How to distinguish the real deals from the wannabes—that’s a recurring theme of this week’s Animal Spirits podcast featuring Jim Madden, Co-Portfolio Manager of Calamos Global Sustainable Equities Fund (CGSIX).
Co-hosts Michael Batnick and Ben Carlson engage Madden in a conversation about a)companies that are seeking to pass as sustainable and b)“watered down” ESG funds.
At a time of so much growth in the space, Madden acknowledges there’s a tendency to “follow the money.” Decades of experience—including trailblazing work doing business as Portfolio 21 starting in 1999—is one difference offered by Madden, Co-Portfolio Manager Tony Tursich and the rest of the Calamos Sustainable Equities team that joined Calamos in August 2021 (read more).
Corporate awareness of ESG has been heightened, Madden says, because many companies understand that paying attention to environmental risks and opportunities “make them a better business.” At the same time, he says, “you get the companies who just want to put out a CSR [Corporate Social Responsibility] report with some fuzzy kittens on it and then claim that they saved 12 gallons of water.”
Commenting on the portfolios, one host says, “This is what you want to see if you're investing in portfolio…It's not a duplication of the S&P 500.” For example, he notes, Berkshire Hathaway—"which is in the top 10 pretty much anywhere”—is “conspicuously absent.”
Laughing, Madden replies, “I love [Berkshire Hathaway CEO] Warren Buffett. I had lunch with him and tried to talk him into ESG a number of years ago…But what are the businesses that he owns? We just look at those businesses, and very few of them are businesses that score highly in our way of thinking. So, to be true to what we do, we couldn't invest there.”
Asked how much of the team’s screening is qualitative versus quantitative, Madden says, “Our advantage is, hey, we’ve been looking at documents from companies and NGOs and third parties for 20 years so it’s the filtering now that is the key. It’s being able to determine what is material to a company.
“It’s the same thing on the fundamental side,” he continues. “If you run an ROIC [Return on Invested Capital] screen, can you get the same portfolio? Yes, but if you could do that, everyone would do that.
“It’s the same thing on the other side of the ball. We’re very happy that none of the rating agencies agree—because they shouldn’t. You should have to go in there and decide for yourself,” says Madden.
“Authentic” experience was an explicit requirement in Calamos’ search for an ESG capability, according to Madden. “If we’re going to get in the space, we want authenticity,” was the thinking, Madden said. “[Calamos said] we want you to be able to back it up by doing what you say you do and producing returns that you’ve produced in the past, hopefully.”
The 27-minute long interview closes with the podcaster’s comment, “It’s nice to talk to someone who we think is doing ESG in a real way.”
The podcast can be found on the major podcast platforms, including Apple Podcasts, Android, Spotify and Stitcher.
Investment professionals, for more about the team or CGSIX, contact your Calamos Investment Consultant at 888-571-2567 or firstname.lastname@example.org.
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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.
The principal risks of investing in the Calamos Global Sustainable Equities 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, value stock risk, foreign securities risk, forward foreign currency contract 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 Fund’s ESG policy could cause it to perform differently compared to similar funds that do not have such a policy. The application of the social and environmental standards of Calamos Advisors may affect the Fund’s exposure to certain issuers, industries, sectors, and factors that may impact the relative financial performance of the Fund—positively or negatively—depending on whether such investments are in or out of favor.