Calvert Global Water Fund has an average Morningstar Sustainability Rating of 3 globes, indicating that the ESG risk of holdings in its portfolio is similar to that of its peers in the Equity Miscellaneous category. Funds with 4 or 5 globes tend to hold securities that are less exposed to ESG risk. ESG risk measures the degree to which material environmental, social, and governance issues, such as climate change, biodiversity, human capital, as well as bribery and corruption, could affect valuations. ESG risk differs from impact, which is about driving positive environmental and social outcomes for society’s benefit.
Calvert Global Water Fund holds itself out to be a sustainable or ESG-focused investment. In other words, ESG concerns are central to the investment process of this strategy. A fund with an ESG-focused mandate would have a higher probability to drive positive ESG outcomes. Calvert Global Water Fund has an asset-weighted Carbon Risk Score of 9.9, indicating that its companies have low exposure to carbon-related risks. These are risks associated with the transition to a low-carbon economy such as increased regulation, changing consumer preferences, technological advancements, and stranded assets. Currently, the fund has 7.8% involvement in fossil fuels, which compares favorably with 29.1% for its average category peer. Companies are considered involved in fossil fuels if they derive some revenue from thermal coal, oil, and gas. Calvert Global Water Fund shows 13.6% involvement in carbon solutions. This percentage surpasses the 4.7% average involvement of its peers in the Natural Resources category. Carbon solutions include products and services related to renewable energy, energy efficiency, green buildings, green transportation, and so on.
The fund aims to avoid, or limit exposure to, companies in violation with international norms, such as the UN Global Compact or the Universal Declaration of Human Rights. The fund has no exposure to high or severe controversies. Controversies are incidents that have a negative impact on stakeholders or the environment, which create some degree of financial risk for the company. Examples of types of controversies include bribery and corruption scandals, workplace discrimination and environmental incidents. Severe and high controversies can have significant financial repercussions, ranging from legal penalties to consumer boycotts. Such controversies can also damage the reputation of both companies themselves and their shareholders.
By prospectus, the fund aims to avoid, or limit its exposure to, companies associated with controversial weapons, tobacco, and and small arms. Yet this goal is far from achieved, as the fund exhibits 1.05% exposure to small arms. This compares with 0.71% for its average peer in the Equity Miscellaneous category.