The Calamos Global Sustainable Equities Fund (CGSIX) seeks to achieve long-term above-average returns with low volatility while investing in companies with substantial environmental, social, and governance (ESG) characteristics. The fund’s key selling points are attributed to its integrated proprietary ESG selection process and its heavily experienced fund managers, Jim Madden and Anthony Tursich, who developed and co-managed one of the first global ESG public equity mutual funds in 1999. Although CGSIX was only launched in December 2021, the fund was already awarded the ‘Best Overall Fund’ in the 2022 United States Refinitiv Lipper Fund Awards. However, with its poor, heavily skewed portfolio and vague selection process, the fund may not be as sustainable as it claims. Nevertheless, as a fairly new sustainable equity fund, I can only give CGSIX the benefit of the doubt and truly hope that a genuine commitment to sustainability will be seen in the fund’s later years.
Top 10 Holdings (as of 31/03//22) – Name, Weighting in Portfolio, Country
(1) Apple, Inc., 2% US (2) Microsoft Corp., 1.7%, US (3) Alphabet, Inc, 1.7%, US (4) Ecolab, Inc. 0.8%, US (5) Ball Corp, 0.8%, US (6) Deere & Company, 0.8%, US (7) Cisco Systems, Inc, 0.8%, US (8) United Parcel Service, Inc, 0.8%, US (9) Siemens, AG, 0.8%, Germany (10) Thermo Fisher Scientific, Inc. 0.8%, US
There are some promising prospects in CGSIX’s top 10 most weighted holdings. For instance, having Microsoft and Alphabet, who are also sustainability leaders in their own industries, placing 2nd and 3rd respectively in this list, suggests that some level of ESG consideration was taken. However, it only goes downhill from here. Addressing the big elephant in the room – a fund that seeks to invest in ‘companies with strong ESG characteristics’ can’t get any worse by acquiring Apple as its largest stock holding. Not only is Apple known to have poor labour regulations/treatments, but its manufacturing process is also incredibly energy-intensive and emits an unimaginable amount of greenhouse gas emissions (check out VoizDao’s review on Apple’s iPhone 13 pro max for more information) - having Apple as the largest stock holding in CGSIX’s portfolio is beyond unsustainable. Moving down the list, I am also uncomfortable with a shipping & receiving company (UPS) being part of the top 10 holdings, given the significant amount of greenhouse gas emissions from transportation alone. I ventured into exploring CGSIX’s entire portfolio in hopes of finding better company investment options but was only disappointed to find more unsustainable companies, such as Nike, which is notorious for its labour sweatshops, hidden underneath the top 10 list.
Perhaps the biggest let-down was by investigating the sector weighting breakdown of the portfolio, where the energy sector comprised 0% of the entire portfolio. In addition to this, I question the need for a relatively larger financial sector weight, placing 3rd of 7.1% in the sector weightings. Such comparison between sector weightings in the CGSIX highlights the fund’s genuine commitment to sustainability – which I would argue barely exists. While CGSIX’s quarterly commentary did indeed acknowledge its lack of representation within the energy sector, more action is needed.
From the analysis above, I would argue that the Calamos Global Sustainable Equity Fund’s portfolio has not lived up to my expectations, especially with a highly experienced team of fund managers in ESG investing (which will be discussed below). Instead, more commitment should be placed upon investing in companies that are (1) genuinely sustainable and (2) genuinely global. In addition to the unambitious portfolio, it may also be vital to note that the fund’s performance has also been underwhelming – returns for the first quarter of 2022 underperformed by -4% compared to the MSCI ACWI index. However, as a relatively new fund that was born in a time of global economic and political uncertainty (or at least, we are on the way to one!), I can only hope for CGSIX to further improve its investment choices in the coming terms. Therefore, at this point in time, a planet rating of 0.5 for what it’s made of seems justifiable.
Under normal market conditions, CGSIX seeks to invest at least 80% of its net assets in common stocks of companies in both developed and emerging markets that achieve above-average positive growth and the ESG criteria of Calamos Advisor. In order to do so, CGSIX follows a few procedures. Specific industries deemed environmentally risky and produce unattractive social outcomes are screened out, including sectors of Agricultural Biotechnology, Alcohol, Animal Testing, Fossil Fuels, Gambling, Metals & Mining, Nuclear Energy, Tobacco and Weapons. Companies that derive revenue or profit that exceeds 5% in any of the particular industries will also generally be disqualified from investment consideration. While I highly praise such an act of decision, I believe that it would be even better if there were an immediate exclusion for companies that are simply associated with such unsustainable industries as this would highly influence corporations to reduce their affiliation and reliance on them.
Overall, CGSIX’s portfolio screening process directly follows Calamos’ principles for investment which will exclude companies that are unsuccessful in (1) ecological limits, (2) environmental stewardship, (3) environment strategy, (4) human rights and equality, (5) societal impacts, and (6) corporate governance. It is important to note that Calamos Advisors does not rely on the ESG ratings of any third-party research provider and instead utilises its own ESG ranking system that examines both the qualitative and quantitative factors when selecting companies for its portfolio. For its proprietary ESG rating system, data sources may include, but are not limited to, corporate disclosures, third-party research providers (e.g., MSCI ACWI index, Bloomberg), NGOs, academic publications, news services, and memberships.
While creating its own ESG ranking system is admirable (and very innovative), I feel that information on its selection process for its company investment portfolio is still incredibly vague. Other than knowing that certain industries are excluded and that companies are selected based on Calamos’ OWN ranking system, I have not understood anything else from its selection process. While I would like to give the benefit of the doubt to CGSIX and have complete faith in its inclusion/exclusion operation, the results of the portfolio have already disappointed me, whereby its principles in investment have not matched the companies it has chosen to invest in. Therefore, I find it substantially difficult to trust their so-called ‘proprietary ESG ranking system’, especially due to the lack of available information and transparency of more data. Thus, I give this section of CGSIX a planet rating of 0.5.
The fund has two co-managers – Jim Madden and Anthony Tursich, who both have over 24 years of experience in ESG investment, global equity strategy, and portfolio managing. Such immense experience may enable them to further identify high-quality companies in growth and sustainability potential according to the CGSIX selection process (although this is clearly not the case as of right now). What sets the CGSIX fund’s co-manager apart from other fund managers is that they had previously worked together since the 1990s, where they established, launched, and managed one of the first global ESG public equity mutual funds in 1999 together. As one of the pioneering duos in the sustainable investment industry, not only did Jim and Anthony help set the industry standards for ESG-focused products, but such a rare, shared work experience is challenging to beat! In addition to Jim and Anthony as CGSIX’s co-managers, there is also a sustainable equity research team where only the head of the team was disclosed – Beth Williamson also possesses a high level of experience of 18 years in ESG investing.
Perhaps it is a pure coincidence that the gender demographics in the CGSIX fund team and in Calamos Investments are the same, where a men-to-women ratio of 2:1 was found– a statistic that must be significantly improved upon in the investment firm in general. A better racial diversity within the firm should also be worked towards, as White employees (62%) have a significant presence over Asian (12%) and Black or African American (11%) employees.
It is also perhaps worth noting that Calamos was previously involved in individual and class-action lawsuits with its ex-employees over the violation of multiple sections of the Investment Advisers Act of 1940 – where an issue of transparency and dishonesty was claimed by the plaintiff. However, the results for both lawsuits are still pending, and thus, my speculations should only remain as assumptions. Taking everything into consideration (except for the lawsuits), I believe that a planet rating of 1.5 is adequate.