Calvert Will Score Companies on ESG to Add to Its Funds

Calvert has created an environmental, social, and governance (ESG) scoring measurement to judge whether a company qualifies to be included in its equity separate account strategies.

Companies included in the ESG Leaders Strategies must score in the top third for at least one sustainability metric across 200 peer groups to be considered for inclusion, according to Anne Matusewicz, responsible investment strategist at Calvert Research and Management.

A business that ranks in the top third for an environmental score must still place at least in the top two-thirds for another metric. About 550 companies may be chosen for a fund, out of roughly 4,000 companies reviewed.

The funds stick closely to a benchmark allocation, though they may lean slightly overweight in the information technology (IT) sector and slightly underweight in energy companies, according to Matusewicz.

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That mirrors other strategies that focus on financially material ESG factors, meaning that companies are assessed on sustainability issues that have a significant impact on a company’s business model. For example, the S&P 500 ESG Index is expected to mimic the benchmark while also including sustainability values.

”Companies that achieved top ESG scores in financially material factors have historically produced stronger financial performance than those with weaker ESG scores,” Jade Huang, portfolio manager at Calvert, said in a statement.

Calvert is also the only fund manager in the US that offers a full range of 28 equity, fixed-income, allocation, and sector funds with a sustainability focus, according to Morningstar.

Calvert’s Matusewicz said the firm differentiates itself from other firms with its structured engagement work with companies. Calvert has its own proxy voting guidelines to file shareholder resolutions and engage companies on issues that the firm feels can improve their performance.

“We’re talking to companies to improve operations to improve performance,” Matusewicz said.

The seven ESG Leaders Strategies are: US ESG Leaders, Tax-Managed US ESG Leaders, Global ex.-US Developed Markets ESG Leaders, Tax-Managed Global ex-US Developed Markets ESG Leaders, Global Developed Markets ESG Leaders, Tax-Managed Global Developed Markets ESG Leaders, and Emerging Markets ESG Leaders.

Calvert will also make some strategies available for tax-paying investors through a partnership with Parametric Portfolio Associates, which, along with Calvert, is an Eaton Vance subsidiary.

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Tags: Calvert, company, environmental social and governance investing, ESG, Investment, Investment Fund, Socially Responsible Investing

The UK’s Financial Conduct Authority (FCA) has established a package of measures intended to reduce weaknesses in the defined benefit (DB) transfer market, including a ban on contingent charging in most cases. The measures also include additional support for customers who are considering whether to transfer out of a defined benefit plan or who have already transferred out.

The regulator said the move to prohibit contingent charging will eliminate the conflicts of interest that occur when a financial adviser only gets paid if a plan participant goes through with a transfer. It is also intended to benefit good advisers who often tell participants not to transfer in that it will help them compete with transfer-happy advisers.

To address ongoing conflicts, the FCA said advisers are now required to consider an available workplace pension as a receiving plan for a transfer, and if they recommend an alternative solution, they must demonstrate why it is more suitable.

“The proportion of customers who have been advised to transfer out of their DB pension is unacceptably high,” Christopher Woolard, the FCA’s interim chief executive, said in a statement. “While much of the advice we looked at was suitable, we are still finding too many cases in which transfers were not in the customer’s best interests.”

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The FCA said it will also implement proposals that allow advisers to provide an abridged advice process, which is intended to help consumers access initial advice that is more affordable. However, the abridged process can only result in a recommendation not to transfer or a statement that it is unclear whether a consumer would benefit from a pension transfer without giving full advice.

The regulator also published an update to its collection of data concerning the appropriateness of the advice firms have given to defined benefit pension participants looking to transfer out. The FCA provided feedback to more than 1,600 firms, which resulted in more than 700 of them giving up their permission to provide pension transfer advice.

Although the FCA said it found that there has been an improvement in the suitability of advice given over time, it said it is still concerned at the number of files that either appeared to be unsuitable or had information gaps. Seventeen percent of files had advice that appeared unsuitable, which the FCA said is too high, and it is undertaking 30 enforcement investigations as a result of its findings.

Some of the files reviewed by the FCA included advice given to members of the British Steel Pension Scheme. It said it found that the percentage of unsuitable files was higher than those in the rest of the sample. Of the 192 instances of advice to former British Steel pension members that were reviewed, 47% appeared to be unsuitable, 32% appeared to contain information gaps, and only 21% appeared to be suitable. As a result, the FCA said it will write directly to the approximately 7,700 former members who transferred out of the plan and for whom contact details are available. It said this will help them revisit the advice they received and allow them to complain if they have concerns.