Calvert\'s Alternative Energy While Paper


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Global revenues for solar photovoltaics,
wind power, and biofuels
grew from $75.8 billion in 2007
to $115.9 billion in 2008. Between 2005 and 2030, global energy demand is projected to increase by 50%—with more than 80% of that demand
coming from emerging economies, namely China and India.

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Calvert\'s Alternative Energy While Paper

  1. 1. PERSPECTIVES M AY 2009 Jens Peers A Bright Future for Alternative Energy Portfolio Manager, KBC Asset Management Executive Summary International, Ltd. In these uncertain times, alternative energy companies—like most Paul Hilton companies—have encountered significant challenges. A massive Director, Advanced sell-off, frozen credit markets, and an investor aversion to risk Equities Research, have conspired to inhibit growth among these relatively smaller Calvert companies recently. Nevertheless, we see tremendous growth op- portunity in this dynamic sector as political, social, and economic Lily Donge Senior Sustainability forces are aligning to create a more favorable business landscape. Analyst/Manager, In this paper, we discuss the following five trends that, we believe, will help propel Environment and Climate longer-term growth in the alternative energy sector: Change, Calvert n The rising global energy demand n A scarcity of accessible oil n The growing investment in new energy technologies n Climate change n A changing regulatory landscape Read on to learn more about alternative energy, the developments we see across the various segments of the sector—wind, solar, biofuels, geothermal, hydropower, fuel cells, and energy conservation—and where we see opportunity for growth in coming years. THE CURRENT ENVIRONMENT: FACING THE FINANCIAL CRISIS The onset of the global financial crisis and economic recession hit alternative energy companies particularly hard, as have lower crude oil prices and a prolonged “flight to quality.” Investors favored less-risky assets, including near-zero-rate U.S. Treasury bills, and shunned higher volatility sectors and asset classes, including growth stocks, emerging markets equities—and many alternative energy stocks that fall into the high-beta camp. In addition, the global credit freeze created a difficult operating environment for these young growth companies heavily reliant on project financing. On the positive side, “green investments” are a key component of the massive global fiscal policy response to the present economic crisis. Major stimulus programs in the United States, China, the European Union, and the United Kingdom all feature green initiatives that target energy efficient transportation, construction, waste water treatment, electricity grid infrastructure, and renewable energy. Despite the emergence of a highly favorable policy environment for alternative en- ergy and attractive long-term supply and demand fundamentals, alternative energy stocks currently remain challenged—along with most other global equity markets. This reflects continued concern about prospects for the overall equity market and skepticism regarding the timing and pace of the impending global economic recov- ery. Nevertheless, we see tremendous growth opportunity in this dynamic sector as political, social, and economic forces are aligning to create a more favorable business landscape for these companies. May Lose Value. Not FDIC Insured. Not a Deposit. No Bank Guarantee. Not NCUA/NCUSIF Insured. No Credit Union Guarantee.
  2. 2. 2007 to $115.9 billion in 2008. At the same time, new global investments in energy technologies, including venture capital, Global revenues for solar photo- project finance, public markets, and research and develop- voltaics, wind power, and biofuels ment, increased by 4.7% from $148.4 billion in 2007 to $155.4 billion in 2008, as tallied by New Energy Finance. grew from $75.8 billion in 2007 to $115.9 billion in 2008. Today, momentum for global strategic action to reduce carbon emissions has accelerated, with a huge assist from the elec- tion of U.S. President Barack Obama. His administration has enumerated the inter-connected benefits of reinvigorating THE FIVE KEy DRIVERS OF GROwTH FOR THE the economy while also building the base for a clean energy ALTERNATIVE ENERGy SECTOR society. The proposed 10-year $150 billion “green” stimulus In just the last several years, alternative energy has emerged as plan emphasizes improving residential and automobile energy a definable economic sector and from an investment perspec- efficiency, modernizing federal buildings, and enhancing the tive, a distinct asset class. The term generally encompasses power grid. The American Recovery and Reinvestment Act, companies involved in developing technologies that reduce signed into law in February, 2009, includes more than $70 bil- reliance on traditional fossil fuels, such as coal, oil, and natu- lion in spending for renewables and tax credits for a variety of ral gas. That includes companies involved with 1) new energy clean-energy initiatives. sources, such as wind, solar, bioenergy, geothermal, wave/tidal power, and small-scale hydro; 2) conservation and efficiency Looking forward, we expect growth in the alternative energy technologies, such as energy-efficient lighting, and efficient sector to be driven by the following five key determinants of engines; and 3) storage mechanisms, including fuel cells, hy- supply and demand: drogen generation, and storage batteries. n rising global energy demand Prior to the financial crisis, revenue growth among alternative n scarcity of accessible oil energy companies was thriving. As reported in Clean Edge’s n growing investment in new energy technologies Clean Energy Trends 2009, global revenues for solar photo- n climate change voltaics, wind power, and biofuels grew from $75.8 billion in n a changing regulatory landscape projected increase in world marketed energy consumption by region from 2005 - 2030 (Quadrillion British Thermal Units) Between 2005 and 2030, global energy demand is projected to increase by 50%—with more than 80% of that demand coming from emerging economies, namely China and India. Average Annual Percent Change Region 2005 2010 2015 2020 2025 2030 2005 - 2030 OECD 240.9 249.7 260.5 269.0 277.6 285.9 0.7 North America 121.3 126.4 132.3 137.8 143.4 148.9 0.8 Europe 81.4 83.9 88.5 86.8 90.4 92.0 0.5 Asia 38.2 39.3 41.4 42.7 43.7 44.9 0.7 Non-OECD 221.3 262.8 302.5 339.4 374.2 408.8 2.5 Europe and Eurasia 50.7 55.1 59.5 63.3 66.0 69.1 1.2 Asia 109.9 137.1 164.2 189.4 215.3 240.8 3.2 Middle East 22.9 26.4 29.5 32.6 34.7 36.8 1.9 Africa 14.4 16.5 18.9 20.9 22.5 23.9 2.0 Central and South America 23.4 27.7 30.5 33.2 35.7 38.3 2.0 Total World 462.2 512.5 563.0 608.4 651.8 694.7 1.6 2.0 The Organisation for Economic Cooperation and Development (OECD) is comprised of economically developed countries, including the United States, European countries, Australia, and Canada. It promotes economic and social welfare throughout the OECD area. Source: Energy Information Administration (EIA), International Energy Annual 2005 (June-October 2007), http://www. Note: Totals may not equal sum of components due to independent rounding. Projections: EIA, World Energy Projections Plus (2008). 2
  3. 3. clean energy projected revenue growth from 2008 - 2018 ($U.S. Billions) Markets for three clean energy technologies are projected to climb substantially in coming years. Projected Revenue Growth 2008 – 2018 $34.8 Biofuels $105.4 $51.4 Wind Power $139.1 2008 $29.6 Solar Power 2018 $80.6 $115.9 TOTAL $325.1 $0 $50 $100 $150 $200 $250 $300 $350 (In Billions) Source: Clean Edge, 2009 Together, revenue from these technologies is projected to reach $325.1 billion within a decade. Keep in mind, however, that an increase in clean energy revenue growth does not necessarily indicate positive investment results for a fund investing in energy or alternative energy. The energy and alternative energy sectors can be volatile. Investment involves risk, including possible loss of principal. RISING GLObAL ENERGy DEMAND also makes the development of biofuels and advances in trans- Even with the synchronized global recession, world popula- portation technologies, such as those used in hybrid vehicles, tion growth and rising global living standards are expected to more attractive. In a long-term environment of rising and translate into significantly higher global demand for energy. volatile energy prices, we expect companies increasingly to The world’s population doubled from 3 billion to 6 billion in diversify their energy portfolios. the 40-year period from 1959 to 1999, and it is expected to approach 9 billion by 2042.1 Meanwhile, demand for energy is GROwING INVESTMENT IN NEw ENERGy TECHNOLOGIES growing exponentially, particularly as emerging economies New alternative energy technologies and sources are likely strive to raise the living standards of their people. As noted in to play a growing role in bridging the energy supply-demand the table on page 2, the Energy Information Administration gap. Increased investment in new technology would help drive (EIA) predicts that global primary energy demand will rise 50% down the costs of competing energy alternatives, such as solar, between now and 2030, with more than 80% of the incremen- wind, biofuel, and hydrogen sources. Already, wind turbines tal demand coming from developing countries. can be cost competitive with coal and gas production. China alone is expected to account for approximately 30% of Of the total venture capital investment in the United States in the increase in energy demand over the next 20 to 25 years. By 2008, 11.8% was related to energy technologies, up from just 2010, the country is forecast to have 90 times the number of 0.6% in 2000.4 Based on these trends, a growing number of cars it had in 1990, and as early as 2030, China could have more investors and analysts see alternative energy as opening up a cars than the United States.2 new horizon for long-term investment. SCARCITy OF ACCESSIbLE OIL Spurred by mounting public concern, renewed interest, and While the recent decline in oil prices may have dampened the stimulus funding for energy infrastructure and research and sense of urgency over diminished supplies, the scarcity of ac- development, the pace of innovation within the alternative cessible oil has meant rising fuel shortages worldwide, as key energy sector is likely to accelerate. Longer term, alternative oil producing countries are at or near production capacity, energy technologies will almost inevitably be an increasingly and easy-to-reach natural gas supplies have declined. Some significant contributor to solutions to global energy problems. speculate that despite development of more sophisticated ex- traction technologies, we may be approaching the point where total oil production volumes globally are in decline, a concept known as “peak oil.” Indeed, already 54 of the largest 65 oil- producing countries have begun to experience a decline in Technologies that make the grid oil production.3 even 5% more efficient would allow Global supply constraints—from production to refining— savings equal to the elimination of suggest fossil fuel prices will rise over time. Costlier oil makes GHG emissions from 53 million cars. more expensive methods of oil production more viable but 3
  4. 4. to understand investors’ use of climate risk data. The research The Investor Network on Climate found that information that companies provided to CDP on Risk has grown from 10 investors emissions reduction targets, as well as corporate strategies to deal with the climate change, was factored into investment managing $600 billion in assets to and asset allocation decisions at 75% of the investment firms more than 70 investors managing surveyed. This sends a clear signal that investors surveyed take climate change issues seriously and are gaining sophistication more than $7 trillion in assets. in assessing the related impacts on their portfolios. CHANGING REGULATORy LANDSCApE A central objective of programs that harness technology for While green economy sentiment and policy changes favoring clean energy involves transforming the existing infrastructure renewable energy are taking hold in the United States, these into a “smart grid.” A smart grid allows renewable energy to be issues are already high on the international policy agenda. The channeled efficiently within communities and brings power European Union (E.U.) continues to play a leadership role, re- generation closer to users. The shorter the distance from cently affirming its 2020 targets calling for a 20% reduction in generation to consumption, the more efficient, economical, carbon emissions and for a fifth of its energy consumption to and clean the process can be. Smart grids also enhance energy come from renewable energy sources. Additionally, the United efficiency by helping households and other consumers to man- Kingdom plans to reduce emissions by 26% in 2020 and 80% age their electricity by giving consumers better information by 2050. Among developing nations, China, in a 2008 year-end about the costs of using power during peak and non-peak report, reiterated its commitment to improving energy effi- periods. Experts estimate that making the grid even 5% more ciency and expanding the use of renewables. efficient would mean savings equal to the elimination of greenhouse gas (GHG) emissions from 53 million cars.5 We anticipate that new regulations under consideration designed to combat climate change and reduce reliance on for- CLIMATE CHANGE eign oil will dramatically alter the energy landscape and help Today, there is broad scientific consensus and corresponding make alternative energy significantly more competitive in the public concern about the potentially catastrophic impact of cli- period ahead. Recent actions include: mate change. The Intergovernmental Panel on Climate Change (IPCC) has clearly established that the earth is warming and United States human activity is accelerating this trend at an alarming rate. n States are leading the way in setting vehicle greenhouse gas According to the National Center for Atmospheric Research, emissions standards. The state clean car standards require greenhouse gas concentrations in the atmosphere are now an approximate 30% reduction in emissions from new ve- higher than at any time in the last 750,000 years.6 Based on hicles by 2016. To date, 18 states have adopted, or are in the current projections, the IPCC projects a potential increase process of adopting, these standards. of temperatures over the next 100 years of between 2 and n By the end of March 2009, 28 states had signed into law 11.5° F (1.1 and 6.4° C).7 This is hugely significant, since over the a Renewable Portfolio Standard (RPS) that sets a specific, last 10,000 years there has not been a change of more than legally-binding target for renewable energy production in 1.8° F (1.0° C).8 The projected magnitude of warming could each state. mean a rise in sea levels, increased flooding, disruption of vari- n The American Recovery and Reinvestment Act of 2009 ear- ous ecosystems and agricultural zones, and changes in pest marked $11 billion for smart grid updates, $4.5 billion for infestation and disease patterns. energy-efficiency improvements to federal buildings, and $500 million for green jobs programs through the Workforce Business Risks Recognized Investment Act, among other programs to promote renew- The imperative to slow the rate of climate change already has ables. The Act includes provisions for $13 billion to extend imposed some risks on corporations. Investors increasingly by three years the placed-in-service date for renewable are interested in how companies are managing the impact energy investments and an additional $1.6 billion for clean of their energy usage and carbon footprint. The Investor energy bonds. Network on Climate Risk, which is a coalition of institutional n The Administration supports an economy-wide, cap-and- investors pushing for companies to address climate risk, has trade program to reduce greenhouse gas emissions 80% grown from 10 investors managing $600 billion in assets by 2050. to more than 70 investors managing more than $7 trillion n It also supports the goal to ensure 10% of U.S. electricity in assets. It has persuaded some two dozen Fortune 500 comes from renewable sources by 2012 and 25% by 2025. companies, including leading oil, automobile, and insurance n In March 2009, the Environmental Protection Agency (EPA) companies, to improve their climate policies, practices, found that carbon dioxide is a danger to public health, a step and disclosure.9 that could trigger management and disclosure of emissions of greenhouse gases across the economy. The so-called en- In the first quarter of 2009, The Carbon Disclosure Project—a dangerment finding could clear the way for the EPA to use project sponsored by Calvert and HM Consulate General (of the Clean Air Act to control emissions of greenhouse gases. the British Government) and written by global consulting firm Mercer—released its findings. The goal of the global survey was continued on page 6 >> 4
  5. 5. developments in alternative energy Wind — Wind is one of the most cost-competitive, technologically be competitive with traditional fossil fuels. The sector is highly capital mature, and scalable renewable energy sources available. In many cases, intensive, but benefits from low operating costs since generating the wind energy already is close to cost competi- power requires no purchased fuel and is not tive when compared to new start-up coal and subject to varying fuel costs. gas plants. New capital expenditures for wind installation are projected to grow from $51.4 Ocean — Ocean, or wave power, is an emerging billion in 2008 to $139.1 billion in 2018. In 2007, power generation technology not yet deployed global wind power installations reached a record commercially on a meaningful level. However, 27,000 megawatt (MW), including more than it has great potential, because abundant wave 8,000 MW of capacity added in the United power resources are available globally. According States. This amounted to more than 40% of to the U.S. Department of Energy, wave power the country’s total new electricity generating could produce 40MW to 70MW of power per capacity brought online in 2008–putting the kilometer along the western U.S. coastline. United States ahead of Germany as the world’s leading generator of Still, further cost and technological improvements are needed for large- wind energy.10 scale applications. Solar — Solar technology is advancing at one of the fastest rates in the Hydropower — Hydropower is a long-established technology that uses renewable energy sector and may reach grid parity by 2012 in sunny turbines to generate energy from water flow. The advantages of hydro- regions of the world. Yet solar power installations currently account power include minimal pollution levels, good reliability compared with for less than 0.1% of total power generation other renewables, low operating costs, and cost capacity worldwide. Germany, Japan, and the competitiveness with fossil-fuel power genera- United States are the three largest solar markets, tion. Disadvantages of hydropower include very accounting for 78% of the total market. Solar high initial capital costs, as well as significant photovoltaics (PV), including modules, system environmental and social concerns about the components and installation, are projected construction and operation of large dams. to grow from a $29.6 billion industry in 2008 to $80.6 billion by 2018, according to Clean Fuel Cells — Many fuel cell products are still in Edge.11 Annual installations worldwide reached the testing and development phase, although more than 4 gigawatt (GW) in 2008, a fourfold large research and development funding is be- increase from four years earlier, when the solar ing devoted to the industry. Fuel cells generate PV market first reached the gigawatt milestone. electricity from an electrochemical reaction in which air and fuels, such as hydrogen, combine to form energy, producing a byproduct of pure Biofuels — Biofuels are currently the only renewable alternative to tra- water. There are many different types of fuel cells for various applica- ditional transportation fuels. Biofuels include ethanol, which is derived tions, ranging from large-scale stationary power to portable (lap-top from starch-based plants such as corn, wheat or sugar, and biodiesel, computers, cell phones) and automotive applications. Fuel cell-powered which can be derived from vegetable oils, algae, or animal fats. In vehicles are the furthest from commercialization due to cost. the United States, the Energy Independence and Security Act of 2007 increased the Renewable Fuel Standard (RFS) target to a minimum Efficiency/Conservation — Energy conservation technologies mainly usage of 35 billion gallons of biofuels by 2020, and enacted an ethanol involve developing more efficient machinery, lighting, building blending excise tax credit of $0.51 per gallon to support the industry. techniques, materials, superconducting techniques for transportation The European Union promotes the use of biofuels through its usage of energy, and improvements in energy storage and thermal efficiency. target of 5.75% of all fuel by 2010. According to the American Council for an Energy Efficient Economy (ACEEE), investment in efficiency retrofits and new construction could Geothermal — Geothermal energy stems from the earth’s natural grow to $700 billion annually by 2030.12 Energy efficiency may be the heat. Unlike wind or solar, geothermal power is available throughout most compelling solution to reducing GHG emissions while generating the day, regardless of weather conditions. The most efficient modern cost savings and supporting jobs. geothermal facilities can produce electricity at wholesale prices and 5
  6. 6. 20% of its total power from renewable sources by 2020, This will be a crucial year in inter- and of reducing greenhouse gas emissions by 20% by the same date. In addition, new legislation has been introduced national efforts to address climate calling for the E.U. to reduce greenhouse gas emissions to change, culminating in the United 20% below 1990 levels. Driven partly by attractive govern- ment incentives, Spain and Germany are home to solar and Nations Climate Change Conference wind companies that can claim some of the largest global in Copenhagen in December 2009. market shares. n Although China has not established a climate change policy, the country has made policy commitments to water and International infrastructure management. China has not set specific n Some 184 countries have ratified the Kyoto Protocol which domestic targets for controlling greenhouse gas emissions, is set to expire after 2012. The Protocol requires countries in but it has set energy efficiency goals that officials say show the European Union and 36 other industrialized countries, the government’s commitment to tackling CO2 emissions. A which represent 55% of global emissions, to reduce green- 2006-10 plan aims to reduce energy consumption per unit house gas emissions by 5.2% from 1990 levels through a of gross domestic product by 20%. China also is addressing cap-and-trade system. The United States is the only hold-out global warming through vehicle emissions. The country has among developed countries. India and China have ratified said it wants to raise its annual production capacity of alter- the Protocol but are not required to reduce carbon emissions native energy vehicles to 500,000 cars and buses by the end under the present agreement. of 2011, from 2,100 in 2008. n 2009 will be a crucial year in international efforts to address climate change, culminating in the United Nations Climate CALVERT’S pOLICy pRIORITIES: bUILDING MOMENTUM Change Conference in Copenhagen December 7-18. The FOR CLIMATE CHANGE SOLUTIONS agenda for this conference will help provide a post-Kyoto At a time when growing worldwide demand for energy is framework. Establishment of international greenhouse gas straining traditional energy resources globally, the potential emissions reduction targets that are consistent with the sci- of alternative energy solutions to alleviate shortages, address entific consensus—specifically with the recommendation by pressing climate change issues, and reduce dependency on the IPCC—would be a critical step. unstable external fuel supplies has become increasingly ap- n The European Union has adopted a goal of generating parent to the public and the scientific community. At the same examples of alternative energy companies WIND ENERGY: SOLAR: ENERGY EFFICIENCY: Iberdrola Renovables (IBR) MEMC Electronic Materials (WFR) Itron Inc. (ITRI) Iberdrola is the largest global wind farm MEMC produces silicon wafers. Its products Itron is a global supplier of wireless data operator and market leader within this are used in computers, telecommunica- acquisition and communication products for mature and scalable renewable energy sector. tions equipment, automobiles, consumer electric, gas, and water utilities. Its software It is the number one operator in the United electronics products, industrial automation for automating meter data collection permits Kingdom and the number two operator in the and control systems, as well as analytical and utilities to enhance both resource manage- United States. No other company boasts as defense systems. MEMC is vertically inte- ment and conservation and to develop much experience in installing, designing, and grated, producing silicon, ingots, and wafers. customer rate structures that encourage managing wind farms. To date, the company, Roughly 50% of the company’s sales is from conservation. Itron’s automatic meter reading which went public in 2007, has delivered on the semiconductor industry. The remaining (AMR) systems, handheld meter reading its growth forecasts, and in our view, will ex- 50% is generated from solar sales. computers, and meter data acquisition and pand more rapidly than any other wind farm analysis software help utilities work with operator. Given its strong track record, IBR’s their customers to reduce loads during peak profit margins should remain strong. The usage times. Such “smart meters” enable recent extension of the U.S. Production Tax customers to better manage their energy Credit reinforces opportunities for IBR in the usage and costs while also improving United States. system reliability. As of April 30, 2009, Iberdrola Renovables represented 6.4% of the net assets of Calvert Global Alternative Energy Fund. MEMC Electronic Materials represented 2.7% of Calvert Global Alternative Energy Fund and 0.07% of Calvert Social Index Fund. Itron represented 1.9% of the net assets of Calvert Global Alternative Energy Fund, 2.0% of Calvert Global Water Fund, 2.6% of Calvert Capital Accumulation Fund, and 0.03% of Calvert Social Index Fund. 6
  7. 7. time, there is growing appreciation of the damaging impact CONCLUSION of climate change on companies, industries, and whole econo- For the nascent alternative energy sector, 2009 is shaping up mies, as well. Spurred by the strong fundamental drivers cited as the year when the political, social, and economic forces are in this paper, we can imagine the emergence of a new era of aligned for positive change. Even amid a crippling global fi- opportunity for the alternative energy sector. nancial and economic downturn, governments worldwide are affirming—even strengthening—commitments to curb car- In addition to offering investments designed to provide bon emissions. This suggests that the need to address climate solutions to pressing climate change issues, Calvert remains change has crossed a threshold whereby a return to the old active on the policy level. In November 2007, Calvert, in part- ways is no longer possible. nership with Ceres, a national environmental coalition, led institutional investors managing $1.4 trillion in assets in urg- From an investment perspective, we believe this development, ing Congress to implement strong national regulatory action along with the five key drivers discussed herein, build a case on climate change. for considering alternative energy stocks as part of an invest- ment portfolio’s equity allocation. Including alternative energy Calvert’s policy priorities include support for the following: companies can enhance overall portfolio returns by providing investors with access to a new, potentially high-growth set n Enactment of cap-and-trade legislation that would put a of companies. price on carbon. This also would benefit renewable energy because of its zero-carbon generation. On balance, while alternative energy stocks represent higher n Assumption of a strong leadership role by the United return potential, they also involve higher risk potential. States at the United Nations Climate Change Conference in Navigating the companies in this relatively young sector Copenhagen in December convening to establish a strong should be done with the help of investment professionals post-Kyoto framework. skilled in assessing the financial strength, competitive ad- n Establishment of a national standard for renewable energy vantages, supply-demand fundamentals, and future growth requiring utilities to generate at least 25% of their electricity prospects of these unique companies. We tend to favor com- from renewable sources by 2025—a standard that can only panies that we consider to be long-term winners, low-cost be met through the use of renewable energy sources, not producers, and companies with proven technologies. energy efficiency. n Implementation of measures to reduce dependence on pol- With alternative energy stock prices driven to attractive levels luting energy sources, including: 1) adoption of an energy due to the market correction, and the implementation of a efficiency resource standard (EERS); 2) development of a na- range of green initiatives underway, we consider this a good tional smart grid that facilitates efficiency; and 3) increased time to consider adding alternative energy exposure. We ex- transmission of electricity generated by renewables. pect the fact that climate change will be an integral part of global public policy stimulus measures to be an important catalyst for the alternative energy sector in 2009. n alternative energy vs. clean tech Alternative energy is a sub-set of clean technology. While alternative energy includes efficiency, energy production, and energy storage, “clean tech” refers to a broader set of technologies that addresses the management of natural resources and waste. Examples include water treatment and distribution, recycling, and waste minimization. 7
  8. 8. 1. U.S. Census Bureau, http:/ / 2. Institute for the Analysis of Global Security, “Fueling the Dragon: China’s Race into Calvert Global Alternative Energy the Oil Market,” by Gal Luft, Fund (CGAEX) is an all-market-cap, 3. Association for the Study of Peak Oil&Gas, “The Oil Supply Tsunami Alert,” by Kjell Aleklett, http:/ / alternative energy sector mutual 4. Clean Energy Trends 2009, March 2009, CleanEdge fund that invests in a globally diverse 5. Department of Energy, “The Smart Grid: An Introduction,” selection of companies. http:/ / 6. National Center for Atmospheric Research, Climate and Global Dynamics Research, Modeling and Attribution of Observed Climate Change, For ongoing updates about the http:/ / alternative energy sector and the 7. Union of Concerned Scientists, Global Alternative Energy Fund, 8. Union of Concerned Scientists, please visit us online at http:/ / warming-faq.html 9. Calvert is a member of The Investor Network on Climate Risk. 10. Clean Energy Trends 2009, March 2009, CleanEdge, 11. Clean Energy Trends 2009, March 2009, CleanEdge, http:/ / 12. ACEEE, “The Size of the U.S. Energy Efficient Market: Generating a More Complete Picture,” May 2008, http:/ / This commentary represents the opinions of its authors as of May 20, 2009, and may change based on market and other conditions. Their opinions are not intended to forecast future events, guarantee future results, or serve as investment advice. This commentary is provided for informational purposes only. Any statistics in it have been obtained from sources believed to be reliable, but the accuracy of this information cannot be guaranteed. A Word About the Risks. Calvert Global Alternative Energy Fund is subject to the risk that stocks that comprise the energy sector may decline in value, and the risk that prices of energy (including traditional sources of energy such as oil, gas, or electricity) or alternative energy may decline. The stock markets in which the Fund invests may also experience periods of volatility and instability. In addition, shares of the companies involved in the energy industry have been more volatile than shares of companies operating in other more established industries. Consequently, the Fund may tend to be more volatile than other mutual funds. Lastly, foreign investments involve greater risks than U.S. investments, including political and economic risks and the risk of currency fluctuations. For more information on any Calvert fund, please contact your financial advisor, call Calvert at 800.368.2748 or visit for a free prospectus. An institutional investor should call Calvert at 800.327.2109. An investor should consider the investment objectives, risks, environmental benefits statement of using post-consumer waste fiber vs. virgin fiber charges and expenses of an investment carefully before investing. The prospectus contains this Calvert saved the following resources by using New Leaf Imagination, made with 100% recycled fiber and 100% post-consumer waste, processed chlorine free, and manufactured with electricity that is offset with Green-e® certified renewable energy certificates: trees water energy solid waste greenhouse gases and other information. Read it carefully before you invest or send money. 15 fully grown 6,423 gallons 11 million Btu 711 pounds 1,403 pounds Calculations based on research by Environmental Defense Fund and other members of the Paper Task Force. Calvert funds are available at NAV for RIAs and Wrap Programs. Not all funds available at all firms. Calvert mutual funds are underwritten and distributed by Calvert Distributors, Inc., member FINRA, subsidiary of Calvert Group, Ltd., 4550 Montgomery Avenue, Suite 1000N, Bethesda, MD 20814 #9036-200905 A UNIFI Company SM