ESG strategies so far withstanding coronavirus assault – Calvert CEO

ESG strategies are holding up in the current market and global health crisis, said John Streur, president and CEO of Calvert Research and Management, on a press call Tuesday.

"Performance has held up quite well," Mr. Streur said, noting that Calvert's U.S. index fund is outperforming its benchmark by 110 to 120 basis points. The two main drivers of that are a "very limited exposure to the entire fossil-fuel chain" and good ESG metrics that are really about risk assessment. "It is clear that companies that have been thoughtful about managing social and environmental risks were prepared to deal with this risk," he said.

Calvert Research and Management, with $22 billion in assets under management, is part of Eaton Vance.

Part of Calvert's ESG evaluation process is looking at how companies manage relationships with workers and their community, and in that regard the response to the virus is similar to climate change, Mr. Streur said.

"Experts have been warning of this type of situation for several years," he said. "We think over the coming months investors will start to place more emphasis on those types of risks."

"We know these actions will inform a company's reputation for years to come. There are clear differences between how specific companies are dealing with this. Larger, more well-capitalized companies are coming through this better," he added.

Asked if the current crisis will lead investors to demand more defensive corporate postures even in good times, Mr. Streur said investors are already looking at companies when it comes to governance, compensation and stock buybacks. "It is also an ESG question in terms of how a company is governed itself. Is the company managing itself in a manner that contemplates essentially a rainy day fund? In the long term, there will be greater value placed on companies with stronger balance sheets," he said.

The crisis' impact on lower paid workers will also change how companies approach executive compensation and other manpower decisions such as automation. "This is going to have a big, big impact on executive compensation structures (and) on the future of work."

"The next few weeks are really going to tell the story of how companies navigate this crisis," Mr. Streur said. "This crisis really makes the point that non-financial factors can really have an impact on long-term valuation. We are going to be thinking as a society what other risks are sitting out there that could really impair the value of the assets."

Mr. Streur also predicted more robust research by asset owners and managers. "If anybody was lagging in terms of getting ESG research into their portfolios, this is a massive wake-up call," he said.