The Net Zero Pledge: Building Trust and Market Power


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By John StreurPresident and CEO, Calvert Research and Management and Reed MontagueESG Research Analyst, Calvert Research and Management

Washington - We see the swift growth of the Net Zero Asset Managers initiative (Net Zero)* as sending a clear, important signal to markets that investors view climate change as a material risk. Companies failing to mitigate this risk adequately may ultimately lose favor with investors and face reduced access to public capital markets.

Launched in December 2020, Net Zero calls for its signatories to commit to net zero carbon emissions from operations and investments by 2050 or sooner. Up from 30 original signatories representing USD $9 trillion in assets under management, Net Zero now has 220 signatories representing more than USD $57 trillion under management. Calvert was one of the original signatories to the initiative.

Catalyzing Progress

Calvert has a long history of acting as a catalyst for initiatives that seek to improve companies' behavior and policies toward climate change and inequality as well as other human and environmental sustainability issues. Change at corporations needs to be executed in ways that protect or improve financial value creation. As such, we strive to understand performance on what we believe to be financially material sustainability issues. Many would say climate change is material to all companies.

To develop and promote the market infrastructure needed to evaluate ESG risks and financial materiality, Calvert has been a lead participant across a number of key multi-stakeholder actions. For example, Calvert was the 21st U.S. signatory to the United Nations Global Compact in 2001, a founding signatory to the Principles for Responsible Investment in 2006 and later, a founding member of the Sustainability Accounting Standards Board's Investor Advisory Group. Having helped catalyze many other important efforts over our 45 years as a firm, we recognized the significance of the Net Zero initiative and chose to join at the beginning.

Stepping Up to Net Zero

Today, as stated above, the Net Zero Asset Managers Initiative has 220 signatories with more than USD $57 trillion in total assets under management. This means over half of the world's assets under professional management are now committed to reaching net-zero carbon emissions by 2050 or sooner, marking a key milestone in the development of collective climate ambition in the asset management industry. We believe this rapid growth signals both the importance of the issue and the clear need for action.

To date, numerous companies across multiple industries have recently made some type of Net Zero carbon emissions commitment and we believe many more undoubtedly will. For most companies, this means their operations and products will not add CO2 to the atmosphere, net of efforts each company undertakes to remove that CO2. In both the finance and investment management industries, the Net Zero pledge extends to the carbon emissions of the companies in which we invest. The timeline on these types of pledges ranges from setting interim targets at 2030 to reaching Net Zero by 2050 or sooner.

Calvert Supports Market-Based Action

From here, we need innovators, entrepreneurs and existing companies to step up and respond. We trust the market mechanism to function and incentivize solutions. At Calvert, we are willing to prioritize investment in energy innovators and solutions providers over carbon emitters. We seek to allocate capital to these viable options that support a low-carbon transition.

Given the fact that companies are not close to being on track to achieve their own Net Zero commitments, and Calvert needs companies to do so in order to meet our pledge, why did we sign on and make the Net Zero commitment? This is the market-based system in action; the system in which Calvert believes and functions. We recognize the objective of limiting global warming is essential for human well-being. Although the pathway has yet to be fully delineated, we will work within our role in the capital markets to achieve this objective. Ultimately, we believe the market will dictate the reality of climate change, and, as a market participant, we have a duty to act.

Bottom line: We believe the rapid growth of Net Zero in less than a year clearly indicates that investors view climate change as a material risk. At Calvert, we are committed to prioritizing investment in energy innovators and solutions providers over carbon emitters.

*More details on the Net Zero Asset Managers initiative can be found at