BETHESDA, Md.--(BUSINESS WIRE)--Calvert Investment Management, Inc., a leading responsible investment manager, has partnered with Professor George Serafeim of the Harvard Business School to publish “The Financial and Societal Benefits of ESG Integration: Focus on Materiality.” This study, which is the second paper in the Calvert-Serafeim series, explores how systematic analysis of material environmental, social and governance (ESG) data may be able to help portfolio returns without adding additional risk.
The paper finds in a market environment that increasingly precludes alpha generation based purely on an analysis of financial metrics, the proper integration of ESG information into investment analysis can uncover risks and opportunities that markets have not yet valued.
“As the correlation between companies’ sustainability initiatives and their financial performance crystallizes, investors need to be factoring material ESG data into their investment evaluation and decision-making process,” states Calvert Investments CEO John Streur. “This new paper in the Calvert-Serafeim series reinforces decision-making by asset managers and owners of all sizes that seeks to allocate capital in a manner that rewards good corporate behaviors identified via integrated ESG analysis. We are excited to be on the forefront of establishing a research platform that separates the financially material from the financially immaterial information when evaluating ESG factors.”
Additional takeaways from the paper include:
- Widespread access to insightful ESG data remains cloudy, with corporations’ non-financial disclosures remaining inconsistent, noisy and selective. This opacity gives rise to opportunities for investors analyzing both ESG and financial data sets.
- Incorporating material ESG data into investment analysis can provide an advantage as the data can be a leading indicator of future financial performance and provide unique insights into the quality of a company’s business model and management that financial data alone cannot provide.
- Companies investing in material ESG areas have the potential to outperform in terms of risk-adjusted stock price and profitability margin growth. Therefore, investors focusing on material ESG factors may have an edge in selecting stocks more likely to improve profit margins over time.
- In addition to yielding financial returns for investors, the integration of ESG data in investment decisions can also drive environmental and social outcomes, particularly through the direct effect on a firm’s cost of capital.
Driven by the commitment to ESG-focused data science and analysis, Calvert Investments has uniquely positioned itself to offer investors access to RI strategies and innovative ESG products that pair market returns with tangible societal impact. Unlike many large asset managers that maintain a small subset of ESG products, Calvert Investments exclusively focuses on providing a differentiated, proprietary approach to responsible investing. Calvert’s approach merges a focus on market returns with an industry-leading ESG research system that spans the global capital markets and an emphasis on shareholder engagement with a sustained commitment to driving direct impact.
The Calvert Research System is the proprietary platform that is built to capture multiple sources of ESG data and evaluate information through the perspectives of analysts’ deep sustainability expertise. It applies a streamlined investment decision-making process that integrates both financial and sustainability insights and compares companies across these metrics.
About Calvert Investments
A global leader in responsible investing, Calvert Investments is a diversified investment management firm that provides mutual funds and separate accounts to institutional investors, retirement plans, financial intermediaries and their clients. Calvert Investments’ exclusively focuses on providing a differentiated, proprietary approach to responsible investing. Calvert’s approach merges a focus on market returns with an industry-leading ESG research system that spans the global capital markets, an emphasis on shareholder engagement and a sustained commitment to driving direct impact.
About George Serafeim
George Serafeim is the Jakurski Family Associate Professor of Business Administration at Harvard Business School. He has taught courses in the MBA and doctoral programs, chaired Executive Education programs, authored more than 100 articles and business cases, and presented his research in more than 100 conferences and seminars. He has spoken at major events in over 60 countries around the world and is one of the most popular business authors, according to rankings of the Social Science Research Network.