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Morningstar

Calvert Balanced A CSIFX Sustainability

Morningstar Medalist Rating
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Sustainability Analysis

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Sustainability Summary

 | Published as of .  Based on data as of

Calvert Balanced Fund has a number of positive attributes that a sustainability-focused investor may find appealing.

This fund has relatively low exposure to ESG risk compared with its peers in the Moderate Allocation category, earning it the second highest Morningstar Sustainability Rating of 4 globes. ESG risk provides investors with a signal that reflects to what degree their investments are exposed to risks related to material ESG issues, including climate change, biodiversity, product safety, community relations, data privacy and security, bribery and corruption, and corporate governance, that are not sufficiently managed. ESG risk differs from impact, which is about seeking positive environmental and social outcomes.

Calvert Balanced Fund has a sustainability or ESG-focused mandate. Funds with an ESG-focused mandate are more likely to align with the expectations of an investor who cares about sustainability issues. One key area of strength for Calvert Balanced Fund is its low Morningstar Portfolio Carbon Risk Score of 4.79 and very low fossil fuel exposure over the past 12 months, which earns it the Morningstar Low Carbon Designation. Thus, the companies held in the portfolio are in general alignment with the transition to a low-carbon economy.

Its 13.2% involvement in carbon solutions is higher than the 11.1% average involvement of its peers in the Moderate Allocation category. Carbon solutions include products and services related to renewable energy, energy efficiency, green buildings, green transportation, and so on. By prospectus, the fund aims to avoid, or limit its exposure to, companies associated with controversial weapons, tobacco, and and small arms. The fund fulfills this goal by having negligible investment exposure to each of these activities. The fund aims to avoid, or limit exposure to, companies in violation with international norms, such as the UN Global Compact or the Universal Declaration of Human Rights.

The fund exhibits moderate exposure (6.58%) to companies with high or severe controversies. Controversies are incidents that have a negative impact on stakeholders or the environment, which create some degree of financial risk for the company. Examples of types of controversies include bribery and corruption scandals, workplace discrimination and environmental incidents. Severe and high controversies can have significant financial repercussions, ranging from legal penalties to consumer boycotts. Such controversies can also damage the reputation of both companies themselves and their shareholders.

ESG Commitment Level Asset Manager

 | Basic , 

Morgan Stanley Investment Management has followed Calvert’s lead by strengthening its policies on environmental, social, and governance issues and expanding its ESG offerings, but the lack of an overarching ESG philosophy across its lineup holds it back. It maintains a Morningstar ESG Commitment Level of Basic. In March 2021, Morgan Stanley acquired Eaton Vance, at which point Calvert became a wholly owned subsidiary of MSIM. Calvert maintains an independent board to ensure rigorous ESG integration in all Calvert-branded funds, but the firms are increasingly merging, especially in terms of resources. Emily Chew left MSIM to become the chief responsibility officer of Calvert in May 2021, and Ted Eliopoulos moved from MSIM to succeed John Streur as CEO of Calvert in December 2022. Despite changes in leadership, the acquisition has not upended Calvert’s innovation and merit within sustainable investing. Calvert has led the field since the 1980s when it launched the Calvert Social Investment Fund, proposed its first socially driven shareholder resolution, and helped champion the foundation of Ceres, a network of investors and organizations that advocates for policy changes to accelerate the climate transition, among other sustainability issues. Calvert continues to build on this legacy through independent fund oversight and cutting-edge investment stewardship (including proxy voting and engagement). Calvert’s excellence in sustainable investing has provided a blueprint for MSIM’s own progress in the field, but MSIM has a long road ahead to catch up. Beginning in 2021, MSIM updated its sustainable-investing principles and developed ex-ante portfolio modelling of ESG risks in its proprietary database. In 2022, the firm launched a suite of co-branded MSIM-Calvert sustainable funds in Europe, which introduced Calvert’s proprietary research to overseas markets. Still, outside of ESG-branded funds, the incorporation of ESG risks is left to the discretion of portfolio managers, leading to inconsistent firmwide adoption. The firm’s ESG efforts are well supported by a dedicated central team and ESG specialists on individual investment teams. Navindu Katugampola replaced Emily Chew as global head of sustainability in May 2021 with oversight of four verticals: policy, product development, stewardship, and data. Although the core ESG crew is small relative to peers, its access to Calvert’s expertise is a key advantage, especially regarding access to third-party data sources and proprietary research. MSIM’s active ownership capabilities still have room to grow. The guidelines for proxy voting and engagement on environmental and social issues stop short of detailing desired actions on climate change or the firm’s strategy for escalating engagements with laggards. Still, the firm’s proxy-voting record indicates strengthening commitment in recent years. In 2022, MSIM funds (including Calvert and other subsidiaries) backed more than 90% of key ESG shareholder resolutions, with the highest support for those related to human rights disclosure, political lobbying, and workforce diversity. Calvert is a founding signatory of the Net Zero Asset Managers Initiative in 2020 and committed 100% of its assets under management to the effort. Calvert also joined Climate Action 100+, which leads collaborative efforts to address climate change, in 2018. MSIM, on the other hand, has yet to join either initiative.