Boston - As it has for the past seven years, Barron's surveyed the annual returns of environmental, social and governance (ESG) funds in the Morningstar database to identify the top performers for 2022. Two Calvert funds — Calvert Small-Cap (#7) and Calvert Equity (#8) — placed among Barron's top 10 U.S. ESG equity funds.1
According to the article, "Here Are the Best-Performing ESG Funds," the top 10 U.S. equity mutual funds in Barron's survey outperformed the S&P 500 index by an average of more than 40 basis points (bps) in 2022. The S&P 500 returned -18.1% for the year versus an average loss of -13.8% for the ESG funds. While Calvert Small-Cap and Calvert Equity were among Barron's top 10 U.S. ESG fund leaders, Calvert Mid-Cap was no slouch, ranking #17 on Barron's "top 33" list.
Making the cut
Barron's chose its final list of the 33 best-performing ESG funds from the Morningstar database of actively managed, large, small and mid-cap U.S. stock funds with an explicit ESG or sustainable investing mandate. This was a departure from prior years, when Barron's criteria included large-cap U.S. funds with an above-average Morningstar sustainability rating, regardless of their investment mandate. For 2022, selected funds had to have at least $250 million in assets and more than one year of performance. Barron's then ranked the funds by one-year returns for the 12 months ended December 31, 2022.
Pulling rank: Calvert Small-Cap and Calvert Equity
Barron's noted that Calvert Small-Cap "stuck to its knitting" in a tough market. In the article, fund co-manager Griff Noble notes, "We buy great companies, don't overpay, and have a long-term perspective." He said stocks must adhere to Calvert's ESG principles, which favor companies that promote environmental sustainability, equitable societies and accountable governance.
One of the few growth funds to make the cut, Calvert Equity also turned in strong three- and five-year performance versus its large-cap growth peers, according to Barron's. Calvert Equity pursues a high-quality, growth-oriented sustainable investment approach. In the article, Calvert Equity manager Joe Hudepohl says the team "looks for quality, sustainable businesses with long-term growth drivers — elements that offer the highest return with the least amount of risk."
ESG here to stay
Without a doubt, 2022 was a tough year for ESG investors. Concerns about greenwashing, political backlash and increased regulatory scrutiny and oversight led to major industry shifts that we believe may ultimately strengthen ESG products and performance.
Despite the challenges, ESG appears entrenched in many investment models and valued by a wide spectrum of investors. According to a recent Morningstar survey, 80% of asset owners — including pensions, sovereign wealth funds and insurers — believe ESG is a financially material, critical investor input.2
Bottom line: It bears repeating that not all ESG is created equal. Calvert's focus is on financially material metrics — distinguished by the breadth and depth of our research and the industry-specific expertise of our teams. We believe this is why, in these exacting times for ESG, three Calvert funds are on Barron's list of 33 best-performing U.S. ESG funds for 2022.
Past performance is no guarantee of future results.
S&P 500® Index is an unmanaged index of large cap stocks commonly used as a measure of U.S. stock market performance. It is not possible to invest directly in an index.
To construct its list, Barron's began with actively managed, U.S. large-cap, small-cap and mid-cap stock mutual funds in Morningstar's universe with an explicit ESG or sustainable investing mandate. Barron's eliminated funds with less than $250 million in assets and then ranked them by one-year returns, per data provided by Morningstar Direct.
1. Barron's, "Here Are the Best-Performing ESG Funds" by Lauren Foster, January 27, 2023.
2. Morningstar Magazine, Q4 2022, Morningstar ESG Asset Owner Survey, commissioned by Morningstar Indexes and Morningstar Analytics, August 2022.