Anthony Eames is a vice president and director of responsible investment strategy for Calvert Research and Management, a wholly owned subsidiary of Eaton Vance Management specializing in responsible and sustainable investing across global capital markets. He is responsible for the suite of strategies focused on responsible investing, encompassing actively and passively managed U.S. and international equity strategies, fixed-income strategies and asset allocation funds. Anthony is responsible for client communications and insights on investment strategy and portfolio positioning. He joined Calvert Research and Management in 2016 when Eaton Vance acquired the business assets of Calvert Investment Management, forming Calvert Research and Management.
Anthony began his career in the investment management industry in 1995 with Calvert Investment Management. He has been affiliated with the Eaton Vance organization since 2016. Before joining Eaton Vance, he was senior vice president and national sales manager at Calvert Investment Management. Previously, he represented Calvert as senior regional vice president in the Northeast and held various roles in client services and sales.
Anthony earned a B.A. from Wittenberg University. He holds the Accredited Investment Fiduciary and Accredited Asset Management Specialist designations, and FINRA Series 7, 24 and 63 licenses.
I spoke with Anthony earlier this week.
Please describe your role in the Eaton Vance/Calvert organization. What was the background behind the acquisition of Calvert and how are its products now positioned?
I serve as a product specialist and strategist and run a small team of specialists who are designed to be experts in responsible investing (RI) and Eaton Vance and its affiliates’ RI capabilities. We serve as a resource for all of our client-facing business development professionals across Eaton Vance.
As to the acquisition, Eaton Vance had a window into Calvert for many years because 20 years ago, Calvert hired Atlantic Capital Management to sub-advise its largest fund, the Calvert Equity Fund – and that relationship continues. Eaton Vance wanted to get more involved in the ESG space, and Calvert was a natural partner. Eaton Vance has always has exposure to responsible investing, primarily through Parametric, another affiliate, and the custom-core business that Parametric has, which allows investors to screen for specific ESG issues that are priorities. The Calvert acquisition allowed Eaton Vance to increase its footprint in the responsible investing space with an established ESG leader.
Calvert is an affiliate of Eaton Vance and we continue to manage the Calvert family of funds. Nothing has changed in terms of the lineup of Calvert funds since the deal, but Calvert now has the benefit of a much larger parent, a global investment firm in terms of infrastructure, investment expertise, and distribution. Legacy Calvert investors really benefit from that scale with greater access to investment expertise, equity and credit research, and much broader distribution.
What overall trends are you seeing among advisors with regard to ESG/SRI investing? What percentage of advisors have embraced this approach?
We are seeing tremendous interest in responsible investing from advisors. Every day more advisors are interested in learning about it, so that they can offer these strategies to their clients. Ultimately, it is driven by the clients.
Research we have seen, including internal surveys we have done, indicates that there is lots of interest on the part of investors in RI. The largest percentage by far is with the millennial generation, but we are seeing increases across demographic groups. Financial advisors are recognizing that there is a benefit to learning more about responsible investing. As opposed to talking their clients out of responsible investing, they are now discovering the benefits of learning more about it and working it into their practice, sometimes building model ESG model portfolios, so they can scale their business. They feel like it will allow them to better engage with existing clients, as well as better position themselves to attract new clients.
What is the typical profile of the clients who want ESG/SRI products? What is the typical profile of the advisors who are using ESG/SRI?
It is interesting because historically the clients who have been most interested in responsible investing were those who have a very specific set of values that they live their life by – a belief system. We have seen responsible investing as a way to economically express those values. We’ve been happy to serve those clients for decades.
Today, a new investor has emerged. This kind of investor is interested in learning more about responsible investing because they believe that companies’ environmental, social and governance behaviors matter – and that companies demonstrating good behavior might be positioned to perform just as well, if not better, than companies that are not doing as good of a job managing their ESG risks.
According to some studies, while interest across all the demographic groups has increased over time, women and millennials continue to be the leading demographic groups, followed by generation-x, and then boomers.
There are certainly plenty of advisors who have focused on ESG investing for many years. Those with RI-minded clients have recognized that serving those clients well will lead them to more clients and more business-development opportunities. However, we are seeing such interest across the board. It’s not just advisors; even the firms these advisors work for have developed impact-investing programs to create a suite of resources to help their advisors better connect with and grow their business with responsible investing.
I don’t think you can characterize a typical ESG advisor, because I believe ESG considerations are becoming much more commonplace.
What solutions are there for implementing ESG/SRI beyond traditional equities?
In years past, options were relatively limited to U.S. large cap and maybe large-cap international public equities. Now we have 27 ESG strategies across a variety of assets classes at Calvert alone. ESG solutions come in many forms, including emerging-market equities, bank loans, absolute-return bonds, active strategies or passive strategies. The opportunities for diversification for an advisor have never been better, and we are a far cry from the early 1980s when there were only a handful of these funds. Now there are hundreds of options, and the ability to build a diversified portfolio in a broad mix of asset classes is an important step forward for advisors looking to build RI portfolios for their clients.
Are there any “hot button” issues that stand out with regard to ESG/SRI – issues such as climate change or gender diversity that are the primary motivators that have pushed clients toward this approach to investing?
The biggest hot-button issues recently have been climate change, civilian firearms in the wake of the horrible school shootings, the opioid epidemic and companies that are involved in that business and its associated risks, gender diversity, and income inequality. We often find that if there is a particular issue motivating or inspiring an investor to consider ESG/SRI, they tend to appreciate all the other things we do from an investment perspective. If one has an interest in climate risk and having that addressed in their portfolio, they are probably going to support our work around civilian firearms and gender diversity as well.
The traditional approach to ESG/SRI investing has been to use “negative screens” to filter out undesirable companies – for example, tobacco and firearms providers. How has that approach evolved?
We spend a lot of time talking about this. This is part of the reason why many advisors view incorporating ESG as a performance drag and do not appreciate the benefits of today’s integrated investment approaches. In the early days, 10 to 30 years ago, we didn’t have the benefit of publicly traded companies disclosing a lot of information on how they were managing these ESG issues. We were left with a negative-screening approach where you would screen out certain companies, or even entire industries, based on the product or service that they offered. That was a very blunt instrument – an exclusionary approach – and at times it could be a factor in uneven performance.
Today we have the benefit of the vast majority of companies – as of last year, 85% of S&P 500 companies (according to the Governance & Accountability Institute) – issuing a corporate sustainability report. They are completing questionnaires sent by various ESG data providers. They are doing a much better job of being transparent about how they are managing these issues. We factor in the concept of financial materiality, which says that ESG issues are not uniformly important to companies. From a financial perspective, you have to focus on what is most material to a company based on its industry. That has allowed the investment industry, particularly Calvert, to build portfolios that are much more focused on identifying the companies that are doing the best job managing their ESG risks. We are not just screening out certain companies.
We’ve done our own research into advisor attitudes toward ESG/SRI investing. We found that one of the key issues holding advisors back from moving toward ESG/SRI is a belief that it involves sacrificing performance or diversification relative to an appropriate benchmark. What guidance do you offer to advisors when confronted with this objection?
This comes up all the time. I saw recently in Cerulli and Callan research papers that as much as 50% of the time, the reason that advisors decide not to explore responsible investing options for their clients is because of the notion that they are sacrificing performance. However, there is an increasingly large body of data, including academic and industry research, which indicates that performance does not need to be sacrificed to invest responsibly.
It is more and more difficult for someone to find supporting evidence that shows that ESG investing approaches leads to underperformance.
Our research also showed that advisors are very focused on how fund managers construct portfolios – their methodology and implementation. What have you found is the best way to educate advisors about those issues?
Our specialist team and I spend a lot of time talking about the different approaches to building ESG-focused portfolios. Obviously, we are advocating for the way we do it, but it is very important that advisors and clients take the time to figure out how a particular manager approaches responsible investing. There has long been an interest in third-party evaluators that can assess the ESG performance of portfolios. Morningstar created its Globe ratings last year, where it leveraged Sustainalytics data. That has certainly met a pressing need for an objective evaluation of responsible-investing approaches and performance.
We describe our process at Calvert with our “four pillars” framework. Those pillars are to find a manager focused on performance; has a comprehensive ESG research process; has an engagement strategy for pushing companies to improve and voting proxies in alignment with our priorities; and lastly, generating impact metrics so that we can illustrate to clients the progress that we’re making on important and material ESG issues. That very much reflects our methodology and implementation. We believe it is critical that advisors consider managers’ various approaches to ESG to ensure alignment when they build portfolios for their clients.
Have you found that advisors need to provide customized solutions to accommodate individual client needs and desires with regard to ESG/SRI? What solutions are you offering?
There are many situations where a mutual fund that is broadly addressing environmental, social, and governance issues is appropriate for a client. But there are also situations where a client has very specific priorities on things like gender diversity or exposure to fossil fuels, and having the ability to customize a portfolio is imperative. We benefit from being part of the Eaton Vance family, as one of our sister companies is Parametric, which has a very large business around its “custom-core” business, which allows a client to select specific ESG issues that are important to her. Parametric will build a portfolio typically centered on an index, either a broad market benchmark like the S&P 500 or one of the Calvert indexes, among others. Clients can choose additional customization options such that their investments reflect their stances on those issues.
Have advisors and their clients been looking for additional reporting that goes beyond performance to show the ESG/SRI impact of their investments?
They absolutely have. We have seen the highest demand for additional reporting above and beyond traditional performance reporting centers on the shareholder advocacy and engagement work we do and the ESG impact metrics. I’ll take those in reverse order.
Over the last year and a half, we have started to produce portfolio-level impact metrics on many of our funds, where we show quite prominently, on the quarterly fact sheets, our exposure to things like carbon emissions, toxic emissions, tobacco, fossil-fuel reserves, water use, and landfill waste, among others. We measure those outputs for our funds versus those of a traditional benchmark.
If we engaged with a particular company, we also report on how we vote our proxies. Increasingly, we have observed that investors and brokerage firms are going to demand and really expect a manager to produce impact metrics, so that the client has a window into the work the manager is doing and the effectiveness of their approach.
Our research has shown that the biggest obstacle to growing ESG/SRI assets among advisors is a lack of client demand. But what are the key trends in the political or economic environment that are likely to stimulate greater demand among clients? How should advisors prepare for this?
We’ve actually see this current political environment as a boon for responsible investing. There are people who are disappointed by the current public policy positioning in Washington, such as the U.S. pulling out of the Paris Agreement. Simultaneously, we are not seeing companies move away from their commitment to responsible practices. For instance, there are a number of companies that have committed to sourcing 100% of their energy needs from renewable energy. I do not think any of those companies have backed away from that commitment, even though U.S. regulations and legislation may not require or reward it.
Many investors see responsible and impact investing as a way to vote with their dollars, to economically express their priorities, and to make sure their investments align with companies that are addressing the social and environmental issues of our time. We are convinced that there are many clients who think this way and we encourage advisors to engage with their clients on responsible investing.
The views expressed in this (report/commentary) are those of Anthony Eames and are current only through the date stated at the top of this page. These views are subject to change at any time based upon market or other conditions, and Calvert disclaims any responsibility to update such views. These views may not be relied upon as investment advice and, because investment decisions for Calvert are based on many factors, may not be relied upon as an indication of trading intent on behalf of any Calvert fund. This commentary may contain statements that are not historical facts, referred to as “forward-looking statements.” The Funds’ actual future results may differ significantly from those stated in any forward-looking statement, depending on factors such as changes in securities or financial markets or general economic conditions, the volume of sales and purchases of Fund shares, the continuation of investment advisory, administrative and service contracts, and other risks discussed from time to time in the Funds’ filings with the Securities and Exchange Commission.
Investing primarily in responsible investments carries the risk that, under certain market conditions, the Fund may underperform funds that do not utilize a responsible investment strategy. No fund is a complete investment program and you may lose money investing in a fund. The Fund may engage in other investment practices that may involve additional risks and you should review the Fund prospectus for a complete description.
Parametric Custom Core: Parametric Portfolio Associates LLC (Parametric) is an SEC-registered investment advisor and a majority-owned subsidiary of Eaton Vance Corp. Tax-managed Custom Core TM strategies are offered by the Parametric Custom Tax-Managed & Centralized Portfolio Management segment of Parametric. Indexed Custom Core strategies are offered by Parametric Investment & Overlay Services. Parametric is located at 1918 8th Avenue, Suite 3100. Seattle, WA 98101. For more information regarding Parametric and its investment strategies. to request a compliant presentation, the firm's list of composite descriptions, or to request a copy of Parametric's Form ADV, please contact us at 206.694.5575 or visit our website.
Calvert mutual funds are distributed by Eaton Vance Distributors Inc. Member
Calvert Research and Management is a subsidiary of Eaton Vance Corp. and an affiliate of Eaton Vance Distributors Inc. Member FINRAISIPIC. Two International Place Boston. MA 02110
For more information on any Calvert fund, please contact your financial advisor or visit calvert.com for a free summary prospectus and/or prospectus. An investor should consider the investment objectives, risks, charges, and expenses of an investment carefully before investing. The summary prospectus and prospectus contain this and other information. Read them carefully before you invest or send money.
More Schwab IMPACT Conference Topics >
