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Popular with investors for their tax-exempt and stable income streams, municipal bonds are also associated with projects that foster the public good, such as infrastructure repair or cleaner water. We aim to take this mission a step further by systematically integrating environmental, social and governance (ESG) research into security selection.
The Calvert Principles for Responsible Investment, and our own proprietary municipal ESG rating process, provide the framework for evaluating investments for the Calvert Responsible Municipal Income Fund. Through this process, we seek to identify municipal investments that drive positive impact from an environmental or social perspective.1
The Calvert Principles promote:
- Environmental Sustainability and Resource Efficiency
- Equitable Societies and Respect for Human Rights
- Accountable Governance and Transparent Operations
Here, we seek to summarize some of the positive impacts generated by select Calvert Responsible Municipal Income Fund investments in 2024. Our impact reporting is organized across nine sectors, noted below, where we highlight a few specific holdings and their individual impact. Recent bond purchases across these sectors include:
Clean Water and Water Conservation. Massachusetts State Revolving Fund: Sustainability bonds to finance projects that adhere to environmental standards of the Clean Water Act and Safe Drinking Water Act in communities with adjusted-per-capita income below 60% of the state's average.
Education. State of Connecticut: Social bonds to reimburse school construction across the state, with a significantly higher rate of funding for lower income school districts. The program provides funds to support school district projects, including new facilities or alterations for mandatory instructional programs, physical education facilities, and correction of code violations.
Affordable Housing. Housing Authority of Seattle: Fund the Juniper Apartments project in Seattle, WA to create 114 units for low-income occupants. Approximately 35% of units will be available for residents that earn under 30% of the area median income and additional units will be for families earning below 60% of AMI. The housing project will serve to increase the amount of affordable housing for Seattle residents.
Clean Energy and Environmental Conservation.California Community Choice: Green bonds that finance prepayment of electricity from renewable sources including solar, geothermal and wind turbine facilities throughout California. Bonds advance California's goal toward decarbonization of the power sector and reaching statewide renewable portfolio standards.
Health and Social Services. University of Wisconsin Hospital: Finance improvements to health care facilities to support the growth in patient volume while providing equitable and accessible health care. The research hospital's facilities are designed to meet stringent green standards, including installing a solar canopy, committing itself to halving its greenhouse gas emissions within 10 years, and constructing all new buildings to a LEED Gold standard.
Connectivity. Port of Portland: Green bonds to support the Port's strategic goals of improving the region's travel, trade and economic development while reducing greenhouse gas emissions and improving energy efficiency of operations. The Port implements a renewable fuel program, with a movement toward zero emissions, and is an active participant in water management, wildlife life hazard management and water conservation programs.
Community Development and Economic Opportunity. Hudson Yards: Bond proceeds will be used to support the development of Hudson Yards Development in New York City to improve access to sustainable and affordable transportation while expanding community development. The project area will be developed to create a pedestrian-friendly, mass transit-oriented district for community development, job growth, housing availability growth and hospitality space.
Waste Management and Recycling. Gevo NW Iowa RNG, LLC: Green bonds will fund a biogas facility designed to mitigate air emissions from three dairy farms. The project is carbon negative and will support the processing of manure though an anaerobic digestion process, breaking the manure into biogas and biofertilizer to create a renewable gas.
General Government Operations. State of California: Support projects for safe neighborhood parks, disaster preparedness and flood prevention, K-12 public education, and infrastructure improvements.
Bottom line: Going forward, we expect to continue to invest in projects or issuers that help fight climate change, attempt to address income inequality, and provide access to health care, clean water and affordable housing. As summarized above, we believe our investments demonstrate our commitment to successful impactful investing and build upon Calvert's long history of responsible investing leadership.
1 We seek municipal bond investments for the Fund with ESG ratings of 5 and 4. For reference, an ESG score of 5 indicates the security has exceptional environmental and/or social community impact. A score of 4 indicates meaningful environmental and/or social community impact, while a score of 3 indicates the security is a standard municipal bond for the public benefit in general.
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Risk considerations: There generally is limited public information about municipal issuers. Investments in income securities may be affected by changes in the creditworthiness of the issuer and are subject to the risk of non-payment of principal and interest. The value of income securities also may decline because of real or perceived concerns about the issuer's ability to make principal and interest payments. As interest rates rise, the value of certain income investments is likely to decline.
Investments rated below investment grade (sometimes referred to as "junk") are typically subject to greater price volatility and illiquidity than higher rated investments.
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