Morningstar - Q2 2023 - 38

Spotlight: Bonds
EXHIBIT 2
The Largest Sustainable-Bond Funds Big funds are better able to counter the current premium charged in ESG bonds.
Name
TIAA-CREF Core Impact Bond Instl TSBIX
CCM Community Impact Bond CRA CRAIX
Invesco Floating Rate ESG A AFRAX
Calvert Bond A CSIBX
iShares ESG U.S. Aggregate Bond ETF EAGG
Calvert Short Duration Income A CSDAX
Pimco Total Return ESG Institutional PTSAX
iShares ESG USD Corporate Bond ETF SUSC
iShares ESG 1-5 Year USD Corp Bd ETF SUSB
Calvert Ultra-Short Duration Income A CULAX
Impax Core Bond Fund Institutional PXBIX
DFA Global Sustainability Fixed Inc Ins DGSFX
Calvert Green Bond I CGBIX
Praxis Impact Bond A MIIAX
Calvert Income A CFICX
Morningstar Category
Intermediate Core Bond
Intermediate Core Bond
Bank Loan
Intermediate Core-Plus Bond
Intermediate Core Bond
Short-Term Bond
Intermediate Core-Plus Bond
Corporate Bond
Short-Term Bond
Ultrashort Bond
Intermediate Core Bond
Global Bond-USD Hedged
Intermediate Core-Plus Bond
Access Capital Community Investment I ACCSX Intermediate Government
Intermediate Core Bond
Impax High Yield Bond Investor PAXHX
Corporate Bond
High Yield Bond
Nationwide BNY Mellon Cr Pl Bd ESGR6 NWCIX Intermediate Core-Plus Bond
iShares ESG Adv Ttl USD Bd Mrkt ETF EUSB
AB Impact Municipal Income ABIMX
Touchstone Impact Bond Y TCPYX
Source: Morningstar Direct. Data as of March 6, 2023.
Intermediate Core-Plus Bond
Muni National Long
Intermediate Core Bond
Fund Size
($Bil)
6.00
3.20
3.03
2.57
2.39
2.23
2.08
1.14
0.90
0.88
0.80
0.76
0.75
0.70
0.70
0.68
0.60
0.58
0.57
0.52
0.51
YTD
5-Yr
Return (%) Return (%)
1.08
0.07
2.97
1.47
0.42
1.26
0.92
1.09
0.33
1.18
0.49
0.77
0.86
0.28
0.49
2.44
2.36
1.03
0.50
-0.33
2.79
0.98
1.59
0.22
1.04
1.40
1.25
0.38
0.49
2022
Return (%)
Inception
Date
Average
Credit Quality
-14.01 9/21/12 BBB
-10.20 8/30/99 A
5/1/97 B
-2.49
-12.45 8/24/87 BBB
- -13.17 10/18/18 AAA
-5.01 1/31/02 BBB
5/1/91 A
-15.58
-16.11
-5.84
7/11/17 BBB
7/11/17 BBB
-0.27 10/31/06 A
-12.93 12/16/16 -
-0.39
0.06
1.55
2.01
0.97
0.46 -
0.96
0.38
2.19
0.25
- -15.61 11/6/18 A
-12.78 10/31/13 BBB
-11.83 6/23/98 AAA
-13.12 5/12/99 A
-15.57 10/12/82 BB
-12.89 10/8/99 -
-13.16 7/17/92 BBB
-12.72 6/23/20 A
-12.32 9/12/17 BBB
-13.07 11/15/91 AA
Morningstar
Rating Overall
QQQQ
QQ
QQQQ
QQQQ
QQQ
QQQQ
QQ
QQQ
QQQ
QQQ
QQQ
QQ
QQQ
QQQ
QQ
QQQQ
QQ
QQQQ
-
QQQQQ
QQQ
Current
Yield (%)
3.55
3.11
7.16
3.71
3.01
3.91
3.48
4.30
3.33
3.02
3.36
2.87
3.02
3.61
3.24
4.98
6.14
3.94
2.96
4.63
3.78
It won't vanish any time soon. " Obviously,
there might be a greenium until they're all the way
to 50% " of the bond market, says Adam
Bernstein, ESG analyst at Gitterman Wealth
Management, which has a substantial sustainableinvestment
practice.
Such premiums might create a big problem for
price-conscious individual investors, but
they create an opportunity for institutions that can
use their weight to lower prices. For example,
Gitterman likes to invest in the larger managers-
the TIAA-CREFs, Pimcos, and Calverts of the
world-which " can get better pricing than anyone
else because of the size of the trades, "
Bernstein says.
38
Morningstar Q2 2023
Indeed, Calvert Bond CSIBX is the fourth-largest
sustainable-bond fund and drew more than
$400 million of investment in 2022 ( EXHIBIT 2 ) . It
performed well because its portfolio had a shorter
duration, meaning it was less sensitive to
interest rates. About one third of the fund also
had clear use of proceeds for its bonds.
Screening Approach
Many sustainable-bond funds that incorporate
ESG analysis take a screening approach:
They eliminate companies with low ESG ratings.
Praxis Impact Bond MIIAX, for example,
avoids companies that focus on weapons and
military contracting and looks for issuers
that practice environmental stewardship, respect
workers' rights, and support their communities.
" We screen out the worst of the worst, overweight
some of the ones with great ESG ratings, "
Bailey says.
For Smith of Sage Advisory Services, finding
issuers with good governance is critical.
" Through good governance, you can assess how
well diversified is your board, how well you
take care of workforce in terms of safety records,
and how are managements compensated
in terms of building sustainable companies in
terms of treating all stakeholders equally, "
Smith says. " Without good G, you'll never have
good E or good S. "
https://www.morningstar.com/funds/xnas/csibx/quote https://www.morningstar.com/funds/xnas/miiax/quote
Morningstar - Q2 2023

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