The integration of values and investments has been increasing rapidly across the globe. Consider:
- Assets under management in sustainable investing approaches grew nearly 50% from 2015 to 2016, to $113.7 billion.
- In the United States: Sustainable investing now accounts for more than one of every five dollars under management.
- In Europe: Assets with sustainability themes grew by 146% from 2013 to 2015.
Historically, investing and the pursuit of positive change weren’t easily aligned. But today, approaches that put your portfolio in sync with your value system are more easily accessible. Investing in the planet, in future generations, and in geopolitical stability can be done while seeking positive returns and long-term growth.
But effective sustainable investment requires a coordinated, analytic strategy.
How is sustainable investing done?
There are several pathways for blending your ethical and financial interests. Each can be combined with others and modified to fit your changing outlook and strategy.
- Environmental, Social and Governance (ESG) Integration: This strategy considers any environmental, social and governance issues, factors and risks that may affect a company’s financial performance, along with traditional financial analysis.
- Thematic Investing: This strategy focuses on companies or funds supporting specific social or environmental issues, such as clean energy, education, infrastructure and healthcare.
- Positive Screening: Also known as “best-in-class screening,” this approach identifies companies in given sectors that perform well according to non-financial measures, such as low-carbon footprints.
- Exclusionary Screening: This strategy removes any sectors, industries or companies whose activities or practices are inconsistent with investor values, standards or norms.
- Impact Investing: This approach aims to generate measurable positive social or environmental impact alongside financial return, often involving the use of private equity or private debt.
Corporate commitment to sustainability
Socially and environmentally positive qualities are increasingly linked to fundamentals. Companies that strive to make positive impacts, improve governance and promote sustainability are valued by investors who believe holdings with these qualities will strengthen their portfolios.
Some financial institutions are putting this philosophy into practice, committing to sustainable investing and adopting policies around use of renewable energy. In 2017, J.P. Morgan announced the firm’s commitment to financing $200 billion in environmentally friendly projects and companies to facilitate clean innovation and additional policies for adopting renewable energy practices.
Our efforts to develop and promote sustainable investing date to 2005, when J.P. Morgan’s Environmental and Social Policy Framework addressed social and environmental concerns associated with our business endeavors. We issued our first dedicated Environment, Social and Governance Report in 2015.
“Sustainability captures a variety of elements,” says Max Neukirchen, Chief of Staff of JPMorgan Chase’s Corporate & Investment Bank. “Both making sure our business operations manage scarce resources properly, and making sure we channel the energy of our employees toward advancing sustainable solutions.”
Contact your J.P. Morgan representative to discuss which sustainable investing approach might work best for you.