Calvert’s approach is distinguished by the breadth and depth of our research, the industry-specific expertise of our teams, and an emphasis on discerning the precise Environmental, Social and Governance (ESG) issues most relevant to each company we invest in.

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Materiality: focusing on the factors that matter most


At the heart of our research process is a approach called "financial materiality" — a methodology backed by years of experience that identifies which ESG factors are most likely to affect a company’s corporate performance.

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While green bonds may be an obvious choice for responsible investors, most are actually unsecured obligations that are equal to the issuer’s other outstanding debt. It is therefore critical to conduct issuer-level ESG and credit analysis.

Managing Risk


Because materiality differs by industry and subindustry, our process begins by refining established classifications into custom peer groups based on common ESG risks. This allows us to make more relevant company comparisons, ultimately leading to better investment decisions.

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Our deep experience often reveals opportunities that wouldn’t otherwise be apparent: in one case a separate investment led to the purchase of an entire issuance of asset-backed securities (ABS) backed by pools of residential energy-efficiency loans.

Uncovering Opportunity


Our materiality based approach also helps identify opportunities where a company that’s lagging in a particular ESG practice may be able to recognize better financial performance with improved tactics in that area.

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Data Evaluation: a more sophisticated understanding


Calvert's edge comes from how we evaluate ever-evolving, incredibly diverse sets of data. So, instead of simply accepting the thousands of indicators available from ESG data vendors at face value, we look to the raw data informing a vendor’s summary scores, then use our experience to identify precisely which indicators are the most relevant for performance analysis.

We Build Our Own Scorecards


Setting A High Bar for Data Quality

What's more, we don't limit ourselves to standard industry metrics. In fact, we'll often create our own key performance indicators (KPIs) when the standard approaches are missing key insights. And when we see areas where there are critical data gaps, we'll either actively work with industry standard sources like MSCI and Sustainalytics to start providing that data, or fund academic research to explore emerging connections.

Custom KPI What it Does
Energy Pipeline Infrastructure Score Measures age and engineering risks of physical system
Calvert Governance Score Evaluates financial transparency, board independence and effectiveness, shareholder rights, and more
Data Privacy Score Tracks a company's data security and privacy management, in line with global best practices and certification schemes

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Literature


  • White Paper

    COVID-19 and the Energy Transition

    October 2020 | 10 min read
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  • Issue Brief

    The COVID-19 pandemic and the demand for racial justice

    Q3 2020 | 6 min read
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  • White Paper

    How corporate governance factors can influence financial performance

    September 2020 | 10 min read
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