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PRI reporting framework 2020

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ESG incorporation in actively managed fixed income

Implementation processes

FI 01. Incorporation strategies applied

Indicate (1) Which ESG incorporation strategy and/or combination of strategies you apply to your actively managed fixed income investments; and (2) The proportion (+/- 5%) of your total actively managed fixed income investments each strategy applies to.
SSA
0 Screening alone
0 Thematic alone
0 Integration alone
95 Screening + integration strategies
0 Thematic + integration strategies
0 Screening + thematic strategies
5 All three strategies combined
0 No incorporation strategies applied
100%
Corporate (financial)
0 Screening alone
0 Thematic alone
0 Integration alone
95 Screening + integration strategies
0 Thematic + integration strategies
0 Screening + thematic strategies
5 All three strategies combined
0 No incorporation strategies applied
100%
Corporate (non-financial)
0 Screening alone
0 Thematic alone
0 Integration alone
95 Screening + integration strategies
0 Thematic + integration strategies
0 Screening + thematic strategies
5 All three strategies combined
0 No incorporation strategies applied
100%
Securitised
0 Screening alone
0 Thematic alone
0 Integration alone
95 Screening + integration strategies
0 Thematic + integration strategies
0 Screening + thematic strategies
5 All three strategies combined
0 No incorporation strategies applied
100%

01.2. Describe your reasons for choosing a particular ESG incorporation strategy and how combinations of strategies are used.

The fixed income breakout above reflects Calvert as well as the collaboration of EVM's Investment Grade Fixed Income team.

The Calvert Principles for Responsible Investment guide their selection of companies not only for all Responsible indexed investment strategies but also for many of their actively managed strategies. We believe that most corporations deliver a net benefit to society, through their products and services, creation of jobs and the sum of their behaviors. As a responsible investor, Calvert seeks to invest in companies that provide positive leadership in the areas of their business operations and overall activities that are material to improving societal outcomes, including those that will affect future generations. Calvert seeks to invest in companies that balance the needs of financial and nonfinancial stakeholders and demonstrate a commitment to the global commons as well as to the rights of individuals and communities. More details can be found at: https://www.calvert.com/the-calvert-principles.php

01.3. Additional information [Optional].

Companies are assessed using the Calvert Research System (CRS), which is their proprietary platform that is optimally engineered to capture multiple sources of ESG data and evaluate this information through the perspectives of Calvert’s analysts' deep ESG expertise. Calvert applies a streamlined investment decision-making process that integrates both financial and sustainability insights and compares companies across these metrics. Calvert’s team of ESG research analysts leads this process and works closely with fixed income analysts to identify the most material ESG factors and data indicators.

EVM”s Investment Grade Fixed Income team collaborates with Calvert’s ESG research analysts to review how ESG themes/metrics are specifically relevant to a company given its sector and would affect the credit drivers of spread performance. The ESG research analysts examine ESG themes and related metrics that span across governance and ethics, environment, workplace, product safety, human rights, Indigenous People's rights, and community relations, depending on the sector, and assess their potential impact on a company's credit profile and ultimately to its valuation.

The Calvert Green Bond Fund seeks to invest in companies and other enterprises that demonstrate positive ESG performances as it addresses sustainability challenges that are primarily "green" investments. These include securities of companies that develop or provide products or services that address environmental solutions and/or demonstrate leadership in their efforts to reduce their own environmental footprint; bonds that support environmental projects; structured securities that are collateralized by assets supporting environmental themes; and securities that, in the opinion of the Fund's Adviser, have no more than a negligible direct environmental impact, which may include securities issued by the U.S. Government or its agencies, and U.S. Government-sponsored entities. In order to manage this fund effectively, ESG review, integration and thematic strategies are all incorporated.

The Calvert Absolute Return Bond Fund falls into the popular "go anywhere" non-traditional bond fund category. Unconstrained funds are not typically managed against a benchmark index, but rather strategically and tactically re-allocate to be best positioned in changing markets. This is the only mutual fund in the non-traditional bond category to feature the incorporation of environmental, social and governance (ESG) analysis in its investment process.

Additionally, Calvert has worked with academic partners on understanding how ESG and event risks are tied to credit risks, and are forming additional academic partnerships to build on their understanding around financially material ESG issues in the public debt space.


FI 02. ESG issues and issuer research

02.1. Indicate which ESG factors you systematically research as part of your analysis on issuers.

Select all that apply
SSA
Corporate (financial)
Corporate (non-financial)
Securitised
Environmental data
Social data
Governance data

02.2. Indicate what format your ESG information comes in and where you typically source it

Indicate who provides this information  

Indicate who provides this information  

Indicate who provides this information  

Indicate who provides this information  

Indicate who provides this information  

02.3. Provide a brief description of the ESG information used, highlighting any differences in sources of information across your ESG incorporation strategies.

Calvert relies greatly on the expertise of their in-house ESG Research team to provide intelligence on how a given company performs across certain ESG factors specific to the sector to which it belongs through the Calvert Research System (CRS), a proprietary platform that allows us to integrate both financial and sustainability insights, while comparing companies across metrics. ESG research analysts also share insights based on conversations with management, NGO reports, trade union reports, and other sources. Their findings are shared across various venues, including an information sharing platform for primary issues (which they refer to as the new issue evaluation process) and regular meetings and informal interactions. Calvert's fundamental portfolio managers and analysts are also well-versed in understanding the material ESG risks and opportunities for each debt issuance, and collaborate with thier respective ESG analyst on both buy and sell decisions.

02.4. Additional information. [Optional]


FI 03. Processes to ensure analysis is robust

03.1. Indicate how you ensure that your ESG research process is robust:

specify description

          Calvert's 3RC Committee oversees all aspects of the ESG research process, including fixed-income issuances.
        

03.2. Describe how your ESG information or analysis is shared among your investment team.

          ESG assessments for fixed income issuers are shared among the Calvert ESG research team and fixed-income portfolio managers leading to joint interactions and discussions.
        

03.3. Additional information. [Optional]

The responses above reflects Calvert as well as the collaboration of EVM's Investment Grade Fixed Income team.


(A) Implementation: Screening

FI 04. Types of screening applied

04.1. Indicate the type of screening you conduct.

Select all that apply
SSA
Corporate (financial)
Corporate (non-financial)
Securitised
Negative/exclusionary screening
Positive/best-in-class screening
Norms-based screening

04.2. Describe your approach to screening for internally managed active fixed income

 

Please see FI 04.3 for the answer

04.3. Additional information. [Optional]

The information in this section reflects Calvert as well as the collaboration of EVM's Investment Grade Fixed Income team.

The Calvert Research System (CRS) is Calvert’s proprietary platform that is optimally engineered to capture multiple sources of ESG data and evaluate information through the perspectives of their ESG analysts' deep ESG expertise. Calvert applys a streamlined investment decision-making process that integrates both financial and sustainability insights and compares companies across these metrics. During the reporting period, Calvert’s team of ESG research analysts led this process and worked closely with fixed income and equity investment analysts to identify the most material ESG factors and data indicators for each sub-industry.

Calvert collaboration of EVM's Investment Grade Fixed Income team uses detailed scoring models that incorporate the best available information to review each potential investment. They then rate and rank companies within their sub-industries and normalize these results to include several relative ESG risk factors, ultimately producing an assessment that reflects both peer-relative and absolute performance in a defined index universe. Only companies that satisfy the team's standards for ESG performance are included in Calvert’s mutual funds and separate accounts that seek to follow the Calvert Principles.

As part of this process, the team bases their investments on the Calvert Principles for Responsible Investment, which encompasses positive screening as well as norms-based screening. These Principles guide the team's selection of companies for all Calvert’s Responsible Indexed investment strategies, and many of their actively managed strategies. They seek to invest in companies that provide positive leadership in the areas of their business operations and overall activities that are material to improving societal outcomes, including those that will affect future generations. Specifically, they address advancing sustainability and resource efficiency; contributing to equitable societies and respecting human rights; and seek accountable governance and building transparency. The applications generally preclude companies with poor ESG performance. Full details can be found at: https://www.calvert.com/the-calvert-principles.php

Additional Information: The Calvert Principles for Responsible Investment take into account norms of the Universal Declaration of Human Rights and the International Labour Organization Conventions as part of their review when assessing a company. Calvert also considers the Treaty on Conventional Armed Forces and UN Register on Convention Arms as part of its analysis for weapons.


FI 05. Examples of ESG factors in screening process

05.1. Provide examples of how ESG factors are included in your screening criteria.

Type of fixed income

ESG factors

Screening

Description of how ESG factors are used as the screening criteria

French Green OAT- CUSIP BEV2B6930
 

Issued by French Treasury to support French commitments under the Paris Climate Agreement

This issuance covers a particularly wide array of green projects because it generally supports the French Government's environmental objectives. Broadly it supports renewable energy research, green buildings, low-carbon transportation infrastructure, and natural capital preservation, among other categories.

The governance on this issuance is naturally very strong, and the country's national commitments give confidence that green funds will be impactful:

  • Emit 40% less greenhouse gas emissions by 2030 (1990 Baseline)
  • Reduce final energy consumption 20% by 2030 and 50% by 2050 (2012 Baseline)
  • Reduce fossil fuel consumption by 30% as of 2030 (2012 Baseline)
  • Increase the share of renewables to 40% of electricity generation by 2030

Type of fixed income

ESG factors

Screening

Description of how ESG factors are used as the screening criteria

Citigroup Inc- CUSIP BEV3B4LX3

This is a part of Citigroup's initiative to lend, invest, and facilitate $100 billion from 2014-2024 towards environmental solutions and activities in an effort to reduce the impact of climate change

Proceeds from Citi's Green Bond Issuances support investments in assets of projects in the following categories:

  • Renewable Energy
  • Energy Efficiency
  • Sustainable Transportation
  • Water Quality & Conservation
  • Green Buildings (included LEED Gold & Platinum)

Recent company impact reporting states 83% of the company's green bond asset portfolio falls under renewable energy, another 11% under sustainable transportation (mass transit in developing countries)

Type of fixed income

ESG factors

Screening

Description of how ESG factors are used as the screening criteria

Terraform Power Operating LLC- CUSIP 88104LAG8
 Issuer is wholly owned by a yieldco that derives 100% of its revenue from renewable energy generation. The Parent, TerraForm Power Inc, owns and operates 4,066 MW of renewable capacity (58.8% Wind and 41.2% Solar) mainly in the US

The entirety of this issuance was used as cash on hand in the financing of an acquisition deal which provided TerraForm with 930MW of wind power, suggesting that around 142 MW of capacity is attributable to the proceeds raised from this issuance.

05.2. Additional information.

The information in this section reflects Calvert as well as the collaboration of EVM's Investment Grade Fixed Income team.


FI 06. Screening - ensuring criteria are met

06.1. Indicate which systems your organisation has to ensure that fund screening criteria are not breached in fixed income investments.

Type of screening
Checks
Negative/exclusionary screening
Positive/best-in-class screening
Norms-based screening

06.2. Additional information. [Optional]


(B) Implementation: Thematic

FI 07. Thematic investing - overview

07.1. Indicate what proportion of your thematic investments are (totalling up to 100%):

8.3 %
1.7 %
0.6 %

07.2. Describe your organisation’s approach to thematic fixed income investing

Please see FI 1.3.

07.3. Additional information [OPTIONAL]


FI 08. Thematic investing - themed bond processes

08.1. Indicate whether you encourage transparency and disclosure relating to the issuance of themed bonds as per the Green Bonds Principles, Social Bond Principles, or Sustainability Bond Guidelines..

08.2. Describe the actions you take when issuers do not disburse bond proceeds as described in the offering documents.

The portfolio manager researches the supporting documentation with the ESG research team and if necessary, engages with the issuer to gather additional information and context. The team will then reassess this information relative to their initial analysis to determine if the security still meets Calvert’s acceptable criteria. If it is determined the security no longer meets their acceptable criteria, the team will liquidate in the best interest of their clients.

The Calvert Green Bond Fund seeks to invest primarily in "green" investments. The Fund has its own definition of "green" investments, which takes a broader approach than the "labelled" green bond market. For "green" project-based investments, they encourage issuers to increase transparency in terms of disclosing the eligibility process for project themes and selection; the process for disbursing proceeds until all funds are allocated; and annual reporting that includes project selection, proceeds allocation, and any impact reporting as available. When an issuer has stated that it will offer annual reporting but it is not readily available, they will contact the issuer to request the reporting for their assessment of the security.

08.3. Additional information. [Optional]

The information in this section reflects Calvert as well as the collaboration of EVM's Investment Grade Fixed Income team.


FI 09. Thematic investing - assessing impact

09.1. Indicate how you assess the environmental or social impact of your thematic investments.

09.2. Additional information. [Optional]

The information in this section reflects Calvert as well as the collaboration of EVM's Investment Grade Fixed Income team.


(C) Implementation: Integration

FI 10. Integration overview

10.1. Describe your approach to integrating ESG into traditional financial analysis.

The information in this section reflects Calvert as well as the collaboration of EVM's Investment Grade Fixed Income team.

Once Calvert has defined the investable universe (based on the CRS) for their actively managed portfolios, Calvert performs an integrated relative value assessment of both fundamental and ESG risks at the sector and security selection level. Calvert's relative value framework is predicated upon their belief that ESG factors are most influential on spread performance for companies that exhibit combined outlier fundamental and ESG characteristics, i.e. an overweight stance on companies with both an improving fundamental and ESG profile, and an underweight stance on companies with both a deteriorating fundamental and ESG profile. Therefore, Calvert believes that ESG factors may not affect spread performance when a company's strong (weak) ESG profile is juxtaposed against a weak (strong) fundamental profile.

Credit analysts rely upon the primary research conducted by Calvert's in-house team of ESG Research analysts for ESG reviews and upon their own research. Both teams also leverage a wide variety of external sources, including ESG ratings provided by third party providers, Bloomberg ESG analytics, NGO reports, and the annual U.S. Department of State Country Reports regarding human rights abuses. Other resources include regulatory filings, bond offering documents, websites for companies or other entities issuing securities, and news reports. Credit and ESG research analysts review the material and evaluate the company's ESG profile in the context of our sustainability reviews. During the reporting period, portfolio managers, credit and sustainability analysts had discussions on ESG issues pertinent to specific securities or across sectors through ongoing dialogues as well as more formal meetings. ESG-related research (third party ratings and ESG Research team opinions) was communicated to credit analysts and portfolio managers and stored on an information sharing platform, which acted as a new issue evaluation process.

10.2. Describe how your ESG integration approach is adapted to each of the different types of fixed income you invest in.

SSA

Calvert's credit team rely upon the primary research conducted by its in-house team of ESG Research analysts for ESG reviews and upon their own research. Both teams also leverage a wide variety of external sources, including ESG ratings provided by third party providers, Bloomberg ESG analytics, NGO reports, and the annual U.S. Department of State Country Reports regarding human rights abuses. Other resources include regulatory filings, bond offering documents, websites for companies or other entities issuing securities, and news reports. Credit and ESG research analysts review the material and evaluate the company's ESG profile in the context of our sustainability reviews. During the reporting period, portfolio managers, credit and sustainability analysts had discussions on ESG issues pertinent to specific securities or across sectors through ongoing dialogues as well as more formal meetings. ESG-related research (third party ratings and ESG Research team opinions) was communicated to credit analysts and portfolio managers and stored on an information sharing platform, which acted as a new issue evaluation process.

Corporate (financial)

Calvert's credit team collaborates with in-house ESG Research analysts to review what ESG themes/metrics may be relevant to a company given its sector, potentially affecting its credit profile and ultimately its valuation. Depending on the sector, the analysts examine ESG factors in the areas of governance and ethics, the environment, supply chain, product safety, human rights, Indigenous People's rights, and community relations-- assessing their potential impact on a company's credit profile and, ultimately, spread performance implications. In the final relative value analysis, the team combine the fundamental and ESG assessments to ascertain whether the security's yield and return profile is commensurate with the risks identified. Calvert assesses the fairness of the valuation for the issuer/security versus its peers, relative to different instruments (including loans, credit default swaps, and credit-equity volatility relationship), and its position along the maturity curve.

Corporate (non-financial)

Calvert's credit team collaborates with in-house ESG Research analysts to review what ESG themes/metrics may be relevant to a company given its sector, potentially affecting its credit profile and ultimately its valuation. Depending on the sector, the analysts examine ESG factors in the areas of governance and ethics, the environment, supply chain, product safety, human rights, Indigenous People's rights, and community relations -- assessing their potential impact on a company's credit profile and, ultimately, spread performance implications. In the final relative value analysis, the team combine the fundamental and ESG assessments to ascertain whether the security's yield and return profile is commensurate with the risks identified. Calvert assesses the fairness of the valuation for the issuer/security versus its peers, relative to different instruments (including loans, credit default swaps, and credit-equity volatility relationship), and its position along the maturity curve.

 

Securitised

Calvert employs a proprietary matrix to assess ESG risks and opportunities for securitized assets, which include consumer and commercial asset-backed securities (ABS), agency and non-Agency mortgage-backed securities (MBS), and commercial mortgage-backed securities (CMBS). Calvert's matrix is comprised of four broad assessment groups which define materiality and outline categories of research. Assessment groups are based on characteristics of the sponsoring entity (or entities) and collateral type. This guides ESG research analysts, credit analysts, and portfolio managers in determining where the material underlying ESG risks and opportunities lie in a specific securitization. Further research is performed on one or many entities and if necessary, the collateral pool. Calvert's process ensures that all securitized asset holdings meet the Calvert Principles for Responsible Investment.

10.3. Additional information [OPTIONAL]

The information in this section reflects Calvert as well as the collaboration of EVM's Investment Grade Fixed Income team.

 


FI 11. Integration - ESG information in investment processes

11.1. Indicate how ESG information is typically used as part of your investment process.

Select all that apply
SSA
Corporate (financial)
Corporate (non-financial)
Securitised
ESG analysis is integrated into fundamental analysis
ESG analysis is used to adjust the internal credit assessments of issuers.
ESG analysis is used to adjust forecasted financials and future cash flow estimates.
ESG analysis impacts the ranking of an issuer relative to a chosen peer group.
An issuer`s ESG bond spreads and its relative value versus its sector peers are analysed to find out if all risks are priced in.
The impact of ESG analysis on bonds of an issuer with different durations/maturities are analysed.
Sensitivity analysis and scenario analysis are applied to valuation models to compare the difference between base-case and ESG-integrated security valuation.
ESG analysis is integrated into portfolio weighting decisions.
Companies, sectors, countries and currency and monitored for changes in ESG exposure and for breaches of risk limits.
The ESG profile of portfolios is examined for securities with high ESG risks and assessed relative to the ESG profile of a benchmark.
Other, specify in Additional Information

11.2. Additional information [OPTIONAL]

The information in this section reflects Calvert as well as the collaboration of EVM's Investment Grade Fixed Income team.


FI 12. Integration - E,S and G issues reviewed

12.1. Indicate the extent to which ESG issues are reviewed in your integration process.

Environment
Social
Governance
SSA

Environmental

Social

Governance

Corporate (financial)

Environmental

Social

Governance

Corporate (non-financial)

Environmental

Social

Governance

Securitised

Environmental

Social

Governance

12.2. Please provide more detail on how you review E, S and/or G factors in your integration process.

SSA

The information in this section reflects Calvert as well as the collaboration of EVM's Investment Grade Fixed Income team.

Once Calvert has defined the investable universe for their actively managed portfolios, they perform an integrated relative value assessment of both fundamental and ESG risks at the sector and security selection level. Calvert's relative value framework is predicated upon their belief that ESG factors are most influential on spread performance for companies that exhibit combined outlier fundamental and ESG characteristics, i.e. an overweight stance on companies with both an improving fundamental and ESG profile, and an underweight stance on companies with both a deteriorating fundamental and ESG profile. Therefore, Calvert's believe that ESG factors may not affect spread performance when a company's strong (weak) ESG profile is juxtaposed against a weak (strong) fundamental profile.

Credit analysts rely upon the primary research conducted by its in-house team of ESG Research analysts for ESG reviews and upon their own research. Both teams also leverage a wide variety of external sources, including ESG ratings provided by third party providers, Bloomberg ESG analytics, NGO reports, and the annual U.S. Department of State Country Reports regarding human rights abuses. Other resources include regulatory filings, bond offering documents, websites for companies or other entities issuing securities, and news reports. Credit and ESG research analysts review the material and evaluate the company's ESG profile in the context of their sustainability reviews. During the reporting period, portfolio managers, fundamental credit and ESG analysts had discussions on ESG issues pertinent to specific securities or across sectors through ongoing dialogues as well as more formal meetings. ESG-related research (third party ratings and ESG Research team opinions) was communicated to credit analysts and portfolio managers and stored on an information sharing platform, which acted as a new issue evaluation process.

The Investment Grade Fixed Income credit team collaborates with in-house ESG Research analysts to review what ESG themes/metrics may be relevant to a company given its sector, potentially affecting its credit profile and ultimately its valuation. Depending on the sector, the analysts examine ESG factors in the areas of governance and ethics, the environment, supply chain, product safety, human rights, Indigenous People's rights, and community relations-- assessing their potential impact on a company's credit profile and, ultimately, spread performance implications. In the final relative value analysis, Calvert combines the fundamental and ESG assessments to ascertain whether the security's yield and return profile is commensurate with the risks identified. Calvert assess the fairness of the valuation for the issuer/security versus its peers, relative to different instruments (including loans, credit default swaps, and credit-equity volatility relationship), and its position along the maturity curve.

Corporate (financial)

Once Calvert has defined the investable universe for their actively managed portfolios, they perform an integrated relative value assessment of both fundamental and ESG risks at the sector and security selection level. Calvert's relative value framework is predicated upon their belief that ESG factors are most influential on spread performance for companies that exhibit combined outlier fundamental and ESG characteristics, i.e. an overweight stance on companies with both an improving fundamental and ESG profile, and an underweight stance on companies with both a deteriorating fundamental and ESG profile. Therefore, Calvert's believe that ESG factors may not affect spread performance when a company's strong (weak) ESG profile is juxtaposed against a strong (weak) fundamental profile.

Credit analysts rely upon the primary research conducted by its in-house team of ESG Research analysts for ESG reviews and upon their own research. Both teams also leverage a wide variety of external sources, including ESG ratings provided by third party providers, Bloomberg ESG analytics, NGO reports, and the annual U.S. Department of State Country Reports regarding human rights abuses. Other resources include regulatory filings, bond offering documents, websites for companies or other entities issuing securities, and news reports. Credit and ESG research analysts review the material and evaluate the company's ESG profile in the context of their sustainability reviews. During the reporting period, portfolio managers, fundamental credit and ESG analysts had discussions on ESG issues pertinent to specific securities or across sectors through ongoing dialogues as well as more formal meetings. ESG-related research (third party ratings and ESG Research team opinions) was communicated to credit analysts and portfolio managers and stored on an information sharing platform, which acted as a new issue evaluation process.

The Investment Grade Fixed Income credit team collaborates with in-house ESG Research analysts to review what ESG themes/metrics may be relevant to a company given its sector, potentially affecting its credit profile and ultimately its valuation. Depending on the sector, the analysts examine ESG factors in the areas of governance and ethics, the environment, supply chain, product safety, human rights, Indigenous People's rights, and community relations-- assessing their potential impact on a company's credit profile and, ultimately, spread performance implications. In the final relative value analysis, Calvert combines the fundamental and ESG assessments to ascertain whether the security's yield and return profile is commensurate with the risks identified. Calvert assess the fairness of the valuation for the issuer/security versus its peers, relative to different instruments (including loans, credit default swaps, and credit-equity volatility relationship), and its position along the maturity curve.

Corporate (non-financial)

Once Calvert has defined the investable universe for their actively managed portfolios, they perform an integrated relative value assessment of both fundamental and ESG risks at the sector and security selection level. Calvert's relative value framework is predicated upon their belief that ESG factors are most influential on spread performance for companies that exhibit combined outlier fundamental and ESG characteristics, i.e. an overweight stance on companies with both an improving fundamental and ESG profile, and an underweight stance on companies with both a deteriorating fundamental and ESG profile. Therefore, Calvert's believe that ESG factors may not affect spread performance when a company's strong (weak) ESG profile is juxtaposed against a strong (weak) fundamental profile.

Credit analysts rely upon the primary research conducted by its in-house team of ESG Research analysts for ESG reviews and upon their own research. Both teams also leverage a wide variety of external sources, including ESG ratings provided by third party providers, Bloomberg ESG analytics, NGO reports, and the annual U.S. Department of State Country Reports regarding human rights abuses. Other resources include regulatory filings, bond offering documents, websites for companies or other entities issuing securities, and news reports. Credit and ESG research analysts review the material and evaluate the company's ESG profile in the context of their sustainability reviews. During the reporting period, portfolio managers, fundamental credit and ESG analysts had discussions on ESG issues pertinent to specific securities or across sectors through ongoing dialogues as well as more formal meetings. ESG-related research (third party ratings and ESG Research team opinions) was communicated to credit analysts and portfolio managers and stored on an information sharing platform, which acted as a new issue evaluation process.

The Investment Grade Fixed Income credit team collaborates with in-house ESG Research analysts to review what ESG themes/metrics may be relevant to a company given its sector, potentially affecting its credit profile and ultimately its valuation. Depending on the sector, the analysts examine ESG factors in the areas of governance and ethics, the environment, supply chain, product safety, human rights, Indigenous People's rights, and community relations-- assessing their potential impact on a company's credit profile and, ultimately, spread performance implications. In the final relative value analysis, Calvert combines the fundamental and ESG assessments to ascertain whether the security's yield and return profile is commensurate with the risks identified. Calvert assess the fairness of the valuation for the issuer/security versus its peers, relative to different instruments (including loans, credit default swaps, and credit-equity volatility relationship), and its position along the maturity curve.

Securitised

Once Calvert has defined the investable universe for their actively managed portfolios, they perform an integrated relative value assessment of both fundamental and ESG risks at the sector and security selection level. Calvert's relative value framework is predicated upon their belief that ESG factors are most influential on spread performance for companies that exhibit combined outlier fundamental and ESG characteristics, i.e. an overweight stance on companies with both an improving fundamental and ESG profile, and an underweight stance on companies with both a deteriorating fundamental and ESG profile. Therefore, Calvert's believe that ESG factors may not affect spread performance when a company's strong (weak) ESG profile is juxtaposed against a weak (strong) fundamental profile.

Credit analysts rely upon the primary research conducted by its in-house team of ESG Research analysts for ESG reviews and upon their own research. Both teams also leverage a wide variety of external sources, including ESG ratings provided by third party providers, Bloomberg ESG analytics, NGO reports, and the annual U.S. Department of State Country Reports regarding human rights abuses. Other resources include regulatory filings, bond offering documents, websites for companies or other entities issuing securities, and news reports. Credit and ESG research analysts review the material and evaluate the company's ESG profile in the context of their sustainability reviews. During the reporting period, portfolio managers, fundamental credit and ESG analysts had discussions on ESG issues pertinent to specific securities or across sectors through ongoing dialogues as well as more formal meetings. ESG-related research (third party ratings and ESG Research team opinions) was communicated to credit analysts and portfolio managers and stored on an information sharing platform, which acted as a new issue evaluation process.

The Investment Grade Fixed Income credit team collaborates with in-house ESG Research analysts to review what ESG themes/metrics may be relevant to a company given its sector, potentially affecting its credit profile and ultimately its valuation. Depending on the sector, the analysts examine ESG factors in the areas of governance and ethics, the environment, supply chain, product safety, human rights, Indigenous People's rights, and community relations-- assessing their potential impact on a company's credit profile and, ultimately, spread performance implications. In the final relative value analysis, Calvert combines the fundamental and ESG assessments to ascertain whether the security's yield and return profile is commensurate with the risks identified. Calvert assess the fairness of the valuation for the issuer/security versus its peers, relative to different instruments (including loans, credit default swaps, and credit-equity volatility relationship), and its position along the maturity curve.

12.3. Additional information.[OPTIONAL]

The information in this section reflects Calvert as well as the collaboration of EVM's Investment Grade Fixed Income team.


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