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GreenMoney Journal - publishing since 1992
Fall 2010 issue
Socially Responsible Investing – Better Companies, Better Communities
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GreenMoney Interviews: Barbara J. Krumsiek, President & CEO, Calvert Investments
Interview by Cliff Feigenbaum, founder of GreenMoney Journal
One of the more enjoyable tasks at GreenMoney Journal is interviewing true leaders in the socially
responsible investing world.
This issue features Barbara Krumsiek, the well-respected
President and CEO of Calvert Investments. As a ground-breaking investment firm for 30 years,
Calvert offers a broad range of products, from expertly managed bond funds to the nation's largest
array of socially responsible mutual funds.
In this, her first GMJ interview, she has much to share:
GMJ: Tell us about your
background and what brought you into SRI. Who are some of your strongest influences in business and
in life?
BARBARA: I spent my first 23 years in the industry at
Alliance Capital and, later, at Equitable Capital in a strictly for-profit investment environment.
During these years, I had a few clients who incorporated environmental, social, and governance
(ESG) criteria into their guidelines, but that was really the extent of my contact with the world
of sustainable and responsible investment. In fact, it was only when I began to consider the job of
leading Calvert that I thought seriously about sustainability criteria and what that meant in a
broader context.
The belief, very early on, was that evaluating company performance on
governance issues, labor relations, gender equity, environmental impact and other classic SRI
issues, was actually another way of evaluating management quality. That is, a management team that
treats its workers fairly, that doesn't harm the environment, and that doesn't make dangerous
products is, all other things being equal, going to outperform. It seemed to me, almost from the
beginning, that there was a link between good social performance and good investment performance.
That meant that the discipline of sustainable and responsible investment did not just have to be of
interest to the small segment of the investment world that wanted to invest according to their
values - it was appropriate for every investor. That idea-which I think we grasped quite
early-inspired a series of efforts to expand SRI to a broader audience of investors. For instance,
within a few months of joining Calvert, I attended my first-ever social investment conference. This
was in the fall of 1997. The most heavily attended session in the whole conference was about how to
handle the fiduciary issues that arose when you included a mutual fund that integrated ESG research
in a defined contribution plan. A Calvert colleague suggested that I talk to the deputy secretary
of pensions at the Department of Labor (DOL). We had a conversation about the problem - defining
once and for all what a plan sponsor's fiduciary duties were, in relation to adding an SRI option
to a plan - and the deputy secretary recommended we write a letter asking for guidance.
My general counsel Bill Tartikoff wrote a letter to the DOL. On May 28, 1998, we received a
response. In a tremendously influential ruling, the DOL stated, "the fiduciary standards of
sections 403 and 404 do not preclude consideration of collateral benefits, such as those offered by
a 'socially-responsible' fund, in a fiduciary's evaluation of a particular investment opportunity.
However, the existence of such collateral benefits may be decisive only if the fiduciary determines
that the investment offering the collateral benefits is expected to provide an investment return
commensurate to alternative investments having similar risks." In other words, societal impact was
fine, and perhaps even desirable, as long as the fund performed competitively. This letter-and I've
often heard it referred to as the Calvert letter-was Calvert's first major push for broader
acceptance of SRI. We have continually worked to educate and inform all kinds of investors - both
individual and institutional - about the benefits and characteristics of investments featuring
integrated ESG research. We have also consulted closely with the institutional investment community
to develop the Principals for Responsible Investment.
GMJ: Calvert has grown
with new funds such as Global Alternative Energy fund. Can we expect additional new funds from
Calvert in the next year?
BARBARA: Yes. Today we're focused on
leveraging our sustainability research capabilities to capture market opportunities and selectively
investing in companies that produce products and services that address some of society's most
pressing environmental and sustainability challenges. We call this SRI approach Calvert 'Solution
Strategies.' Last year, we launched the first of these portfolio strategies, the Calvert Global
Alternative Energy Fund, and it turned out to be our most successful product launch to date.
GMJ: Where do you think most of the growth in SRI assets will come from in the future,
- small boutique SRI firms or large firms with small SRI groups?
BARBARA: Both. I believe that in ten years you won't see distinct lines
separating firms specializing in sustainable and responsible investing from the traditional asset
management industry. With Calvert's Global Alternative Energy Fund we are already competing with a
very different set of firms than we have competed with in the past due to the fact that traditional
asset managers are offering sustainable investment products to meet opportunities and satisfy
investor demand.
Second, broader spectrums of investors, both individual and
institutional, are interested in sustainable investment approaches. People are concerned about
these issues making the headlines: climate change, alternative energy, corporate malfeasance and
workplace discrimination, and investors are choosing investments that enable them to be part of the
solution to those issues.
GMJ: What major trends do you see for SRI in the next
5-10 years?
BARBARA: We are seeing three very powerful trends
affecting the SRI industry right now and we believe they will each continue to gain strength:
We view that competition as a good thing, and we are not concerned with whether traditional
asset managers are entering the business because they believe in it or because it looks like a
profitable opportunity. Calvert will continue to differentiate itself against these new competitors
as it always has: through cutting edge sustainability research and providing portfolio strategies
that appeal to a diverse audience of SRI investors. We believe that a major part of our growth will
come from offering investors options that move beyond the traditional SRI approach of excluding
companies that do not meet sustainability criteria from investment consideration. We remain firmly
committed to our original SRI products, while also recognizing that there is no one-size-fits-all
approach for an increasingly diverse range of investors for whom ESG issues are important.
Different investors are seeking different ways to invest for their financial goals while advocating
corporate responsibility.
First, corporations have embraced ESG practices and are
incorporating them into their operations as a matter of course. At Calvert, we've seen the impact
of this as companies that might meet our ESG criteria have sought out our advice how to improve
performance in these areas. We have been asked to consult on environmental, sustainable and
governance issues at a number of prominent Fortune 500 companies over the last year, as companies
seek to meet higher standards for sustainable performance.
Third, corporate engagement
has proven increasingly influential and successful. Remember, the SRI business grew out of
exclusion. If a stock didn't meet certain criteria, it would be excluded from a portfolio. Yet
today, there is a whole host of ways to influence corporate behavior, from multinational
organizations like the UN Global Compact, to shareholder advocacy programs, to both formal and
informal dialogue with corporate management. As the SRI tool set becomes larger and more nuanced,
we believe that there will be more investment choices and more types of investors than ever before.
GMJ: What are the latest issue(s) on your radar, inside and outside
SRI?
BARBARA: We continue to support a targeted divestment
strategy in Darfur. This is, obviously, a terrible human tragedy, akin in many ways to the South
Africa divestment movement that gave SRI mainstream acceptance. Yet it's also different and more
complex. Institutional investors are looking for guidance not on whether to divest, but how to do
it. We made recommendations in regards to trying to distinguish between companies that are
supporting the regime in Sudan and those that are providing some benefit to the people in Darfur.
We've provided testimony to the legislatures in Maryland and Texas, and this year our comments to
the SEC's proposed guidelines to institutional investors were incorporated into its final
recommendations.
GMJ: How important is SRI research and shareholder advocacy to
achieving Calvert's mission?
BARBARA: They are both core to our
mission. In fact, they're part of how we distinguish ourselves in a larger, more competitive market
for sustainable investment strategies. For instance, now, as more and more companies try to
incorporate ESG principles into their operations and, perhaps, issue corporate social
responsibility reports, how can investors separate real progress from hype?
At Calvert,
we've been analyzing companies for decades. We have the largest, most experienced sustainability
research group of any investment manager. That enables us to tell the difference between a PR
campaign and a genuine commitment.
Corporate engagement is becoming increasingly
important to us. I can envision Calvert offering portfolios where engagement is the primary tool,
where we are actively working with a select group of companies that may not meet our ESG criteria
today and therefore not included in our original SRI funds. For instance, we might emphasize a
company that is doing very positive things in the area of environmental stewardship, but needs
improvement in its board diversity. By owning this company, and advancing ESG best practices from
the inside, we think we might be able to encourage positive change beyond our traditional universe
of companies that meet or exceed our ESG criteria. An engagement approach also allows us to invest
in sectors and industries that have been under-weighted in our original SRI portfolios. Right now,
for instance, oil and commodities companies are market leaders, and most of our funds can't own
them. An engagement fund would allow investors more choices about the sectors and industries they
might be exposed to.
It makes a difference. So much so that we are offering a new
category of SRI called Calvert SAGE Strategies. SAGE stands for Sustainability Achieved through
Greater Engagement. These portfolios will invest in companies that are performing well financially,
but whose sustainability performance could be improved. Calvert, through an ownership position,
will engage with these companies from the inside to advocate for greater progress on vital
environmental, social and governance concerns. In fact, we were the first investment management
company ever to file a shareholder resolution when we filed a resolution in 1986 with Angelica on
labor/management issues. Proxy voting, however, is just one form of engagement, and what's emerging
now is a whole range of other ways we can influence corporate behavior. For instance, as I
mentioned, a number of large corporations have recently asked for our help in developing ESG
policies and programs. There are broad-based international efforts like the UN Global Compact and
the Global Reporting Initiative. The behavior can also be influenced through more specialized
industry-specific groups like the Extractive Industries Coalition or the Internet Privacy
Coalition. All these developments give us more ways to encourage companies to improve their ESG
performance and overall sustainability.
For more information on any Calvert fund, please
contact your financial advisor or call Calvert at (800) 368-2748 for a free prospectus. An investor
should consider the investment objectives, risks, charges, and expenses of an investment carefully
before investing. The prospectus contains this and other information. Read it carefully before you
invest or send money. Calvert mutual funds are underwritten and distributed by Calvert
Distributors, Inc., member FINRA, subsidiary of Calvert Group, Ltd. (07-09-08). Contact for
questions: Elizabeth A. Le Vaca of Calvert at (301) 657-7047
For more information on the
Calvert mutual funds go to http://www.calvert.com
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of The GreenMoney Journal / Cliff Feigenbaum
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