Get comfortable talking about Responsible Investing: Calvert

From

John Streur

John Streur, President and CEO, Calvert Research and Management, a leader in Responsible Investing, with approximately USD$12.9 billion in funds under management and an affiliate of Eaton Vance, stresses that framing a Responsible Investing conversation in terms of principles and pillars can help both financial advisors and investors get on the same page in constructing a portfolio that meets risk-return goals, while also addressing investor concerns about ESG issues and their own values.

He elaborates “As Responsible Investing draws more interest in the marketplace, many financial advisors need deeper education to become more comfortable talking about it with their clients.”

Results from the U.S. Trust Insights on Wealth and Worth annual survey in 2016 indicated that among high-net-worth individuals, 93% of millennials, 88% of GenX and 51% of baby boomers say they are interested in environmental, social and governance (ESG) investing. However, that survey reports that just 44% of advisors use ESG in their practice currently.[1]

The client interest is easy to understand. Some comes from current events. It is difficult not to consider the investment risk faced by some companies as the result of climate change when watching coverage of a devastating hurricane, for example. There are more available academic resources that support Responsible Investing, and more sophisticated metrics to measure impact. In addition, corporations are increasingly taking a proactive approach to addressing ESG issues material to their operations, and asset managers like Calvert engage with companies as necessary to improve performance.

However, while the investor interest is apparent, starting a conversation about Responsible Investing with clients may be difficult for some financial advisers. Becoming comfortable talking about the principles behind Responsible Investing, and the pillars on which it stands, can help meet those client needs.

The Calvert Approach: Principles and Pillars

Calvert seeks to invest in issuers that balance the needs of financial and nonfinancial stakeholders and demonstrate a commitment to the global commons, as well as to the rights of individuals and communities. In doing so, the fundamental basis for Calvert’s investment decisions are the Calvert Principles for Responsible Investment, which provide a framework for our evaluation of investments and guide Calvert’s stewardship on behalf of investors through active engagement with issuers.

The Calvert Principles seek to identify companies and other issuers that operate in a manner that is consistent with or promote:

  • Environmental Sustainability and Resource Efficiency
  • Equitable Societies and Respect for Human Rights
  • Accountable Governance and Transparency

Using the Calvert Principles as a guide, we believe that there are four pillars that must be present to form an acceptable Responsible Investment strategy.

  1. Performance: Our first responsibility is to seek strong portfolio returns.
  2. Research: We conduct deep, proprietary research focused on material ESG issues.
  3. Engagement: As shareholders, we actively engage with companies to help drive performance and social value.
  4. Impact: We believe the impact of your investments should be material and measurable.

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[1] U.S. Trust Insights on Wealth and Worth annual survey, 2016. Accessible online at http://www.ustrust.com/publish/content/application/pdf/GWMOL/USTp_AR9R6RKS_2016-05.pdf

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