Morningstar - Q2 2020 - 80

Investors

Calvert Equity CEYIX

relevant," Hudepohl says, "and there's better
information as well."

Growth of $10K

Garrison argues that ESG has evolved beyond
$18K

Morningstar US
Large Growth

14.75
14.64

16
14
12

CEYIX

10
04/2017

04/2018

04/2019

Morningstar Category

Large Growth

Morningstar Rating

QQQQQ
0.74

.

0 / 1/2020.

corporate reporting. Garrison holds the
Fundamentals of Sustainability Accounting
Credential from SASB, as do Walton and Miller.
That leaves Hudepohl as the only member
ESG credential. But
that doesn't mean he lacks conviction in ESG
.
days. "ESG is still evolving. It's still very early
on," he says. "But where some people think ESG is
just investing to feel good, we are investing
to create performance."
One of the ways his team believes that
ESG research helps is when investors are thinking
about risks. "Every investor is looking for
ways to help identify risks and opportunities
in their portfolio," comanager Walton
says. "ESG just gives us another lens to help
us do exactly that."
Still, some investors remain skeptical about
the value of ESG analysis to investment success.
The Atlanta Capital team acknowledges this
but thinks skeptics are missing key developments
in the industry. "ESG is becoming more

80

portfolio that, in aggregate, is one of the
top-scoring portfolios [from an ESG standpoint]."

Morningstar Q2 2020

such as tobacco, weapons, gaming, or nuclear
power. "ESG started as an exclusionary
approach," he says. "Now, it has evolved to an
.
is top of mind rather than just eliminating
'sin' stocks."
To be sure, ESG analysis shapes Calvert Equity's
portfolio beyond that initial screen for eligible
companies. The team says that Calvert's concerns
with data security and privacy kept it out
of Atlanta-based Equifax EFX before the creditreporting agency announced a disastrous
data breach in September 2017. The portfolio also
backed out of Facebook FB in early 2018,
though not in time to avoid taking a hit, after
the Cambridge Analytica scandal dented
Facebook's ESG scores.
ESG research also played a role in getting two
basic materials stocks into the portfolio:
Linde LIN and Ecolab ECL.
basic materials stocks might not seem the most
ESG-friendly. But the Atlanta Capital team
considers Linde and Ecolab among the most
sustainable companies in its portfolio.
"Linde's entire business," Garrison says, "is
improving the environmental performance of
their clients," including harnessing atmospheric
.
adds that some of Ecolab's key products help
businesses reduce water usage-an important
goal for many ESG investors.
Getting Noticed

Hudepohl is careful to remind clients and
potential investors that Calvert Equity's portfolio
balances ESG considerations with quality
and growth criteria. "You're not going to agree
with every name in our portfolio from an
ESG perspective," Hudepohl says. "I think we're
going to get you one of the most sustainable
portfolios out there, but you can go through every
portfolio and say, 'Well, I disagree with
that' because you have an issue that's near and
dear to your heart. We're trying to build a

role in setting expectations. "No company
is perfect," he says, "and it's a challenge for the
.
By Morningstar's measure, the overall portfolio
scores well from an ESG perspective. Calvert
Equity's January portfolio earned a 5-globe
Morningstar Sustainability Rating, indicating that
it ranked in the top decile of large-growth
funds. The sustainability rating is an assetweighted roll-up of Sustainalytics' company-level
ESG
material ESG risks as those that could have a
managed appropriately.
In 2019, Morningstar Research Services added
the fund to Morningstar Prospects, a list
of funds not under analyst coverage but worth
watching. (While the fund doesn't have a
Morningstar Analyst Rating, its institutional and
retirement share classes receive Morningstar
Quantitative Ratings of Bronze; the pricier
A and C shares are rated Neutral.) Investors are
taking notice as Hudepohl's record nears the
$900
.
million in the 12 months through February.
Perhaps the ESG label is getting investors'
attention, but Hudepohl thinks it's more than that.
He insists that ESG
a quality-growth orientation. "The way ESG is
evolving," he says, "I don't think you can ignore it
anymore. As a quality manager, you're
going to have to pay a lot of attention to a lot of
.
people care about all these issues-whether it's
investors, employees, or customers."
If Hudepohl's got the right read on the
situation, he and his team might be in a good
position-just as his winning Olympic
teams were. As he succinctly puts it, "We have
an early advantage." K
Tony Thomas is a senior analyst with Morningstar
Research Services.



Morningstar - Q2 2020

Table of Contents for the Digital Edition of Morningstar - Q2 2020

Contents
Morningstar - Q2 2020 - CT1
Morningstar - Q2 2020 - CT2
Morningstar - Q2 2020 - Cover1
Morningstar - Q2 2020 - Cover2
Morningstar - Q2 2020 - 1
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Morningstar - Q2 2020 - Contents
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