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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Fixed Income, Methane Emissions Among Calvert's Engagement Priorities

By Tim YoumansCorporate Engagement Strategist, Calvert Research and Management

Boston - At Calvert Research and Management (Calvert), our dedicated engagement team works with companies on financially material environmental, social and governance (ESG) issues in areas where we believe improvement could help mitigate risk or advance opportunities, benefiting long-term investors. Two key areas we're focusing on in 2023 are fixed income investments and methane leaks.

Opportunities in fixed income engagement

Many investors associate corporate engagement with equities, given that commonly used strategies — like shareholder resolutions or proxy voting — are linked to these investments. However, fixed income investors also have the opportunity to engage with issuers. At Calvert we engage on behalf of both our equity and fixed income holdings in each company.

Engaging with fixed income issuers is a little different than it is for traditional equity investments. There are no annual meetings for bondholders, so there are no proxy voting or shareholder resolution tools to use. However, aside from that, engagement on the fixed income side is very similar to equity-based engagements. Our audience is generally the CFO and the company's "bond road show team," and we use direct dialogue and other methods to foster improvement on material ESG issues.

Fixed income analysts are becoming very focused on material ESG issues to detect potential bond mispricing and opportunities. Post-pandemic shifts in the fixed income markets has seen central banks put trillions of additional dollars into the economy, some of which was in direct or indirect support for corporate liquidity and bond markets. In turn, this made it easier for corporations to use the bond markets to raise funds, which has increased the influence of bondholders. Calvert will continue to use all the engagement tools at our disposal to advocate for our investors' interests.

Campaign to "Stop the Leaks"

Our "Stop the Leaks" campaign targeting methane emissions started with roughly two dozen of the biggest upstream and midstream oil and gas companies. We currently engage with these companies on two areas related to the Inflation Reduction Act (IRA).

  1. Our work focuses on the required near-term shift to empirical methane measurement from the current EPA-approved "inventory method" to assess the risks associated with potential under-reporting of methane emissions.
  2. We are also advocating that companies prepare to comply with the IRA's required shift to categorical facility level methane emissions reporting from the current aggregated reporting.

We will use this engagement to assess the financial impacts of new government fees for companies exceeding certain methane emissions thresholds. That will help us understand how effective these fees may be in incentivizing further reductions in methane emissions.

This is far from the only project the Engagement team is working on. We also have efforts looking at diversity as a performance driver, the "Just Transition" in energy and increasing the quality of climate disclosure among high emitters.

Bottom line: Two of Calvert's current engagement projects involve working with fixed income issuers and methane emitters. As always, our dedicated engagement team will be looking to encourage improvements in financially material ESG areas beneficial to long-term investors.