On a mission: Corporate boards must adopt more dynamic operating models




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By Anne Matusewicz, CAIAResponsible Investment Strategist, Calvert Research and Management and John FarleyResponsible Investment Strategist, Calvert Research and Management

Boston - Calvert believes that a company's governance emanates from its Board and properly operating Boards may influence corporate performance. Understanding a Company's Board - how it is structured, who board members are, the skillsets and experience that board members bring - is one of the most financially material factors that can impact a Company's performance.

In fall 2019, Calvert CEO John Streur was one of 31 commission members who contributed to the NACD Blue Ribbon Commission report, "Fit for the Future: An Urgent Imperative for Board Leadership." The report provides guidance on how boards can address pressing environmental, social, and governance (ESG) issues, including climate change, data privacy and cybersecurity, and the changing cultural demands of a more diverse and tech-savvy workforce.

In alignment with the findings from that report, Calvert believes companies with effective boards have potential to outperform over the long term. The Calvert Research System is designed to help us understand the financially material factors impacting company performance and assess the role and impacts that the boards of companies play in companies' success.

Assessing governance - Impactful analysis

The Calvert Research System employs a proprietary research framework that uses measurable data points, or Key Performance Indicators (KPI's) to assess the financially material ESG factors impacting companies. Our experience shows that the factors related to Board performance are some of the most impactful to a company, and we use these factors universally through all of Calvert's ESG scoring models.

Calvert's distinct approach

Calvert's bottom-up approach is uniquely suited to identifying companies with innovative and effective boards. Our process combines traditional data with proprietary ESG research, which includes ongoing engagement to better understand board positioning and efficacy. Because generally available data on governance is inconsistent and flawed in many respects, Calver t views it as an attractive source of alpha that we can capitalize on with our expertise and commitment. This includes ongoing development and refinement of KPIs that help us better compare companies based on both governance norms and best practices that are relevant to financial performance.

Through understanding the traits of an effective board we are able to tie those characteristics back to performance outcomes, informing what we consider are best practices. This work further helps us prioritize our engagement efforts — f rom the types of questions we ask to enhance our research to the issues we identify and cases we build for structured engagement. We encourage companies to focus on how they can improve on ESG issues we consider financially material, which we believe will increase shareholder value for our clients over the long term.

Bottom line: At Calvert, we believe that companies with innovative, diverse, dynamic and well performing boards can best position their companies to outperform over the long term. As investors we examine the makeup and operations of Boards from a number of perspectives that can influence our investment decisions and our engagement priorities.

The views expressed in these posts are those of the authors and are current only through the date stated. These views are subject to change at any time based upon market or other conditions, and Eaton Vance disclaims any responsibility to update such views. These views may not be relied upon as investment advice and, because investment decisions for Eaton Vance are based on many factors, may not be relied upon as an indication of trading intent on behalf of any Eaton Vance strategy. The discussion herein is general in nature and is provided for informational purposes only. There is no guarantee as to its accuracy or completeness.