Climate Change Climate change is one of the primary ESG issues for Calvert’s engagement team. We expect companies to set realistic “net zero” or science-based emissions-reduction targets, put in place management systems to achieve these targets, and set meaningful performance goals to ensure management accountability. Calvert has continued to see progress on data over the past few years. Reporting on climate-related data and climate change strategies is now the norm among U.S. and European companies, after many years of engagement, with an increasing emphasis on how companies and investors execute against those targets. However, the quality of the data available remains inconsistent. In particular, the disclosure of Scope 3 emissions significantly lags that of Scopes 1 and 2, which obscures a holistic view into a company’s true carbon impact and exposure across the value chain. Our engagement approach is tailored to each sector and company. Some sectors have established emissions-reduction processes already in place. Others are looking for ways to effectively decarbonize, with potential opportunities available for first movers. In 2022, we continued to press companies we’ve had long-standing engagements with on the issue of climate change. Given how far-reaching climate change is as a material business risk—regulatory, operational, physical and reputational— our engagements and underlying objectives vary: from encouraging companies to align their reporting with the Task Force on Climate-Related Financial Disclosures (TCFD) to setting clearly defined GHG emissions reduction targets and ensuring that lobbying activities align with the Paris Supported Voted for Agreement’s goal of limiting temperature rise to 1.5 C. 100% 16 out Calvert examines how companies follow through on the of U.S. commitments made. environmental of 16 proposals climate proposals „ Disclosure, governance etc. „ Leading through the energy transition Engagement in Action: Xcel Energy As the shift to a low-carbon economy continues, investors and others are becoming increasingly aware of the need for a "Just Transition" that integrates climate change and human capital management to create the necessary environment for action. Calvert engages with companies on Just Transition in a number of ways, both on our own and as a part of investor coalitions. One example of Calvert's engagement is our work with Xcel Energy, which we undertake as a part of our work with Climate Action 100+, an investor-led coalition that asks corporate greenhouse gas emitters to take necessary action on climate change. Xcel was the first CA100+ utility sector company to commit to a net-zero target. Moreover, Xcel has significant operations in Colorado, which is the first state in the U.S. to have Just Transition legislation. We are working directly with Xcel to strengthen its net-zero commitments, associated targets and interim steps. In addition, we are asking the company to align climate lobbying policy and human capital management policies, including Just Transition, to support the achievement of net-zero targets. We asked that Xcel consider including its natural gas utility operations in its net-zero commitment. Subsequent to meeting with the company, Xcel announced its ambition to achieve net-zero greenhouse gas emissions from its natural gas business by 2050–becoming the first integrated U.S. utility company to commit to an enterprise-wide net-zero target. 10