Mid-cap stocks are often overlooked relative to their larger and smaller peers. That status is amplified when introducing environmental, social, and governance (ESG) and sustainability principles into the equation.
As such, there’s a scant number of exchange traded funds on the market today that check either the ESG or sustainability boxes. The Calvert US-Mid Cap Core Responsible Index ETF (CVMC) is one member of that sparsely populated group. CVMC, which follows the Calvert US Mid-Cap Core Responsible Index, is pertinent today because data suggest more mid-cap companies are prioritizing ESG and sustainability.
As is par for the course with mid-caps, the segment’s increasingly impressive ESG credentials aren’t getting much attention, but that doesn’t diminish the potential long-term potency of CVMC.
Mid-Cap/ESG Combination on the Rise
While many advisors and investors may not be associating mid-caps with ESG today, studies indicate perhaps they should. For example, recent research by the Governance & Accountability Institute (G&A) notes more mid-companies are making ESG strides.
“The research showed substantial increases in sustainability reporting for both large-cap and mid-cap U.S. public companies, with large-cap companies in the S&P 500 approaching 100% reporting and mid-cap companies closing the gap with 82% publishing reports in 2022,” according to G&A’s 2023 Sustainability Reporting in Focus.
Eighty-two percent of mid-cap companies in the Russell 1000 Index publishing ESG updates is relevant to investors considering ETFs such as CVMC for multiple reasons. First, that percentage is up from 68% in the 2021. Second, mid-caps represent the smallest percentage of companies in the Russell 1000 Index.
Overall, 90% of Russell 1000 member firms published at least one sustainability report last year, indicating that there’s room for CVMC holdings to continue improving on that front. With more companies, regardless of size, recognizing value in ESG and sustainability disclosures, more mid-cap corporations may get in on the act.
“We urge companies to embrace new ESG reporting standards and disclosure regulations as an opportunity to provide greater transparency and accountability to all stakeholders. This is a chance for companies to redefine their legacy and set precedents that will define the future of our society and our one and only planet Earth,” said G&A co-founder Louis Coppola in a statement.
CVMC, which turns a year old in January, allocates over 37% of its weight to industrial and technology stocks. The fund charges 0.15% per year, which is favorable among non-large-cap ESG strategies.
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