Calvert Investments

The Sustainable Investing Fund Manager Series Continues

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Calvert Investments

Founded in 1976 and now headquartered in Bethesda, MD, Calvert Investments had more than $13 billion in assets under management as of July 31, 2014, making it one of the largest sustainable and responsible (SRI) fund managers in the US today. Calvert serves individual investors, financial advisors and their clients, retirement plans and insurance carriers, as well as institutional investors, through a variety of equity, bond, and asset-allocation strategies, using environmental, social, and governance (ESG) research and corporate engagement.

Strategies are available via mutual funds, sub-advisory services, and separate account management.

Calvert is one of the longest standing players in SRI since its inception more than 30 years ago.

Shortly after the launch of its first mutual fund, Calvert Investments made headlines for being the first mutual fund advisor to take a stand against Apartheid. Four years later, Calvert Investments became the first mutual fund advisor to file a shareholder resolution tied to a social issue (on labor/management relations - they have been involved in many such resolutions since as can be seen at their website here).

Legacy of Firsts

Calvert has long maintained a strong conviction that evaluating the Environmental, Social, and Governance (ESG) profiles of companies – in addition to traditional financial metrics – gives Calvert broader and deeper insight, helping the company best generate attractive returns and avoid risks.

In the 1990s, Calvert Investments won a landmark victory for the SRI community. Calvert asked the Department of Labor (DOL) for an advisory opinion on the suitability of socially screened funds as investment options for defined contribution plans, such as 401(k)s. Until then, managers of such plans had been concerned that including SRI funds in their offerings would violate their legal obligation to maximize returns, based on a mistaken belief that SRI funds yielded inferior returns.

The DOL advised that an SRI fund in fact can be used as an investment option in 401(k) plans, provided its expected return is equal to other investments with similar risk. This expanded access to SRI funds for individual investors.

In 2004, Calvert launched the first global code of corporate conduct – the Calvert Women’s Principles® – to focus exclusively on empowering, advancing, and investing in women worldwide. The UN subsequently adopted these Principles. In 2014, Calvert marks the tenth anniversary of the Principles and celebrates the fact that more than 700 global companies have signed on. 

From Pioneer to Established Institution

Calvert has been on the frontlines of taking the SRI movement from being something of a radical idea to what is now more of an established force. Now, Calvert is in transition, seeking to redefine itself as a recognized, leading competitor in a somewhat developed SRI market.

Calvert embraces the fact that sustainable investing is a big tent. It is no longer a one-size-fits-all strategy, nor has it been for some time, which is why Calvert offers multiple approaches across  equity and fixed-income.

The company distinguishes itself from much of its competition by meeting a wide range of investor needs, and continues to expand its offerings. Calvert is actively building its retirement specialist team, and is enhancing its offerings for institutional investors by recruiting more specialists and broadening its product base across asset classes.

Under the big-tent, Calvert’s investment strategies, both equity and fixed income, can be categorized by one of the following three sustainable investment approaches:

  • Applying sustainable and responsible criteria to help clients invest in ways consistent with their values 
  • Creating portfolios that focus on  investment themes with positive impact
  • Or by using the integration of Environmental, Social and Governance data in the security analysis process to drive better investment outcomes

In all cases, Calvert excludes companies from its portfolios that are involved in certain particularly harmful activities, such as tobacco and weapons production. Thereafter, Calvert actively seeks out companies that effectively manage their impacts.

Human rights protection in the supply chain, reporting on environmental practices, transparency and accountability at the Board level – these are the hallmarks of the best run companies. When properly analyzed according to this model, Calvert believes that these considerations can contribute to better outcomes for investors.

Calvert’s approach to sustainable investing is evident in some of its developments in recent years:

  • At a time when water issues are among the top global environmental risks, the firm serves as investment advisor to the Calvert Global Water Fund, which invests in companies whose main business is in the water sector, or that are significantly involved in water-related services or technologies. 
  • Calvert is also pioneering in the fixed-income space where it recently developed a “green” fixed income strategy and now manages the Calvert Green Bond Fund. The fund is one of the first products to use an approach that looks for corporate leaders in addition to investing in “green” project bonds. 
  • The firm also recently launched a resource efficiency strategy focused on seeking out the companies in each sector that are making the most efficient use of resources in their areas of business, such as water, energy, and waste. The strategy, which is the result of Calvert’s alliance with Osmosis Investment Management, emerged in response to the recent trend of global capital allocation to new products, processes, technologies, and services designed to confront global economic challenges, such as over-population and natural resource depletion. It is currently available through Merrill Lynch.

Making an Impact on Corporate Behavior

Calvert also has stood out in its use of strategic engagement and shareholder advocacy to encourage positive change in companies in virtually every industry, both to establish certain commitments and to encourage concrete progress. Calvert has been particularly successful in promoting better human- and labor-rights practices in corporate supply chains, and in promoting diversity on corporate boards of directors. Indeed, Calvert has filed more than 60 shareholder resolutions with companies, and successfully encouraged the addition of 31 female and/or minority candidates to boards. To date, Calvert has filed more resolutions on board diversity than any other investment manager.

A Final Word…

Today, Calvert is an organization in transition.

The company announced that its CEO, Barbara Krumsiek, would be stepping down at the end of 2014. Krumsiek, who led Calvert for 17 years and tripled the company’s assets under management during her tenure, will remain chairwoman of the board of directors. 

Under the management of recent CEO John Streur, there have been significant layoffs, and the firm last had $12 Billion of assets, meaning it is no longer the leader in the US, having been surpassed in assets by Parnassus and TIAA-CREF among others. The Calvert brand remains seminal but can it nimbly evolve is a key unanswered question before the firm as others move forward with newer strategies.

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