Environmental, Social & Governance (ESG) Integration

Watch Marisa Buchanan, Director of Sustainable Finance at J.P. Morgan, introduce the approach of ESG Integration.

Defining the approach

ESG integration incorporates environmental, social and governance (ESG) factors into investment due diligence and analysis. The principal objective of this approach is to ensure that relevant ESG issues, factors and risks that may impact companies are considered alongside traditional financial analysis.

Unlike other approaches to sustainable investing, ESG integration proactively assesses financial risks and opportunities, offering investors an opportunity to allocate capital in line with their values and invest in companies that have responsible and/or dedicated ESG practices.

 

 

 

Our capabilities

Investors can approach ESG integration in a variety of ways. To help align your portfolio with your environmental, social and governance values, we offer:

  • Mutual funds
  • Separately managed accounts
 

Case Study: Testing the waters*

The clients wanted their relatively small portfolio to align with their new ESG awareness, particularly in the area of fossil fuels.

PORTFOLIO GOALS: Since their portfolio objective was centered on maintaining wealth, one partner had reservations about whether a sustainable investing approach could meet their performance goals.

OUR APPROACH: Initial investments were made in passive U.S. and international equities strategies. Once both partners were comfortable with performance results, they expanded their sustainable investments to include fixed income and additional equity strategies.

*All case studies are shown for illustrative purposes only and should not be relied upon as advice or interpreted as recommendations. They are based on current market conditions that constitute our judgment and are subject to change. Results shown are not meant to be representative of actual results. Past performance is not a guarantee of the future performance of an investment.

Exclusionary Screening

Access to:

  • Exchange-traded funds
  • Mutual funds
  • Separately managed accounts
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Environmental, Social and Governance (ESG) Integration

Access to:

  • Mutual funds
  • Separately managed accounts
   Learn More 
Positive Screening

Access to:

  • Exchange-traded funds
  • Mutual funds
  • Separately managed accounts
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Thematic Investing

Access to:

  • Exchange-traded funds
  • Mutual funds
  • Fixed income securities
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Impact Investing

Access to:

  • Private investments
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IMPORTANT INFORMATION

ETFs and index mutual funds are marketable securities that are interests in registered funds, and are designed to track, before fees and expenses, the performance or returns of a relevant basket of assets, usually an underlying index. Unlike mutual funds, an ETF trades like a common stock on a stock exchange. ETFs experience price changes throughout the day as they are bought and sold. ETFs typically have higher daily liquidity and lower fees than mutual fund shares. Physical replication and synthetic replication are two of the most common structures used in the construction of ETFs and index mutual funds. Physically replicated ETFs and index mutual funds buy all or a representative portion of the underlying securities in the index that they track. In contrast, some ETFs and index mutual funds do not purchase the underlying assets but gain exposure to them by use of swaps or other derivative instruments. In addition to the general risks of investing in funds, there are specific risks to consider with respect to an investment in these passive investment vehicles. ETF and index mutual fund performance may differ from the performance of the applicable index for a variety of reasons. For example, ETFs and index mutual funds incur operating expenses and portfolio transaction costs not incurred by the benchmark index, may not be fully invested in the securities of their indices at all times, or may hold securities not included in their indices. In addition, corporate actions with respect to the equity securities underlying ETFs and mutual funds (such as mergers and spin-offs) may impact the variance between the performances of the funds and applicable indices. Passive investing differs from active investing in that managers are not seeking to outperform their benchmark. As a result, managers may hold securities that are components of their underlying index, regardless of the current or projected performance of the specific security or market sector. Passive managers do not attempt to take defensive positions based upon market conditions, including declining markets. This approach could cause a passive vehicle's performance to be lower than if it employed an active strategy.

While investments in private equity funds provide potential for attractive returns, access to opportunities not available in the public markets and diversification, they also present significant risks including illiquidity, long-term time horizons, loss of capital and significant execution and operating risks that are not typically present in public equity markets. Private equity funds typically have a 10-15 year term and will begin to monetize investments after holding them for 4-5 years.

This material is for information purposes only, and not an offer or solicitation to enter into a transaction. The information contained in this material should not be relied upon in isolation for the purpose of making an investment decision. Investors are urged to consider carefully whether the products, asset classes (e.g. equities, fixed income, alternative investments, commodities, etc.) and strategies discussed are suitable to their individual needs. Investors must also consider the objectives, risks, charges, and expenses associated with the investment product or strategy prior to making an investment decision.

More complete information is available from your J.P. Morgan representative, and you should be aware of the general and specific risks relevant to the matters discussed in the material.