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November 07, 2012

Calvert Launches Emerging Markets Fund
    by Robert Kropp

The Calvert Emerging Markets Equity Fund uses the firm's environmental, social, and corporate governance criteria in determining the components of a portfolio investing in the fastest-growing segment of the global economy.

SocialFunds.com -- Recent reports from EIRIS and the Emerging Markets Disclosure Project (EMDP) of US SIF: The Forum for Sustainable and Responsible Investment indicate that investor confidence in emerging markets is growing. In 2012, for the first time, emerging markets made up more than half of the global gross domestic product (GDP). Combined with the persistent low returns and volatility prevailing in developed markets since the financial crisis, emerging markets have become an increasingly attractive investment strategy.

Yet as EIRIS pointed out, the assets allocated to emerging markets investment remain a relatively low percentage of investors' portfolios. But a new equity fund launched by
Calvert Investments last week should help sustainable investors increase their exposure while accounting for environmental, social, and corporate governance (ESG) factors.

The
Calvert Emerging Markets Equity Fund (CVMAX) invests in the equity securities of companies located in emerging market countries, using Calvert's sustainability and corporate responsibility criteria. The benchmark index for the Fund is the MSCI Emerging Markets Index, and assets under management at present total just over $16 million.

Hermes Investment Management, the UK-based subadvisor for the Fund, "seeks to identify companies located in emerging market countries that are trading at a discount to what the Subadvisor believes to be their intrinsic value but have the potential to increase their book value," according to the Fund's pros pectus.

Additionally, "The Fund seeks to invest in emerging market companies whose products/services or industrial/ business practices contribute towards addressing one or more global sustainability challenges in their local and/or international markets, including development, poverty and health; environment and climate change; and rights and governance."

Calvert is one of the pioneers of sustainable investment and a leading member of the EMDP initiative, and its well-developed engagement strategy should help address the lack of corporate ESG disclosure that remains a key challenge to investing in emerging markets. "In virtually every industry and sector, companies must address sustainability challenges ranging from climate and water, to development and poverty, to rights and governance," Senior Vice President Bennett Freeman said. "Their willingness to do so can both diminish a range of material risks, but also enhance their ability to grow new products and services which offer sustainability solutions to new customers and markets."

According to Gary Greenberg of Hermes, volatility caused by structural changes in the global economy "means that, at times, quality companies in countries with conditions that are supportive to growth will trade at very attractive valuations, allowing us to profit from temporary bouts of adverse market sentiment."

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