Authentic ESG: CGSIX’s Madden Talks Sustainable Equities Investing with Animal Spirits Podcast

Authentic ESG: CGSIX's Madden Talks Sustainable Equities Investing with Animal Spirits Podcast

How to distinguish the real deals from the wannabes-that's a recurring theme of this week's Animal Spirits podcast featuring Jim Madden, Co-Portfolio Manager of Calamos Global Sustainable Equities Fund (CGSIX).

Co-hosts Michael Batnick and Ben Carlson engage Madden in a conversation about a)companies that are seeking to pass as sustainable and b)"watered down" ESG funds.

At a time of so much growth in the space, Madden acknowledges there's a tendency to "follow the money." Decades of experience-including trailblazing work doing business as Portfolio 21 starting in 1999-is one difference offered by Madden, Co-Portfolio Manager Tony Tursich and the rest of the Calamos Sustainable Equities team that joined Calamos in August 2021 (read more).

Corporate awareness of ESG has been heightened, Madden says, because many companies understand that paying attention to environmental risks and opportunities "make them a better business." At the same time, he says, "you get the companies who just want to put out a CSR [Corporate Social Responsibility] report with some fuzzy kittens on it and then claim that they saved 12 gallons of water."

Commenting on the portfolios, one host says, "This is what you want to see if you're investing in portfolio…It's not a duplication of the S&P 500." For example, he notes, Berkshire Hathaway-"which is in the top 10 pretty much anywhere"-is "conspicuously absent."

Laughing, Madden replies, "I love [Berkshire Hathaway CEO] Warren Buffett. I had lunch with him and tried to talk him into ESG a number of years ago…But what are the businesses that he owns? We just look at those businesses, and very few of them are businesses that score highly in our way of thinking. So, to be true to what we do, we couldn't invest there."

Asked how much of the team's screening is qualitative versus quantitative, Madden says, "Our advantage is, hey, we've been looking at documents from companies and NGOs and third parties for 20 years so it's the filtering now that is the key. It's being able to determine what is material to a company.

"It's the same thing on the fundamental side," he continues. "If you run an ROIC [Return on Invested Capital] screen, can you get the same portfolio? Yes, but if you could do that, everyone would do that.

"It's the same thing on the other side of the ball. We're very happy that none of the rating agencies agree-because they shouldn't. You should have to go in there and decide for yourself," says Madden.

"Authentic" experience was an explicit requirement in Calamos' search for an ESG capability, according to Madden. "If we're going to get in the space, we want authenticity," was the thinking, Madden said. "[Calamos said] we want you to be able to back it up by doing what you say you do and producing returns that you've produced in the past, hopefully."

The 27-minute long interview closes with the podcaster's comment, "It's nice to talk to someone who we think is doing ESG in a real way."

The podcast can be found on the major podcast platforms, including Apple Podcasts, Android, Spotify and Stitcher.

Investment professionals, for more about the team or CGSIX, contact your Calamos Investment Consultant at 888-571-2567 or [email protected].