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An Introduction to Sustainable and Responsible Investing

Sustainable and Responsible Investing (SRI) is an investment strategy that integrates social or environmental criteria into financial analysis.

With approximately $2.71 trillion in assets in the US today¹, SRI is catching on with many individual and institutional investors who seek to:

• Align their investment portfolio with their personal values by avoiding companies that do not meet certain standards.
  
• Encourage improved corporate social and environmental performance through an active investment strategy.
  
• Identify companies with better long-term financial performance through the analysis of social and environmental factors.

SRI was first formally practiced by religious investors who, nearly 100 years ago, avoided companies involved in tobacco, alcohol, and gambling. More recently, however, SRI has evolved beyond such simple avoidance screening to include the following four aspects:

1) Social Research - Examining the social and environmental records of companies to determine which companies to include or exclude in an investment portfolio. Most social investors have certain set criteria they use to identify which companies "make the grade." Increasingly, social research is seen as a way to identify companies with better management and lower risk. For example, Calvert's equity Double Diligence^® research process combines a rigorous review of financial performance with a thorough assessment of corporate integrity. Only when a company meets our standards for both do we invest.

2) Shareholder Advocacy - Using your position as an owner in a company to actively encourage a company to improve. Shareholder advocacy can take many forms, from something as simple as a phone call or letter-writing to filing a formal shareholder resolution calling for a company to take a particular action (which can ultimately come to a vote in front of all shareholders). Advocacy also includes proxy voting, or simply casting your vote as a company shareholder.

3) Social Venture Capital - Seeking out early-stage investments in companies that have identified profitable ways to meet societal needs (such as alternative energy companies), before they are publicly traded. This early-stage investing can help these companies secure necessary funding to grow and often leads to healthy returns for shareholders.

4) Community Investing - Channeling affordable credit to communities underserved by traditional credit markets to create jobs, build homes, and finance community facilities. Investors often accept slightly below-market rates of return to encourage investment that can build or rebuild communities.