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.

Topic Category
Content Type
The article below is presented as a single post. Click here to view all posts.

By John StreurCalvert Research and Management and Bill Delahunty, CFAPortfolio Manager, Municipals

Calvert recently sponsored a working paper for a study conducted by Witold J. Henisz and Christopher C. Bruno at the Wharton ESG Initiative, titled "Environmental, Social, and Governance Factors and Municipal Bond Yields." The study finds that better ESG performance by municipalities can be associated with reduced credit risk.

Key takeaways are:

  • Strong ESG performance, measured by a novel dataset included factors such as mortality rates, jail population, poverty rates, crime rates and housing inequality, was found to be associated with reduced bond yields.
  • Where possible, the difference of outcomes for white vs Black people was considered to explore the implications for racial equity or racial justice. This relationship was very complex.
  • Like their counterparts in the private or sovereign sectors, municipal issuers differ substantially in their ESG performance. Investors have a strong financial and moral interest in distinguishing among them—the Wharton study was designed to offer an expanded toolkit for doing so.
  • The research suggests that good ESG policies linked to community ESG performance outcomes can provide long-term benefits to business growth, migration, and the tax base, while possibly reducing racial inequities.

To read the full paper on the Calvert Center for Responsible Investing website, click here.

Bottom line: The Wharton study finds the association between better ESG performance by municipalities and reduced credit risk (i.e. lower credit yields) was present when controlling for economic performance (e.g., median household income and unemployment rate) and fiscal health (e.g., revenue and debt per capita).