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While U.S. election outcomes may raise concerns, we think responsible investors ought to remain resolute. For more than 40 years, Calvert has been a leader in Responsible Investing (RI), growing to nearly $40 billion in assets under management across divergent political environments. Ultimately, we believe secular global trends like climate change and demographic shifts impact long-term value creation, transcend politics, and will continue to drive commitment to RI.
Under a divided U.S. political climate, Calvert recognizes that short-term setbacks in public policy on environmental and social initiatives are probable. While uncertainty around regulation and the politicization of RI will likely continue under the new administration, our disciplined research approach—rooted in financial materiality1 and commitment to positive change—remains unchanged.
The staying power of Responsible Investing
We believe companies will continue addressing financially material sustainability factors, such as climate change and human capital management, regardless of politics, as they understand the long-term business implications. For example, environmental factors like climate change and biodiversity impacts can result in significant operational, regulatory and reputational risks or opportunities—impacting a company's balance sheet from a revenue, expense or cost-of-capital perspective.
At the same time, social factors, such as labor or workplace practices, can boost or hurt a company's top or bottom-line. We think Calvert is well positioned to competitively seize opportunities arising from secular trends likely to shape the global economy in the decades ahead.
Assets continue to flow into RI strategies. Global environmental, social and governance (ESG) assets exceeded $30 trillion in 2022 and are on track to surpass $40 trillion by 2030, representing over 25% of a projected $140 trillion under management.2 The global rise in ESG adoption and corporate commitments are two important bulwarks to sustainable investing, which we believe will be unaffected by U.S. politics. These trends will continue to support responsible investors, keeping a focus on long-term structural developments.
Trends supporting global adoption
Regulatory developments: Particularly in Europe, regulatory developments are driving institutional investors, pension funds and asset managers worldwide to adopt RI and ESG factors in their investment strategies. Multinational companies that want to attract global capital may need to enhance their sustainability practices and reporting to remain competitive. Companies with a global footprint in sectors like energy, automotive and manufacturing, are investing in green technologies and low-carbon innovations to align with climate goals.
Corporate commitments: Corporate commitments to sustainable practices and reporting are also driving the adoption of RI practices. These commitments, often voluntary, stem from a variety of motivations, including capitalizing on opportunities, risk mitigation, stakeholder plurality, regulatory trends and consumer preferences. At Calvert, we seek to identify companies that take a long-term approach to investing—where the responsible secular growth tailwinds are linked to levers of value creation, such as return on capital, cost of capital and the impacts of capital allocation.
Consumer and investor preferences, particularly of younger generations, are also playing a role as they increasingly prioritize sustainability and corporate responsibility when choosing products and services. This shift in demographics and consumer preference is leading companies to adopt stronger RI practices. Corporate commitments to sustainability—such as reducing plastic use, sourcing ethically, or using renewable sources of energy—help brands align with consumer values and remain competitive.
Our unwavering commitment
Calvert has always believed that global capital markets are uniquely positioned to drive positive global change due to their vast resources, global reach, influence over corporate behavior and ability to align financial incentives with sustainable outcomes. Directing capital toward responsible investments offers a means to help promote systemic positive change across industries and geographies.
As a responsible investment manager, we are tasked with providing competitive investment performance for our clients and opportunities for positive global change. Our focus on pecuniary factors pertinent to an industry or company is core to our research, underpins our investment strategies and informs our strategic engagement on behalf of shareholders. In today's environment of greater deregulation and political uncertainty, we believe Calvert's deep investment experience and responsible investment research expertise gives us broader and deeper insight into the risk and reward potential of each investment.
Bottom line: Ultimately, Calvert's disciplined research approach—rooted in financial materiality and commitment to positive change—remains unwavering. We view the U.S. election as an opportunity to continue investing in companies best positioned to adapt to secular trends likely to responsibly shape the global economy in the decades ahead.
1 For Calvert, financial materiality refers to the risk-return analysis of Responsible Investing factors most likely to impact a company's performance.
2 Bloomberg Intelligence, February 22, 2024, "ESG AUM set to top $40 million by 2030, anchor capital markets," by Director of Research Adeline Diab and ESG Analyst Rahul Mahtani.
Risk disclosure: ESG Strategies that incorporate impact investing and/or Environmental, Social and Governance (ESG) factors could result in relative investment performance deviating from other strategies or broad market benchmarks, depending on whether such sectors or investments are in or out of favor in the market. As a result, there is no assurance ESG strategies could result in more favorable investment performance.
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