Impact Blog
Calvert's continuing response to the opioid crisis

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 Elif Senvardarli, ESG Research Analyst, Calvert Research and Management

      Washington - The opioid crisis is one of the biggest challenges facing our society today. Its impacts go well beyond the health-related issues of those affected by opioid addiction, and carry significant economic and social costs - - as well as impacts to investors.

      While determining the exact economic costs associated with opioid overdoses is challenging, in a November 2017 report, the Council of Economic Advisors found that in the United States, the economic cost of opioid-related deaths reached $504 billion in 2015, or 2.8% of the GDP, a figure more than six times larger than previous estimates. The report found that more than 33,000 of the 50,000 deaths from drug overdoses in 2015 were related to opioids, a figure that has doubled in the past 10 years and quadrupled in the past 16.1

      This has impacts for investors. Manufacturers and distributors face dozens of lawsuits from states, counties, cities and territories. These suits allege that company practices have contributed to the increase in opioid addiction and the associated health care costs. While these lawsuits may take years to work their way through the courts, the potential for verdicts against companies that produce and distribute opioids adds an additional risk to company operations.

      Given the opioid crisis in the United States and Calvert's exposure to pharmaceutical manufacturers and distributors, we have integrated this social issue into our research process and joined with a coalition of investors to engage with companies.

      Opioids and the Calvert Research Process

      At Calvert, we combine traditional financial research with in-depth environmental, social and governance (ESG) analysis. Our focus on materiality helps us identify the ESG factors that we believe are likely to influence company or industry performance. Our scoring models allow us to weigh the most relevant factors for any particular company or industry rather than using a one-size-fits-all approach.

      Calvert's research process enables us to consider issues associated with controversies and pressing issues, such as the opioid crisis, when determining an overall ESG score for companies. One possible outcome is the application of a discount in the review of those companies, which lowers their scores in our model to reflect the increased risk that they possess as investments.

      Regarding this particular issue, Calvert applies a discount to those companies who have benefited from misrepresenting the effects of opioids and that have marketed and distributed products through methods that have resulted in lawsuits and that Calvert believes to be unethical. As a result of this process, Calvert has changed positions on several companies over the past year.


      Calvert joined the Investors for Opioid Accountability (IOA) in November 2017, a month after its launch. The coalition formed as the result of concerns around the profound negative impacts to society of the opioid crisis and the financial impact to companies that are involved either as distributors or manufacturers of opioids. As of January 2018, it was a coalition of 40 asset owners, asset managers and consultants with more than $1.4 trillion in assets under management. Since joining IOA, Calvert has signed on to several engagement letters. In addition, in May, Calvert presented a resolution at the Depomed, Inc. annual meeting of shareholders calling for the company to report on the governance measures it has taken to more effectively monitor and manage financial and reputational risks related to the opioid crisis in the United States. In a historic result, shareholders approved the proposal, with 62.3% of the shares voting in favor.

      As part of IOA, Calvert engages with manufacturers and distributors of opioids. Specifically, the IOA is asking the independent directors of the boards of these companies to investigate how they are responding to increasing risks related to opioids. The coalition is asking boards of such companies to adopt good governance practices and policies to increase transparency, accountability, and deter misconduct.

      Among the specific practices Calvert is looking for are the separation of CEO/chair positions, an independent investigation and report into business risks related to opioids, adoption of executive clawback provisions that emphasize compliance, refraining from exclusion of legal/compliance costs from compensation metrics, drug pricing transparency for companies that manufacture opioid addiction treatment medication, and transparency on lobbying activities and political spending.

      Some companies have been responsive to these requests, while others have not. These responses are considered when we evaluate a company's eligibility for investment under the Calvert Principles for Responsible Investment.

      Bottom line: Opioid abuse is a man-made crisis, so it can be un-made. As responsible investors, our responsibility is to hold companies accountable for any role they may have played in perpetuating the crisis, and consider the risks associated with their exposure.