Calvert Investments on Thursday launched the Calvert Green Bond Fund (CGAFX), packaging as a mutual fund a strategy the company has been managing as a separate account for more than two years.
The actively managed intermediate-term fund will invest across multiple bond subcategories, including development bonds, project loans and real estate projects that fit its mandate of providing solutions to climate change and other environmental sustainability issues.
“Corporate holdings in this fund will meet our definition of green if they derive at least half of their revenues from clean tech or an environmentally beneficial technology, product or service,” said Cathy Roy, Calvert's chief investment officer, who is co-managing the fund along with Vishal Khanduja and Mauricio Agudelo.
The Calvert fund follows the October 2011 launch of the State Street Global Advisors' High Quality Green Bond strategy, which invests primarily in green bonds issued by the World Bank and European Investment Bank.
The Calvert fund will be more diversified across the growing green bond universe, Ms. Roy said.
“This fund will have securities in every bond asset class,” she said.
As a bond fund, the strategy will be subject to both interest rate and credit risk. But as a strategy that focuses on green investments, it also is uniquely subject to certain government and political influences.
Calvert acknowledges that “some green investments may be dependent on government tax incentives and subsidies, and on political support for certain environmental technologies and companies.”
Ms. Roy said that the mutual fund will look exactly like the separately managed account on which it is modeled.
In the separate account's two-and-a-half-year history, it has outperformed the benchmark Barclays U.S. Aggregate Bond Index by two percentage points, according to Calvert data.
The green bond strategy still is relatively obscure, according to Morningstar Inc., which does not separate green bonds from the larger category of socially responsible investing funds.
Morningstar identifies 204 SRI funds, including 33 bond funds.
Total SRI mutual fund assets are calculated at $90.5 billion, of which $19.7 billion is in bond funds.
Ms. Roy added that the fund is designed to emphasize the environmental component of the environmental, social and governance aspect of traditional SRI strategies.
“There's a little higher standard that we're applying to the E with this fund, because this is the first diversified portfolio of green bonds,” she said. “It's not just about climate change, it's also about water and reforestation, and a much broader approach to the environment.”
Calvert has $13 billion under management, including $6 billion in fixed-income portfolios.
Wall Street is beginning to catch on to green investing
Advisers want to add young talent, but ask if they want to add millennials and most will begin to squirm. Hunter Hart, and Marc Schliefer of Equity Planning Inc. disspell some myths and misconceptions of hiring millennials.