CALVERT GLOBAL WATER FUND
An innovative approach
November 2016
CONTENTS
An investment supporting
solutions to water challenges
■
As both a public good and a business input, water sits at
the center of public and private sector interests. Stress on
local water supplies is rising throughout the world.
■
Private companies — utilities, distributors, water
technology and infrastructure companies, and solutions
providers — play key roles in solving global water
challenges and raising water management standards.
■
Solutions to water scarcity, quality and access represent
investment opportunities — on both the supply and
demand sides of the water value chain.
■
Calvert Global Water Research Fund gives investors an
opportunity to drive capital to responsible companies
working to address global water challenges.
Read more about the needs and opportunities that
shape our approach to water investments.
■■ Scarcity, stress and
sustainable development
■■ Water stress and climate
change
■■ Water quality and pollution
■■ Addressing global water
challenges through an
established process
Scarcity, stress and sustainable development
Water is essential for productive livelihoods and economies, with half of the global workforce
employed in water and natural resource-dependent industries.1
ADDRESSING RISKS TO SUSTAINABLE DEVELOPMENT
Stress on local water supplies is rising throughout the world,
with increasing population, greater economic growth and
higher rates of urbanization. The World Economic Forum, in its
Global Risks annual report, consistently names water security
as a top global risk in terms of potential extent of impact,
citing growing global water demand and associated effects on
food and energy prices. Cascading to the private sector, risks
associated with water are impacting business bottom lines
and strategic planning decisions. The World Bank estimates
that unless action is taken soon, water-scarce regions, such as
the Middle East and parts of Africa, will see GDP growth rates
decline by as much as 6% by 2050.2
Water resource management and access to improved water
supplies are critical elements in growing economies and
reducing poverty. The necessity of water management in the
global development context has been acknowledged in the
United Nations’ Sustainable Development Goals (SDG), released
in 2015 and adopted by governments around the world. One
SDG aims to “ensure availability and sustainable management
of water and sanitation for all.” Targets under the goal highlight
improving water quality and reducing pollution, increasing
water-use efficiency across all sectors and implementing
integrated water resources management.
GLOBAL VIEW OF PHYSICAL AND ECONOMIC WATER SCARCITY
Little or no water scarcity
Physical water scarcity
Approaching physical water scarcity
Economic water scarcity
Not estimated
Map Notes:
1.
Little to no water scarcity. Abundant water resources relative to use, with less than 25% of water from rivers withdrawn for human purposes.
2. Physical water scarcity (water resources development is approaching or has exceeded sustainable limits). More than 75% of river flows are withdrawn for agriculture, industry and
domestic purposes (accounting for recycling of return flows). This definition — relating water availability to water demand — implies that dry areas are not necessarily water-scarce.
3. Approaching physical water scarcity. More than 60% of river flows are withdrawn. These basins will experience physical water scarcity in the near future.
4. Economic water scarcity (human, institutional and financial capital limit access to water even though water in nature is available locally to meet human demands). Water resources
are abundant relative to water use, with less than 25% of water from rivers withdrawn for human purposes, but malnutrition exists.
Source: CAWMA (2007, Map 2.1, p.63), reproduced with permission from the International Water Management Institute (IWMI).
2
Calvert Global Water Fund A N I N NOVATIV E A PPROAC H
Water stress and climate change
The nexus among food, energy and demand for water is
intricately linked to the threat of climate change.
CLIMATE CHANGE STRESSES LIKELY TO INTENSIFY
Climate change is predicted to have numerous adverse effects on freshwater
resources, rendering many available water supplies far less reliable. Scientists on the
Intergovernmental Panel on Climate Change (IPCC) report that weather extremes, such
as floods and droughts, are already impacting agricultural regions around the world,
and will likely progressively increase the interannual variability of crop yields.3
In addition to climate change, Ceres notes in its Feeding Ourselves Thirsty report
that growing competition for water, weak regulation, aging and inadequate water
infrastructure, and water pollution are key water risk drivers affecting water security in
the food sector.4
BOTH DRY AND WET REGIONS AFFECTED
The World Bank estimates that for currently arid regions, such as the southwest United
States, subtropical areas, southern Europe and northern Africa, decreased levels of
precipitation and longer and more intense droughts are likely by 2100.5
Wetter regions will not necessarily be able to capture the rainwater for future use,
as more extreme weather events will cause flooding, inundating sewer systems and
treatment plants. Furthermore, soil properties during heavy precipitation often prevent
water from being absorbed into groundwater reserves. In agricultural settings, floods can
lead to partial or total crop destruction. When taking population growth into account,
these projected wetter regions, such as Sub-Saharan Africa, Southeast Asia and South
Asia, are expected to experience increased water stress. The extent of decrease in
water availability per capita is estimated to be from 10 to 20 percent in South Asia to 50
percent in Southeast Asia and Sub-Saharan Africa by the end of the century.6
DISPROPORTIONATE IMPACTS OF
WATER SCARCITY AND STRESS
Although 91 percent of the world’s
population had access to an improved
drinking-water source in 2015, 663 million
people still rely on unimproved sources,
with 159 million people dependent upon
surface water, reports the World Health
Organization.7
This has significant impacts on health,
education, and the livelihoods and
empowerment of girls and women, who
are the primary collectors of water in
developing countries.
The poor are disproportionately affected
by water stress, as time is lost to fetch
water, those without adequate access or
access to unsafe water pay excessive rates
for bottled water and 78 percent of the
world’s poor make a living dependent on
ecosystems, like farming and agriculture.8
GLOBAL WATER DEMAND (FRESHWATER WITHDRAWALS): BASELINE SCENARIO, 2000 AND 2050
Water demand (km3)
6,000
5,000
4,000
3,000
2,000
1,000
0
2000
2050
OECD
Irrigation
2000
2050
2000
2050
2000
2050
BRIICS
ROW
World
Domestic
Livestock
Manufacturing
Electricity
Note: BRIICS (Brazil, Russia, India, Indonesia, China, South Africa), OECD (Organisation for Economic Co-operation and
Development); RoW (rest of world). This figure only measures “blue water” demand and does not consider rainfed agriculture.
Source: OECD, Environmental Outlook to 2050: the consequences of inaction. March 2012
Calvert Global Water Fund A N I N N OVATI VE A PPROAC H 3
Water quality and pollution
Freshwater contamination occurs through industrial discharge,
agricultural runoff, domestic waste, chemical contaminants
and sewer infiltration, highlighting the need for responsible
water management by the public and private sectors.
DEGREDATION THREATS
Only 2.5 percent of water on earth is freshwater, 30 percent of which is designated
as easily accessible. Beyond the fiscal and geographic constraints of installing
infrastructure to transport this freshwater to end users, industrial discharge,
agricultural runoff, domestic waste, chemical contaminants and sewer infiltration are
increasingly polluting freshwater sources.9
A joint white paper by the International Food Policy Research Institute (IFPRI) and
environmental firm Veolia titled, “The Murky Future of Global Water Quality” explains that
naturally occurring substances that influence water quality, such as nitrogen, phosphorus
and organic matter, will be intensified by climate change and increased human activity
in the future, worsening water quality degradation. Many ecosystems across the United
States remain vulnerable and are declining, if not collapsing. The U.S. Environmental
Protection Agency estimates that in the United States, 44% of stream miles and 64% of
lakes are not clean enough for swimming or for human consumption of fish.10
Heavy precipitation events exacerbate issues, and the effects are often felt by local
communities that withdraw from contaminated sources and get sick, are forced to
fetch clean water from farther away and are less productive, or need to purchase more
expensive water on the secondary market. UN-Water’s World Water Development
Report 2016 reports that half of the global workforce is employed in eight water- and
natural resource-dependent industries: agriculture, forestry, fisheries, energy, resourceintensive manufacturing, recycling, building and transport. Not only are all of these
industries highly water-intensive, but all of them also pose risks to contaminating
freshwater sources through wastewater from operations.
SUPPORTING THE UNITED
NATIONS’ SUSTAINABLE
DEVELOPMENT GOALS (SDG)
Companies directly impacting one of
the SDGs have the potential to create a
positive cascading effect on other SDGs.
For example, a company with a solution
to more resilient infrastructure (SDG 9)
can create more access to clean water
and sanitation (SDG 6). This access allows
more women to obtain more education
(SDG 4) instead of harvesting water,
leading to more empowered women
and gender equality (SDG 5). Additional
secondary effects lead to the increased
health and well-being of communities
(SDG 3), as well as more productive
farmers generating higher yields to
combat hunger (SDG 2).
Unilever helped to
establish the U.N.’s
WASH4Work program,
which aims to mobilize
business to improve access to water,
sanitation and hygiene (WASH) in the
workplace, in the communities where
workers live and across supply chains.
Xylem’s Saajhi Stepping Pump is designed
to help small farmers in rural areas irrigate
their land more efficiently using human
weight and motion. The pump was an
Edison award finalist in 2015.
4
Calvert Global Water Fund A N I N NOVATIV E A PPROAC H
Addressing global water challenges
through an established process
SUPPORTING THE UNITED NATIONS’
SUSTAINABLE DEVELOPMENT GOALS
The Calvert Global Water Research Index (Research Index)
was developed based on a process that is well-researched,
comprehensive and solution-oriented — reflecting Calvert’s
Responsible Investment Principles.
Calvert Global Water Fund (the Fund), is an innovative product through which
investors can help drive responsible companies to continually work to solve global
environmental issues.
FOCUSING ON BOTH SUPPLY AND DEMAND
The Research Index is structured to be comprehensive, representing both the demand
and supply side of the water value chain. The Research Index focuses on water
distribution, technology and infrastructure on the supply side, and water use leaders
in the most water-intensive industries on the demand side. To further the impact, the
advisor, on behalf of the Fund, engages companies’ management teams to encourage
them to raise the bar.
Companies in the Research Index, in addition to being part of the solution to water
challenges, must be responsible companies in their own right, meeting Calvert’s
Principles for Responsible Investment. This approach allows for the inclusion of
companies responsible in their disclosure and water practices along the value chain,
uniquely addressing the consumption issues on the demand side that have historically
been excluded in existing water indexes. Engagement encourages companies’
management teams to continuously improve their disclosure or sustainability practices
so that standards are raised across the board.
Through this framework, Calvert Research and Management can evaluate the many
issues around water scarcity, water quality and access to clean water through four
key areas:
On October 24, 2016,
PepsiCo joined a handful
of companies as part
of Ceres’ and WWF’s
Agwater Challenge.
PepsiCo will work with its agricultural
suppliers to improve the water efficiency
of its direct agricultural supply chain by 15
percent by 2025 (compared to 2015 levels)
in high water risk sourcing areas, including
India and Mexico.
H&M has a stated goal of using all cotton
from sustainable sources with a lower
impact on the environment by 2020. H&M
will accomplish this by increasing the use
of organic and recycled cotton.
Aegion has become a
pioneer in transforming
the world’s aging pipeline
infrastructure for water
and wastewater to make it more resilient
and less corrosive.
In July 2016, it was
announced that Royal
Boskalis Westminster N.V.,
a marine contractor, is
working with the Dutch government and
The Ocean Cleanup foundation to test the
foundation‘s technology to remove plastic
bottles from the ocean. In the past, the
company’s build-with-nature philosophy
has been used to protect the shoreline
of Indonesia from erosion by creating a
daming system allowing mangrove tree
growth to protect the shoreline from
strong waves.
WATER UTILITIES AND DISTRIBUTORS
Investing in companies that responsibly deliver and provide clean water at affordable
rates is essential for economic growth and development. Calvert believes that issues
around the pricing of water are essential for investors to understand, given the basic
human right to clean water, as well as its impact on consumption patterns and
efficient water use.
■■ Pennon Group provides water and wastewater services to over 2 million in the
southwest region of the United Kingdom and is one of the leading U.K. recycling,
energy recovery and waste management companies.
Calvert Global Water Fund A N I N N OVATI VE A PPROAC H 5
WATER TECHNOLOGY
By investing in both proven and emerging technologies that
test, monitor or improve the quality of water, or address
the efficient use of water, an investor can contribute to the
provision of usable water globally. Calvert believes efficiency
is a key part of the water solution. By significantly reducing
overall water consumption and minimizing freshwater
withdrawals or improving water quality, the overall freshwater
supply is preserved and protected. Calvert actively supports
the investment in companies delivering products and services
that improve water efficiency and water quality across
economic sectors.
■■ Ecolab provides products and services for water treatment,
water filtration and water safety, including testing for
bacteria such as legionella within facilities.
WATER INFRASTRUCTURE
There is a growing and urgent need to invest in the
rehabilitation of aging infrastructure or expanding
infrastructure in order to deliver clean water to communities
and drive economic growth.
■■ China
Everbright Water Ltd. engages in the environmental
water business, which includes wastewater treatment,
reusable water, wastewater heat pumps, sludge treatment,
and research & development of environmental water
technologies, engineering and construction. It designs,
engineers, constructs, operates and maintains local
government authorities’ water and wastewater
treatment plants.
SOLUTION PROVIDERS
Companies in the most intensive water-consuming industries,
such as beverages and semiconductors, which are leading their
peers in their water efficiency and reuse practices, effectively
6
Calvert Global Water Fund A N I N NOVATIV E A PPROAC H
reduce overall water demand. Investing in water use leaders
with the largest water footprint helps reduce overall water
withdrawals. Furthermore, there are many companies providing
unique, innovative solutions to global water challenges that
actively address water issues outlined in the United Nations
Sustainable Development Goals and contribute to poverty
alleviation and sustainable development. Impacts from climate
change, like rising water temperatures, are increasing the
variability of the hydrologic cycle. Calvert supports investments
in companies that are working to protect and restore water
ecosystems, including wetlands, aquifers, lakes and rivers.
■■ Leaders: Taiwan Semiconductor is a leader among
semiconductor manufacturers for its recycling and reuse
of water. Taiwan Semiconductor far exceeds the industry
average recycling rate of 1.7x by delivering recycle and reuse
rates of 3.0x. The company’s water conservation programs
stand out for their innovation and effectiveness, including
collecting water from air conditioning condensation for reuse;
recycling systems effective to the point where the most toxic
materials in waste sludge are scrubbed out, leaving the purest
water available for semiconductor processing; and water
infrastructure within its foundries that diverts recycled water
to toilets and other facilities that do not require pure water.
Taiwan Semiconductor works with firms in Taiwan’s science
park to develop and share ideas around water conversation
and climate change.
■■ Innovator: Novozymes is a biotechnology company focused
on enzyme production to several industrial end markets. As a
leader in bioinnovation, Novozymes produces enzymes that
are naturally occurring protein molecules and act as catalysts
to accelerate a biochemical reaction. The use of enzymes
helps many of the most water-intensive industries reduce
their raw materials, including water, and increase material
efficiency by substituting traditional chemicals with more
sustainable alternatives. Novozymes works with different
industries to create enzymes that can optimize operational
efficiency and reduce water use, raw materials and chemicals.
About Risk. The Calvert Global Water Fund employs a passive management strategy designed to track, as closely as possible, the performance of the Calvert
Global Water Research Index. Investment in the Fund involves risk, including possible loss of principal invested. An index fund has operating expenses; a
market index does not. Although expected to track its target index as closely as possible while satisfying its investment criteria, the Fund will not be able to
match the performance of the index exactly. It is not possible to invest directly in an index. The Fund is subject to the risk that stocks that comprise the waterrelated sector may fall in value. The water industry can be significantly affected by a number of factors, including availability of water, the level of rainfall,
water consumption, price and supply fluctuations, and government regulations and policies. A downturn in the water-related resource sector would impact
the Fund more than a fund that does not concentrate in this industry, and the Fund therefore may be more volatile than a typical mutual fund.
1. UN World Water Development Report, 2016
2. World Bank. 2016. “High and Dry: Climate Change, Water, and the Economy.” World Bank, Washington, DC. License: Creative Commons
Attribution CC BY 3.0 IGO
3. Climate Change 2014: Impacts, Adaptation, and Vulnerability Part A: Global and Sectoral Aspects
4. Feeding Ourselves Thirsty: A Ceres Report May 2015
5. Turn Down the Heat: Confronting the new climate normal 2014
6. Turn Down the Heat: Confronting the new climate normal 2014
7. www.who.int- Media centre Drinking-water, November 2016
8. The World Bank Biodiversity Overview January 2017
9. Sustainalytics’ report Water Scarcity: Will Investors Be Left High and Dry?
10.The National Water Quality Inventory: Report to Congress for the 2004 Reporting Cycle – A Profile
Cited securities weight in the Fund as of December 31, 2016: Aegion Corp 1.06%, Boskalis Westminster 0.90%, China Everbright Water LTD 0.77%, Ecolab
Inc. 1.41%, Hennes + Mauritz 0.79%, Novozymes A/S-B Shares 0.96%, Pennon Group PLC 1.46%, Pepsico Inc. 0.90%, Taiwan Semiconductor Manufacturing
0.85%, Unilever PLC 0.89% and Xylem Inc. 1.21%. Companies discussed are included as representative of the respective Research Index components, are
no indication that investment in these securities was or would be profitable in the future, and are not recommendations to buy or sell. Portfolio holdings
are subject to change at any time. Current and future holdings are subject to risk.
Calvert Global Water Fund A N I N N OVATI VE A PPROAC H 7
About Calvert Research and Management
Calvert Research and Management is a leader in Responsible Investing. Calvert offers
one of the largest and most diversified families of responsibly invested mutual funds,
encompassing actively and passively managed U.S. and international equity strategies,
fixed-income strategies and asset allocation funds managed in accordance with the
Calvert Principles for Responsible Investment. On December 30, 2016, Calvert Research
and Management acquired substantially all of the business assets of Calvert Investment
Management, Inc. (CIM), which was founded in 1976. Following the transaction, the
CIM Sustainability Research Group as well certain other members of CIM joined Calvert
Research and Management. Calvert Research and Management is a wholly owned
subsidiary of Eaton Vance Management.
For more information on any Calvert fund, please contact your financial advisor or visit Calvert.com for a free
summary prospectus and/or prospectus. An investor should consider the investment objectives, risks, charges, and
expenses of an investment carefully before investing. The summary prospectus and prospectus contain this and
other information. Read them carefully before you invest or send money.
Calvert mutual funds are distributed by Eaton Vance Distributors Inc., Member FINRA/SIPC.
Two International Place, Boston, MA 02110
© 2017 Calvert Research and Management
24323 3.20.17
@CalvertResearch