Sustainability, including consideration of the impact of environmental, social and governance (ESG) factors, is increasingly important to investors.
As expressed in the Calamos ESG Charter, “the Calamos approach to sustainable investing, and in particular the impact of ESG factors is incorporated in our fundamental investment process…ESG analysis, as part of the greater mosaic of inputs to our investment decision-making, complements our ultimate objective of delivering superior long-term investment risk-adjusted returns to advisory clients. Among other benefits, we believe incorporating ESG factor considerations into our greater mosaic will be particularly useful in helping monitor downside risks in the companies in which we invest.”
And, for a specific discussion of how ESG has been formally integrated into the Calamos Evolving Growth Fund (CNWIX) process, see this post from earlier this year.
As of July 31, 2020 four Calamos funds have earned High or Above Average Morningstar Sustainability Ratings in the ESG Consideration category as “otherwise conventional funds that consider ESG a part of their process but have not made sustainability a central focus,” as designated by five and four globes, respectively. They are:
Morningstar Sustainability RatingTM
Out of 1,711 Global Emerging Markets Equity funds as of 7/31/20. Based on 86% of AUM. Data is based on long positions only.
Morningstar Sustainability RatingTM
Out of 6,700 Global Equity Large Cap funds as of 7/31/20. Based on 96% of AUM. Data is based on long positions only.
Morningstar Sustainability RatingTM
Out of 487 Long/Short Equity funds as of 7/31/20. Based on 98% of AUM. Data is based on long positions only.
Morningstar Sustainability RatingTM
Out of 1,463 U.S. Equity Large Cap Value funds as of 7/31/20. Based on 99% of AUM. Data is based on long positions only.
In a report published February of this year, Morningstar reported that “we seemed to have reached a tipping point…More people and more investors are realizing that global warming is a crisis bearing down on us, with significant societal and investment risks. And more people and more investors are realizing that corporate short-termism and focus on shareholder value has not created enough shared value and that a shift toward long-termism focused on creating value for all stakeholders will create more value for both shareholders and society over the long run.”
In addition to counting more than 300 funds in what it considers the sustainable universe (consisting of three types: ESG Focus, Impact/Thematic, and Sustainable Sector), the rating service reported on a significant increase—to 564—in the number of conventional funds that now say they “consider” ESG factors. Morningstar defines the ESG Consideration category as “otherwise conventional funds that consider ESG a part of their process but have not made sustainability a central focus.”
To help investors in the portfolio research and selection process, since 2016 Morningstar has assigned Sustainability Ratings to both Sustainable and ESG Consideration funds.
Even through the pandemic, according to a Morningstar note in August, investor interest in sustainability has continued.
“Some believe that interest in environmental, social, and governance investing is fickle and will dwindle when the going gets rough.”
To the contrary, the rating service reported, “investors paid attention to ESG information when making new investment choices, and we find that even during a pandemic and substantial market volatility, ESG information matters to many investors. We also find that ESG information broadens many investors’ perspective and helps them avoid a myopic focus on recent returns.”
The continued embrace of ESG is prompting a reconsideration of some previously held views, according to a July 28 FUSE Research Network report. While “historically, the viewpoint has been that sustainability is a positive attribute as long as it doesn’t impede performance,” in fact the report found a link between positive fund flows, strong performance and sustainability.
The results, FUSE concluded, “reinforce the idea that sustainability and performance are not independent factors, and suggest that the recent trend of improved flows to portfolios reflecting above-average sustainability is being driven by investors seeking to satisfy both criteria.”
Investment professionals, for more information about Calamos and ESG, please contact your Calamos Investment Consultant at 888-571-2567 or firstname.lastname@example.org.
Before investing carefully consider the fund’s investment objectives, risks, charges and expenses. Please see the prospectus and summary prospectus containing this and other information which can be obtained by calling 1-800-582-6959. Read it carefully before investing.
Opinions and estimates offered constitute our judgment and are subject to change without notice, as are statements of financial market trends, which are based on current market conditions. We believe the information provided here is reliable, but do not warrant its accuracy or completeness. This material is not intended as an offer or solicitation for the purchase or sale of any financial instrument. The views and strategies described may not be suitable for all investors. Opinions are subject to change due to changes in the market, economic conditions or changes in the legal and/or regulatory environment and may not necessarily come to pass. This information is provided for informational purposes only and should not be considered tax, legal, or investment advice. References to specific securities, asset classes and financial markets are for illustrative purposes only and are not intended to be, and should not be interpreted as, recommendations.
Historical Sustainability Score as of July 31, 2020 Sustainability Rating as of July 31, 2020. Sustainalytics provides company-level analysis used in the calculation of Morningstar’s Historical Sustainability Score.
©2020 Morningstar. All rights reserved. The information contained herein: (1) is proprietary to Morningstar and/or its content providers; (2) may not be copied or distributed; and (3) is not warranted to be accurate, complete, or timely. Neither Morningstar nor its content providers are responsible for any damages or losses arising from any use of this information.
The Morningstar® Sustainability Rating is intended to measure how well the issuing companies of the securities within a fund’s portfolio are managing their environmental, social, and governance (“ESG”) risks and opportunities relative to the fund’s Morningstar category peers. The Morningstar Sustainability Rating calculation is a three step process. First, each fund with at least 67% of assets covered by a company level ESG score from Sustainalytics receives a Morningstar® Portfolio Sustainability Score™. The Morningstar Portfolio Sustainability Score is an asset weighted average of normalized company level ESG scores with deductions made for controversial incidents by the issuing companies, such as environmental accidents, fraud, or discriminatory behavior. Second, the Historical Sustainability Score is an exponential weighted moving average of the Portfolio Sustainability Scores over the past 12 months. The process rescales the current Portfolio Sustainability Score to reflect the consistency of the scores. The Morningstar Sustainability Rating is then assigned to all scored funds within Morningstar Categories in which at least thirty (30) funds receive a Portfolio Sustainability Score and is determined by each fund’s rank within the following distribution: High (highest 10%); Above Average (next 22.5%); Average (next 35%); Below Average (next 22.5%); Low (lowest 10%). The Morningstar Sustainability Rating is depicted by globe icons where High equals 5 globes and Low equals 1 globe. Past performance is no guarantee of future results.
The principal risks of investing in the Calamos Evolving World Growth Fund include: equity securities risk consisting of market prices declining in general, growth stock risk consisting of potential increased volatility due to securities trading at higher multiples, foreign securities risk, emerging markets risk, convertible securities risk consisting of the potential for a decline in value during periods of rising interest rates and the risk of the borrower to miss payments, and portfolio selection risk. As a result of political or economic instability in foreign countries, there can be special risks associated with investing in foreign securities, including fluctuations in currency exchange rates, increased price volatility and difficulty obtaining information. In addition, emerging markets may present additional risk due to potential for greater economic and political instability in less developed countries.
The principal risks of investing in the Calamos International Growth Fund include: equity securities risk consisting of market prices declining in general, growth stock risk consisting of potential increased volatility due to securities trading at higher multiples, foreign securities risk, emerging markets risk, small and mid-sized company risk and portfolio selection risk. As a result of political or economic instability in foreign countries, there can be special risks associated with investing in foreign securities, including fluctuations in currency exchange rates, increased price volatility and difficulty obtaining information. In addition, emerging markets may present additional risk due to potential for greater economic and political instability in less developed countries.
The principal risks of investing the Calamos Hedged Equity Fund include: covered call writing risk, options risk (see definition below), equity securities risk, correlation risk, mid-sized company risk, interest rate risk, credit risk, liquidity risk, portfolio turnover risk, portfolio selection risk, foreign securities risk, American depository receipts, and REITs risks.
The principal risks of investing in the Calamos Dividend Growth Fund include: the risk of declining equity values; losses from MLPs related to lack of portfolio diversification, changes in tax laws, lack of liquidity, declining equity values, and conflicts over control rights; incorrect selection or judgments on portfolio holdings by the investment advisor; increased transaction costs because of frequent turnover; losses from currency fluctuations; lack of liquidity or correlation to underlying securities in the options market; and potential illiquidity of securities purchased privately under Rule 144A.