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Perspectives on Innovation: Why “Net Zero” Wins over “Carbon Neutral”

Executive Summary

  • There are important differences between net-zero and carbon-neutral strategies, with significant implications for a company’s risk profile and long-term growth prospects.
  • We believe companies with fundamental business strategies that address resource constraints, ecological limits and climate change are positioned to achieve greater market share.
  • Innovators at the forefront of the net-zero movement will have a competitive edge owing to notable advantages such as an enhanced reputation, reduced risks, cost savings, and access to new markets.

In assessing a company’s climate-mitigation strategy, the Calamos Sustainable Equities Team favors businesses that adopt a net-zero carbon plan, believing net zero to be the superior solution.

  • In our investment approach, we seek out quality companies with above-average growth prospects, reflecting our comprehensive understanding of a company’s financial and nonfinancial risks. Accordingly, we seek to identify companies that go beyond buying offsets in favor of companies that target being net zero.
  • When evaluating a company’s climate mitigation strategy, we believe it is imperative to understand the breadth and depth of the company’s targets, implementation strategy and performance. A company can set ambitious climate goals that are not always backed by substantive actions.
  • Companies that authentically embrace net zero and have actionable climate strategies in place offer many competitive advantages such as enhanced reputation, reduced risk, cost savings associated with the transition to net zero, and access to new markets. These are the companies the Sustainable Equities Team seeks to invest in.
  • Carbon neutrality through carbon offsets may be more subject to “greenwashing,” which increasingly represents a reputational risk to companies.

Read the full paper here.

About the authors

Beth Williamson is a member of the investment team managing the Calamos Sustainable Equities suite, including Calamos Antetokounmpo Global Sustainable Equities ETF (SROI) and Calamos Antetokounmpo Sustainable Equities Fund (SROIX), as well as separately managed portfolios. This team has been at the forefront of sustainable investing since 1997 and launched one of the first fossil-fuel-free funds in the United States. Prior to Calamos Investments, Beth was a portfolio manager for the Trillium ESG Global Equity Fund Retail (PORTX). Valia Tsoukopoulou is a junior research analyst who assists the Sustainable Equities team in conducting material environmental, social and governance analysis of companies, portfolio-level impact assessments and other related research projects.

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The opinions referenced are as of the date of publication and are subject to change due to changes in the market or economic conditions and may not necessarily come to pass. Information contained herein is for informational purposes only and should not be considered investment advice. References to specific securities, asset classes and financial markets are for illustrative purposes only and are not intended to be, and should not be interpreted as, recommendations.

This material is distributed for informational purposes only. The information contained herein is based on internal research derived from various sources and does not purport to be statements of all material facts relating to the information mentioned and, while not guaranteed as to the accuracy or completeness, has been obtained from sources we believe to be reliable.

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