The views expressed in these posts are those of the authors and are current only through the date stated. These views are subject to change at any time based upon market or other conditions, and Calvert disclaims any responsibility to update such views. These views may not be relied upon as investment advice and, because investment decisions for Calvert are based on many factors, may not be relied upon as an indication of trading intent on behalf of any Calvert fund. References to individual companies for Engagement or Research purposes are provided for illustrative purposes only and may not be representative of the results of all of Calvert’s engagement efforts. The discussion herein is general in nature and is provided for informational purposes only. There is no guarantee as to its accuracy or completeness. Past performance is no guarantee of future results.

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By John WilsonDirector of Corporate Engagement, Calvert Research and Management

Many investors prefer to own and engage companies with concerning ESG practices rather than simply relying on outright divestment. We believe ESG engagement may enhance risk-adjusted returns while giving investors the opportunity to participate in driving positive change with their capital.

Calvert selects engagement themes and companies that are consistent with the Calvert Principles and to pursue competitive returns for our shareholders. For the coming year, our engagement priorities include workforce diversity and energy transition, both to mitigate climate change and to help facilitate a just transition that considers the needs of workers and communities.

Let's take the latter as an example of how we approach engagement.

We begin by selecting our targets and our strategy. We analyze each company's climate commitments, and whether their disclosures, investment and business strategies align with these commitments. We assess numerous aspects of their disclosures, such as whether:

  • they disclose their scope 1, 2 and 3 emissions;
  • they have greenhouse gas (GHG) reduction targets;
  • those targets are consistent with international goals for GHG reduction;
  • announced investments, R&D and business strategies are consistent with these goals;
  • they've made progress to date;
  • they use carbon offsets;
  • the board has competencies on climate transition; and
  • company incentives align with achieving those goals.

We also look at social impacts, such as how a company's workforce and local communities will be impacted by the energy transition, whether union jobs will be lost, whether indigenous communities are included in the plans and whether the company will hire from the local community.

Once we've selected our engagement themes, targets and strategies, we engage in dialogue with the companies to raise and address our concerns. We would typically establish objectives for improvement in disclosures, actions to address climate change such as a plan to facilitate a just transition, and performance results such as demonstrated reductions in GHGs. We may meet with the company several times over a period of multiple years to negotiate an agreement that meets these objectives.

From time to time, we escalate our engagements at companies who are reluctant to address our concerns. Our escalation tactics include joining investor coalitions such as Climate Action 100+, proxy voting against board members and proposals where climate action is lagging, and filing shareholder proposals to provide all shareholders the opportunity to express a view on the issue.

These engagement efforts help improve how companies manage their environmental and social risk exposures. As a result, these businesses tend to become better prepared to capitalize on the significant macroeconomic trends we are experiencing as a result of climate change.

Bottom line: Driving positive impacts in this way can help mitigate risk and generate alpha; it benefits both traditional and impact investors, and it's one of the many reasons why Calvert continues to buck industry trends and appeal to both types of investors—especially now that they can access our solutions in an expanded variety of vehicles.