Calvert has created an environmental, social, and governance (ESG) scoring measurement to judge whether a company qualifies to be included in its equity separate account strategies.
Companies included in the ESG Leaders Strategies must score in the top third for at least one sustainability metric across 200 peer groups to be considered for inclusion, according to Anne Matusewicz, responsible investment strategist at Calvert Research and Management.
A business that ranks in the top third for an environmental score must still place at least in the top two-thirds for another metric. About 550 companies may be chosen for a fund, out of roughly 4,000 companies reviewed.
The funds stick closely to a benchmark allocation, though they may lean slightly overweight in the information technology (IT) sector and slightly underweight in energy companies, according to Matusewicz.
That mirrors other strategies that focus on financially material ESG factors, meaning that companies are assessed on sustainability issues that have a significant impact on a company’s business model. For example, the S&P 500 ESG Index is expected to mimic the benchmark while also including sustainability values.
”Companies that achieved top ESG scores in financially material factors have historically produced stronger financial performance than those with weaker ESG scores,” Jade Huang, portfolio manager at Calvert, said in a statement.
Calvert is also the only fund manager in the US that offers a full range of 28 equity, fixed-income, allocation, and sector funds with a sustainability focus, according to Morningstar.
Calvert’s Matusewicz said the firm differentiates itself from other firms with its structured engagement work with companies. Calvert has its own proxy voting guidelines to file shareholder resolutions and engage companies on issues that the firm feels can improve their performance.
“We’re talking to companies to improve operations to improve performance,” Matusewicz said.
The seven ESG Leaders Strategies are: US ESG Leaders, Tax-Managed US ESG Leaders, Global ex.-US Developed Markets ESG Leaders, Tax-Managed Global ex-US Developed Markets ESG Leaders, Global Developed Markets ESG Leaders, Tax-Managed Global Developed Markets ESG Leaders, and Emerging Markets ESG Leaders.
Calvert will also make some strategies available for tax-paying investors through a partnership with Parametric Portfolio Associates, which, along with Calvert, is an Eaton Vance subsidiary.