Impact Blog

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 Streur, President and CEO, Calvert Research and Management

      Washington - I often make the point that inequality is a larger problem for our society than climate change.

      When I broach the topic - as I did in a recent Bloomberg article - many ask why.1 After all, climate change, not inequality, tends to be the ESG issue that investors most often mention in surveys, and it presents obvious risks to portfolios.

      As the result of widespread recognition by investors and society, climate change is a problem that many are actively trying to solve. Governments engage in climate talks. Companies take advantage of cap and trade systems and make investments in renewable energy. Investors seek Responsible Investing portfolios that eliminate or severely reduce fossil fuels and measure the portfolios' impact on critical environmental issues. The acknowledgement of the dangers of climate change brings people, companies and most governments around the world together.

      Inequality has the opposite effect. Left unchecked, it has the potential to tear apart our society and destroy our trust in each other and in our institutions. It could ultimately leave millions of people in despair and without hope.

      Calvert 12-1a

      The many faces of inequality

      Data from the Pew Research Center highlights the problem. Racial and ethnic wealth inequality increased during the Great Recession and has not retreated in the recovery. In fact, the wealth gaps between upper-income families and lower- and middle-income families are at the highest level Pew has ever recorded. In 2016, the median wealth of white households was 10 times the wealth of black households, and eight times that of Hispanic households. The former number has risen since 2007, while the latter has largely stayed the same.2

      Bolstering this conclusion, the most recent Credit Suisse global wealth report, published on November 14, revealed that the richest 1% of the world controls more than half of the wealth.3 At the height of the 2008 financial crisis, when this issue was top of mind for many, they controlled 42.5%. It's safe to say that the aftermath of that did not solve the problem of inequality, but exacerbated it instead.

      This is a global problem, but the United States is at the center. More than 40% of the world's millionaires live here, by far the most of any nation (Japan is next at 7%), but we are experiencing increasing inequality while Japan and many other countries are not.

      Calvert 12-1b

      Inequality's economic costs

      The human cost of inequality should be enough to inspire action, but investors also need to consider the economic costs of this disenfranchisement. As inequality rises, economic growth fails to reach its full potential.

      Calvert 12-1c

      People who are denied educational and economic opportunity, in addition to social justice, are held back in their ability to contribute to overall economic progress. Some become ensnared by the criminal justice system and are forever shut out or severely limited as a result. Societies that lack equality and trust underachieve their economic potential.

      The role of the investor

      Companies play a vital role in determining the equality of opportunity in the United States, through their achievement of diversity and fairness at every level of the organization and their protection of their employees. At Calvert, we monitor this with our engagement on issues like diversity, living wage and executive compensation.

      For example, Calvert supported progress on labor practices by co-filing resolutions regarding minimum wage at Panera Bread, where we asked the board of directors to adopt principles for minimum wage reform, recognizing that a sustainable economy must ensure a minimum standard of living necessary for the health and general well-being of workers and their families. Following our efforts and those of others, Panera's 2016 Corporate Social Responsibility Report includes a discussion of compensation and the company's efforts to augment wages and benefits.

      Calvert also produces a biannual study of the diversity and related policies and practices of large companies, designed to identify trends as well as corporate best practices.

      By engaging with corporations and focusing on improving diversity and equality investors can help to take the critical steps needed to bring all people together, realize the potential of our society and strengthen companies' business interests over the long term.

      Bottom Line: Rising inequality, and the danger it represents, is a critical challenge faced by Responsible Investors. Without tackling this issue, we believe the economy and society will never reach its full potential.