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  4. Investment outlook 2020: ESG

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Investment outlook
2020: ESG

An increased focus on sustainability

 

It seems likely that 2020 will see an increased focus on sustainability within the investment community. Savers are increasingly interested in how their money is being put to work, while numerous sustainability issues are high on policymakers’ agendas. The changes in regulations and policy that could ensue have the potential for far-reaching effects on asset valuations. Consider the following examples:

  • Artificial intelligence is increasingly driving sales revenues. A change in data privacy laws could significantly affect the use of personal information and the outlook for earnings in certain tech and consumer discretionary sectors. 

  • The political backdrop is expected to remain volatile in many countries. Companies will be under increasing political and social pressure to demonstrate responsible capitalism, which could have a significant impact on wage costs and profit margins.

  • Policies to reduce CO2 emissions are coming through thick and fast as governments attempt to meet the targets set out in the Paris Agreement. This creates challenges for some sectors and companies, as well as opportunities in others that are part of the decarbonisation solution. 

Investors not accounting for the changing nature of the political and regulatory agenda around sustainability may be caught out. There are a range of ways in which environmental, social and governance (ESG) information can be incorporated into investment strategies. Those looking to lean heavily into a specific theme may look to thematic strategies, for example. But in our view, ESG integrated strategies, in which the information is available and evaluated alongside other traditional financial metrics, will serve as a base requirement. Keep an eye on our On the Minds of Investors series for more information on the impact of sustainability on the investment landscape.

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This document is a general communication being provided for informational purposes only. It is educational in nature and not designed to be taken as advice or a recommendation for any specific investment product, strategy, plan feature or other purpose in any jurisdiction, nor is it a commitment from J.P. Morgan Asset Management or any of its subsidiaries to participate in any of the transactions mentioned herein. Any examples used are generic, hypothetical and for illustration purposes only. This material does not contain sufficient information to support an investment decision and it should not be relied upon by you in evaluating the merits of investing in any securities or products. In addition, users should make an independent assessment of the legal, regulatory, tax, credit, and accounting implications and determine, together with their own professional advisers, if any investment mentioned herein is believed to be suitable to their personal goals. Investors should ensure that they obtain all available relevant information before making any investment. Any forecasts, figures, opinions or investment techniques and strategies set out are for information purposes only, based on certain assumptions and current market conditions and are subject to change without prior notice. All information presented herein is considered to be accurate at the time of production, but no warranty of accuracy is given and no liability in respect of any error or omission is accepted. It should be noted that investment involves risks, the value of investments and the income from them may fluctuate in accordance with market conditions and taxation agreements and investors may not get back the full amount invested. Both past performance and yields are not a reliable indicator of current and future results.
 

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