project (CDP).
Calvert and the Investor Network on Climate Risk (managed by CERES) has recently published a report based upon the results of the fourth CDP. Calvert provided initial funding to extend that survey to the S&P 500 for the first time. Building upon our leadership in expanding the CDP to the entire S&P 500, we are encouraging members of the Global Warming Shareholder Campaign (GWSC) to push non-responding companies to disclose their climate change risk exposure and management. In addition to working directly to change corporate behavior we will promote change by communicating the materiality of climate change through the Investor Outreach Working Group, part of the GWSC, to encourage proxy advisory firms (ISS, Glass Lewis, and PGI) to support climate resolutions on the part of mainstream investors, and encourage mutual funds to support climate resolutions in their proxy voting. We will continue to work with the Investor Network on Climate Risk to encourage leading companies, institutional investors, and regulatory authorities to be mindful of the financial implications of climate change.
One of the CDP sector leaders, Toyota, is the largest producer of automobiles in Japan and the third largest automobile producer in the world. Toyota has a very fuel-efficient fleet and continues to strive toward improvement in its environmental programs. The company was one of the first automakers to produce and offer a gasoline/electric hybrid vehicle, the Toyota Prius, which has found great commercial success and received numerous awards. The company plans to offer hybrid options for its entire vehicle fleet by 2010. Toyota is also engaged in the development of fuel cell vehicles. In 1998, Toyota was the first large company in California to purchase renewable electricity for its facilities, marking the largest purchase of renewable energy at the time. In 2000, Toyota's greener power contracts were estimated to be the equivalent to the power consumed annually by 6,000 typical California homes.
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