The Way We Invest

Analysis from Trucost Shows Select Calvert Funds Have Less Carbon Risk

Calvert has made a business priority out of moving the needle on the issue of climate change.  We have focused on promoting new carbon policies, evaluating how companies respond to carbon risk, engaging with companies to improve, and assessing our company’s own carbon footprint.  Our most important impact as a company is that made through our products—that is, the carbon footprint of our funds. 

Calvert has examined the carbon profiles of companies in our funds for over 10 years, and this is a vital part of our overall assessment of whether a company makes the grade for our Signature™ funds.  In the interest of measuring the impact of this important ongoing analysis on our funds, in September 2009 Calvert partnered with Trucost, the world's leading provider of carbon data and analysis on companies, to conduct an analysis of the carbon footprints of three of our SRI funds, Calvert Equity Portfolio, Calvert Social Index Fund, and Calvert Large Cap Value Fund.  The results confirm what we have believed for some time: that these funds have much lower carbon intensity than their benchmarks. 

The Trucost report looked at fund holdings as of August 31, 2009, and found that CSIF Equity Portfolio had a carbon intensity score (tons of carbon per $ million of turnover) of 148.42, 57% less than the benchmark at 341.24 (S&P 500). Calvert Social Index Fund had a score of 136.88, 61% lower than the benchmark score of 355.35 (Russell 1000 Index). Calvert Large Cap Value Fund had a score of 397.78, 4% lower than the benchmark (Russell 1000 Value Index).  As a SAGE Strategy fund, Calvert Large Cap Value Fund has fewer threshold ESG criteria than Calvert Signature funds, and while we are pleased to see that our starting point is below the benchmark score we hope to show that our advocacy efforts lower the overall carbon intensity of the fund over time.

What is a carbon footprint of a mutual fund?

A carbon footprint is simply a snapshot of the carbon intensity of a fund at a particular point in time.  It centers on the Greenhouse gas (GHG) emissions of the underlying components of the fund—the individual companies held.  The GHG emissions are converted to carbon dioxide equivalent measure, in terms of metric tons of CO(2) emitted by the companies per million dollars of revenue.  The carbon intensity is then calculated based on the percentage of market capitalization a fund holds in a particular company.  This is a relatively simple exercise once the carbon data on individual companies is identified; however, the majority of companies do not make such data public.  For this reason, a robust profiling system is used to provide estimates of emissions for non-reporting companies.  Companies are evaluated based on their direct emissions (from immediate operations) and first-tier indirect emissions (such as emissions tied to the electricity and logistics provided to the company by suppliers).  For a more detailed description of the methodology used, please see pg. 15 of Trucost’s Carbon Counts USA report.1

Calvert believes that such reduced carbon intensity will help create value for investors by lowering the overall risk exposure of the funds.  Higher carbon exposure means that companies in portfolios will likely face higher costs to comply with future carbon policies, whether through national legislation or international agreements.  Lower scoring companies may have a strategic advantage in competing against less carbon efficient peers.  Trucost’s Carbon Counts USA study2 found significant variability in the carbon intensity of various U.S. mutual funds, from just .1% of total revenue attributed to combined holdings of a particular fund to 3.32% of revenue.  This suggests a high degree of variability of risk between funds—risks that potential fund investors should understand and compare.


1Carbon Counts USA: The Carbon Footprints of Mutual Funds in the U.S. April 2009. Trucost.

2Ibid.

#9368 (9/09)

Last Updated: September 22, 2009

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Calvert Investment Management, Inc. serves as the investment advisor and provides sustainability research for the Calvert mutual funds and institutional investment strategies.

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