Back in January we initiated a discussion on the Socially Responsible Investing and its close cousin Environmental, Social and Governance investing. We continue to believe in this trend individually and at an institutional level. It used to be thought that returns have to largely be sacrificed in order to adhere to SRI criteria.

According to the US SIF Foundation’s 2012 Report on Sustainable and Responsible Investing Trends in the United States, as of year-end 2011, more than one out of every nine dollars under professional management in the United States—$3.74 trillion or more—was invested according to SRI strategies. The next Trends report on SRI assets will be published in the fourth quarter of 2014.

We anticipate that there will be a higher number and that the growth rate will be just as impressive. Socially responsible investing doesn’t have to sacrifice profits for ethos.

Aaron Levitt an Investor Place Contributor wrote an article on March 21st of this year addressing some issues with regard to performance and SRI. According to Goldman Sachs (GS), firms that are considered to be leaders in socially responsible investing have also been leaders in terms of stock performance as well — averaging an extra 25% over the longer term. This echoes similar research conducted by Allianz. Between 2006 and 2010, the German insurance group found that investors could have added an additional 1.6% a year to their investment returns by allocating to portfolios that invest in companies with above average ESG ratings.

Calvert Investments located in Bethesda, MD is a firm that dedicates its asset management process in large part to SRI/ESG investing. Today we will provide a basic outline with regard to three major approaches and in subsequent pieces, we will identify the best and worst that this fund complex has to offer with regard to SRI/ESG investing.

Their original approach is named the “Calvert Signature Series” and combines financial metrics and a thorough assessment of environmental, social and governance performance.

They have the typical exclusion list that includes to some degree in most of their core funds; tobacco, firearms, alcohol and human rights issues. The also engage in an advocacy approach that focuses on four major areas of strategic priority.

  • Environment and climate change
  • Governance and ethics
  • Diversity
  • Human right, labor and indigenous people’s rights

Within this mandate they have funds that cover domestic, international as well as a bond portfolio. They also have “allocation funds” although as a matter of philosophy, we do not believe in their use.

Calvert expanded their offering to include a more thematic mandate named, “Calvert Solution Strategies” whose portfolios selectively invest in companies that produce products and services geared toward solving some of today’s most pressing sustainability issues.

The Calvert Global Alternative Energy Fund advocates mainly for renewable energy while the Global Water Fund advocates in the areas of equitable and affordable access to water, climate change and stakeholder engagement.

While some emerging markets funds focus on dividend yield or pure growth rates, Calvert looks for companies that aim to address global sustainability challenges in their local and or international markets.

The third major approach is their enhanced engagement approach named their “Sage Strategies”. These portfolios emphasize strategic engagement to advance environmental, social and governance performance in companies that may not meet standards today but have the potential to improve.

Within the environmental area they look for reporting and reductions with regard to greenhouse gas emissions and climate change public policy. Their governance screen and advocacy focuses on diversity as well as revenue transparency, policies and engagement.

They offer two equity funds within this area in an equity income fund and a large cap fund.

There are a number of SRI/ESG criteria to consider at the firm level and for your individual clients who may have certain beliefs that are contrary to a fund constructed based solely on financial metric screens.

The next SRI/ESG piece will assess and score a few of the funds within each category to aid firms in their decision to expand into this growing area of the investment world.


Tom Koehler-CIO


“Socially Responsible Investments represent a complex asset class and while we covered a small amount, there is a lot more information needed prior to making an investment decision. Let us know if we can provide more information to help in that process.”