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    1. How do geopolitics highlight the need for more sustainable innovation?

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    How do geopolitics highlight the need for more sustainable innovation?

    April 2022

     

    Although climate change is a key consideration in sustainable investing, sustainable investing is more broadly about finding companies that are durable in the long run and identifying risks that traditional company analysis may not capture. The war in Ukraine is first and foremost an immense tragedy, but it also exposes how seemingly unrelated geopolitical risks and climate challenges intersect, and how companies can innovate to reduce the economic impacts to the consumer.

    1. Renewable energy – The EU imports 23% of its oil and 38% of its natural gas from Russia, which has stymied its ability to swiftly impose energy sanctions. However, the European Commission has proposed a two-thirds reduction in gas imports from Russia by the end of 2022. Achieving this will be a tall order in such a short amount of time. While increased usage of other fossil fuels may be unavoidable in the near term, ultimately we expect an accelerated shift to renewable energy in the years ahead. Investment in means to store and transport renewable energy and electrify the grid will be essential. The technologies exist, but it will take time and resources to scale up.

    2. Sustainable food and water – Russia and Ukraine together account for a significant portion of the world’s corn, sunflower oil, wheat, and fertiliser production. The war has caused significant disruption to global food supply and the U.N.’s food price index recently posted a record gain. Climate change compounds these disruptions, as it contributes to depressed crop yields and extreme weather that can damage food production. However, companies are developing solutions for more efficient agricultural techniques and technologies, better waste and water management, sustainable fertilisers, and improved supply chain practices that should strengthen the global food system over time.

    3. Electrified transportation – The war has also precipitated a spike in energy prices. Brent crude oil is up more than 30% YTD while petrol and diesel prices have hit record highs. This has many consumers reconsidering the merits of electric vehicles. The shift to electric vehicles (EVs) is still in its infancy, but automakers are expanding their line-ups to include EV options. IHS Markit estimates there will be 130 models available by 2026 from 43 brands globally. Investors should also consider opportunities in the broader EV ecosystem, including batteries, EV chargers, and electrification of the energy grid.

    The war unfolding in Ukraine is a political crisis, yet it also highlights economic vulnerabilities to many industries, and underscores the need to adapt in the face of both geopolitical and climate risks.

    Russia commodity production
    % of global production

    A chart showing contribution to global production of commodities.

    Source: Eurostat, J.P. Morgan Securities Research, World Bank, J.P. Morgan Asset Management. Data for 2020 or latest available. Past performance is not a reliable indicator of current and future results. Guide to the Markets -UK. Data as of 31 March 2022.

    NOT FOR RETAIL DISTRIBUTION: This communication has been prepared exclusively for institutional, wholesale, professional clients and qualified investors only, as defined by local laws and regulations.

     

    This is a promotional document and is intended to report solely on investment strategies and opportunities identified by J.P. Morgan Asset Management and as such the views contained herein are not to be taken as advice or a recommendation to buy or sell any investment or interest thereto. This document is confidential and intended only for the person or entity to which it has been provided. Reliance upon information in this material is at the sole discretion of the reader. The material was prepared without regard to specific objectives, financial situation or needs of any particular receiver. Any research in this document has been obtained and may have been acted upon by J.P. Morgan Asset Management for its own purpose. The results of such research are being made available as additional information and do not necessarily reflect the views of J.P. Morgan Asset Management. Any forecasts, figures, opinions, statements of financial market trends or investment techniques and strategies expressed are those of J.P. Morgan Asset Management, unless otherwise stated, as of the date of issuance. They are considered to be reliable at the time of production, but no warranty as to the accuracy and reliability or completeness in respect of any error or omission is accepted, and may be subject to change without reference or notification to you. Investment involves risks. Any investment decision should be based solely on the basis of any relevant offering documents such as the prospectus, annual report, semi-annual report, private placement or offering memorandum. For further information, any questions and for copies of the offering material you can contact your usual J.P. Morgan Asset Management representative. Both past performance and yield are not a reliable indicator of current and future results. There is no guarantee that any forecast will come to pass. 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Securities products, if presented in the U.S., are offered by J.P. Morgan Institutional Investments, Inc., member of FINRA. J.P. Morgan Asset Management is the brand for the asset management business of JPMorgan Chase & Co. and its affiliates worldwide. To the extent permitted by applicable law, we may record telephone calls and monitor electronic communications to comply with our legal and regulatory obligations and internal policies. Personal data will be collected, stored and processed by J.P. Morgan Asset Management in accordance with our privacy policies at https://am.jpmorgan.com/global/privacy. This communication is issued by the following entities: In the United States, by J.P. Morgan Investment Management Inc. or J.P. Morgan Alternative Asset Management, Inc., both regulated by the Securities and Exchange Commission; in Latin America, for intended recipients’ use only, by local J.P. Morgan entities, as the case may be; in Canada, for institutional clients’ use only, by JPMorgan Asset Management (Canada) Inc., which is a registered Portfolio Manager and Exempt Market Dealer in all Canadian provinces and territories except the Yukon and is also registered as an Investment Fund Manager in British Columbia, Ontario, Quebec and Newfoundland and Labrador. In the United Kingdom, by JPMorgan Asset Management (UK) Limited, which is authorized and regulated by the Financial Conduct Authority; in other European jurisdictions, by JPMorgan Asset Management (Europe) S.à r.l. In Asia Pacific (“APAC”), by the following issuing entities and in the respective jurisdictions in which they are primarily regulated: JPMorgan Asset Management (Asia Pacific) Limited, or JPMorgan Funds (Asia) Limited, or JPMorgan Asset Management Real Assets (Asia) Limited, each of which is regulated by the Securities and Futures Commission of Hong Kong; JPMorgan Asset Management (Singapore) Limited (Co. Reg. No. 197601586K), this advertisement or publication has not been reviewed by the Monetary Authority of Singapore; JPMorgan Asset Management (Taiwan) Limited; JPMorgan Asset Management (Japan) Limited, which is a member of the Investment Trusts Association, Japan, the Japan Investment Advisers Association, Type II Financial Instruments Firms Association and the Japan Securities Dealers Association and is regulated by the Financial Services Agency (registration number “Kanto Local Finance Bureau (Financial Instruments Firm) No. 330”); in Australia, to wholesale clients only as defined in section 761A and 761G of the Corporations Act 2001 (Commonwealth), by JPMorgan Asset Management (Australia) Limited (ABN 55143832080) (AFSL 376919). Copyright 2022 JPMorgan Chase & Co. All rights reserved.

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