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Once again, sustainable funds lead in Barron's survey

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      By Anthony EamesDirector of Responsible Investment Strategy, Calvert Research and Management

      Boston - As fallout from the pandemic, U.S. elections, climate change and civil unrest unsettled and divided many U.S. citizens, investors increasingly turned to environmental, social and governance (ESG) strategies to focus on mitigation and solutions. According to Morningstar, in 2020, sustainable funds saw net inflows of $51 billion, more than double the total for 2019 — and once again, proved their financial as well as ESG merit.

      In its sixth annual survey of large-company equity mutual funds in the Morningstar database, Barron's found that investors who favored sustainable funds beat the broad market in 2020, just as they did in the five years prior.1

      According to the January 22 article, "Barron's Top Sustainable Funds," 54% of the sustainable, large-company funds on Barron's list outpaced the S&P 500, compared to 43% of all actively managed large-cap funds, based on 2020 one-year returns. The article also notes that 75% of sustainable stock funds beat their category average, and "42% ranked in the top quartile of their categories, versus just 6% in the bottom quartile." Notably, the percent rank in a category is a fund's total return percentile rank relative to all funds in the same Morningstar category.

      Making the cut

      Barron's chose its final list of 191 funds based on the large-cap, U.S. stock funds in the Morningstar universe and eliminated those with less than $300 million in assets and a sustainability rating of "average" or below. It required funds to have a minimum of one year of performance. Barron's did include all 39 big-cap funds with an explicit sustainability rating, regardless of their Morningstar sustainability rating. Barron's then ranked the funds by one-year returns for the 12 months ended December 31, 2020. Morningstar sustainability ratings are based on a fund's holdings and intended to measure how well the companies held are managing ESG risks and opportunities.

      Calvert Equity: A Barron's long-term performer

      In the article, Barron's also looked at long-term performance, evaluating funds that had beaten the S&P 500 over 10-, 15- and 20-year periods, as well as the shorter 1-, 3- and 5-year time frames. Only 22 sustainable funds made the cut, outpacing the S&P 500 over all six time periods. Barron's narrowed the list of 22 to name the top 10 funds, with Calvert Equity Fund capturing the #7 slot. Calvert Equity Fund pursues a high-quality, growth-oriented sustainable investment approach.

      Barron's noted that, "as usual, high-quality companies score high on sustainability," and that "the top funds included those that invest in growth stocks — companies with strong earnings and revenue potential."

      Bottom line: Beyond offering critical insight into a wide range of issues and material risks, ESG is increasingly seen as an effective tool for promoting societal change, underscored by the tumult of 2020. As more data reinforces the competitive performance of ESG strategies, we believe they are likely to capture an essential position in the investment marketplace.

      1. Barron's, "Barron's Top Sustainable Funds," January 22, 2021, by Leslie P. Norton.

      For Calvert Equity Fund (CEYIX) standardized performance, click here: Calvert Equity Fund.

      Methodology: Barron's selected the top U.S. large-company stock funds and ETFs with above-average sustainable ratings from Morningstar, as well as big-cap funds with sustainable mandates even if these had a lower Morningstar sustainability rating, then ranked them by one-year returns. The ranking was based on data provided by independent research firm Morningstar. Past performance is no guarantee of future results.