Investing Sustainably in Emerging Markets
Calvert Emerging Markets Equity Fund looks for companies that help advance sustainability in developing countries.
Calvert Emerging Markets Equity Fund, which strives to take advantage of the growth opportunities available in developing markets, is one of Calvert's Solution™ Strategies. These portfolios are thematic investment approaches that seek to invest in companies whose products or businesses help address one or more global sustainability issues. Calvert believes that companies operating in emerging markets can enhance their long-term performance by contributing to sustainable development and differentiating themselves through attention to risks and opportunities related to environmental, social, and governance (ESG) factors. The Fund seeks to invest in companies that contribute to addressing global sustainability challenges, whether through their products and services, business and industrial processes, or contributions to their local or regional markets.
Economic Development and Poverty Reduction
One area of sustainability evaluation involves economic development and poverty reduction. Companies that help boost incomes and the quality of life in poor communities or that support agricultural innovation and food security may be good candidates for inclusion in Calvert Emerging Markets Equity Fund. Along the same lines, firms that provide access to safe medications and low-cost health care in developing countries or that work to expand digital access and communications for underserved communities could also be viable candidates for the Fund.
For example, Datatec, a South African company that provides a wide range of information and communication technology products and services, is a leader in expanding the availability of digital and mobile communications in developing countries. In addition to South Africa, Datatec operates in Mexico, Brazil, India, Kenya, China, and other emerging markets. Calvert believes that Datatec is a good example of the type of positive role that companies can play in addressing global sustainability issues.
Climate Change, Water Infrastructure
Environmental degradation and climate change is another sustainability issue facing emerging- market countries that companies can help address. Firms that provide products and services that mitigate the effects of climate change and environmental problems may offer the potential for significant long-term performance by staying ahead of the advancing effects of climate change. In particular, companies that help provide access to clean water and sanitation infrastructure, which is a major and immediate need in many emerging markets, may be well-positioned to gain while helping improve the lives of people in developing countries.
Banco do Brasil, the largest financial institution in Latin America in terms of assets, represents a model for how companies in a range of industries can help meet environmental challenges in developing countries. The Brazilian state-run bank has an extensive environmental policy that it implements and monitors across its global operations. In addition, Banco do Brasil is a signatory of the United Nations Environment Programme Finance Initiative (UNEP FI), which seeks to identify and adopt the best environmental and sustainability practices for financial institutions. Banco do Brasil has also adopted the Equator Principles, which are guidelines for determining and managing environmental risks in the development and construction of major infrastructure projects funded by banks.
Human Rights, Diversity, and Governance
Human and labor rights are a major sustainability issue in emerging markets. One notable and tragic example is the April 2013 collapse of a building that housed apparel factories in Bangladesh, resulting in more than 1,100 lives lost. Companies that fail to address basic workers' rights and worker safety in developing countries could face consumer boycotts— as some have in the past. Firms that can advance gender equality and diversity in the workplace and that strive to overcome corruption through improved governance and transparency also meet the sustainability criteria of Calvert Emerging Markets Equity Fund.
Benefits of Advancing Sustainability
There are a wide range of sustainability issues that affect developing countries, and companies that help address these problems can potentially benefit through reduced risk and expanded markets for their products. "In virtually every industry and sector, companies must address sustainability challenges ranging from climate and water, to development and poverty, to rights and governance," says Calvert Senior Vice President for Sustainability Research and Policy Bennett Freeman. "Their willingness to do so can both diminish a range of material risks and enhance their ability to grow new products and services which offer sustainability solutions to new customers and markets."
Investment in mutual funds involves risk, including possible loss of principal invested. You could lose money on your investment in the Fund, or the Fund could underperform, because of the following risks: a) the market prices of stocks held by the Fund may fall, b) the individual investments of the Fund may not perform as expected, and c) the Fund's portfolio management practices may not achieve the desired result. Investing in foreign securities involves additional risks relating to political, social, and economic developments abroad, differences between the regulations that apply to U.S. and foreign issuers and markets, the potential for foreign markets to be less liquid and more volatile than U.S. markets, and currency risk associated with securities that trade or are denominated in currencies other than the U.S. dollar. In addition, the risks of investing in emerging market securities are greater than those of investing in securities of developed foreign countries.
As of May 31, 2013, Calvert Emerging Markets Equity Fund's holdings included Datatec (3.24% of the Fund's net assets) and Banco do Brasil (1.70%). Calvert may or may not still invest in, and is not recommending any action on, companies listed. See the most recently available information on individual holdings in each Calvert fund here. Current and future portfolio holdings are subject to market risk.