The first thing most of us learned as children about protecting the environment was reduce, reuse, recycle. Those enduring principles are particularly relevant for companies looking to reduce their environmental footprint and their costs. For companies that provide solutions to facilitate the three R’s, it is also an opportunity to generate profits.

Reduce – Waste is a meaningful contributor to greenhouse gas emissions. As we highlighted in a previous post, about 6% of greenhouse gas emissions come from food waste alone and an additional 3% come from wastewater and landfills. One of the best solutions to cutting back on waste is not producing it in the first place. Many consumer-packaged goods companies have cut back on the amount of packaging they’re using and opted for more sustainable materials where possible, as evidenced by the move away from plastic bags and straws. However, for waste that is unavoidable, waste management companies are finding ways to neutralize or destroy waste before it makes it to the landfill. 

Reuse – Companies can also facilitate reuse, not only for consumer products, but also by rehabilitating or repurposing machinery that would have otherwise been decommissioned and left to the scrapyard.

Recycle – The U.S. generates nearly 300 million tons of residential and commercial municipal solid waste each year from households, restaurants, businesses, schools, and hospitals. Only about one-third is recycled or composted. Globally, only 16% of all plastic waste is recycled to make new plastics according to McKinsey. There is enormous scope to increase recycling of plastics, metals, and other consumer products and repurpose the output. Many companies have used recycled plastic or water bottles to create a range of products from household goods to apparel.

Two companies that are leading innovation in reducing, reusing, and recycling are TOMRA and Trex:

TOMRA is a market leader in recycling solutions, particularly in reverse vending and using sensors in resource management. In 2021, the company collected and recycled 42 billion plastic containers through its reverse vending machines.  Although this accounts for just 2% of containers produced annually, the company has pledged to collect and recycle 40% of all post-consumer plastic packaging by 2030 and for 30% of this packaging to be recycled in closed-loop systems.

Trex is a major manufacturer of wood-alternative composite decking and eco-friendly outdoor products. Its decking is made from 95% recycled and reclaimed materials, repurposing 1.5 billion plastic bags each year. In 2020, more than 900 million pounds of plastic film and reclaimed wood that would have otherwise been destined for landfills were upcycled.

These companies are among the holdings of J.P. Morgan’s Climate Change Solutions ETF (NYSE:TEMP). An actively managed sustainable fund. The securities highlighted above have been selected based on their significance and are shown for illustrative purposes only. They are not recommendations.

Management of U.S. Municipal Solid Waste
2018

Source: Environmental Protection Agency, J.P. Morgan Asset Management. Sources included in the text: McKinsey, Our World Data. Data are as of April 18, 2022. 

Investing on the basis of sustainability/ESG criteria involves qualitative and subjective analysis. There is no guarantee that the determinations made by the adviser will align with the beliefs or values of a particular investor. Companies identified by an ESG policy may not operate as expected, and adhering to an ESG policy may result in missed opportunities.  

Investors should carefully consider the investment objectives and risks as well as charges and expenses of the JPMorgan ETF before investing. The summary and full prospectuses contain this and other information about the ETF. Read the prospectus carefully before investing. Call 1-844-4JPM-ETF or visit www.jpmorganETFs.com to obtain a prospectus

Risk Summary for JPM Climate Change Solutions ETF: Climate change solutions strategies may result in investments that underperform the market. Such investments may be negatively impacted by changes in global and regional climates, environmental protection regulatory actions, changes in government standards and subsidy levels, changes in taxation and other domestic and international political, regulatory and economic developments. Because society's focus on climate change issues is relatively new, the emphasis and direction of governmental policies is subject to significant change, and rapid technological change could render even new approaches and products obsolete. There is a risk that the companies identified by the adviser do not operate as expected when addressing climate changes issues. In addition, there are significant differences in interpretations of what it means for a company to have solutions that address climate change.

J.P. Morgan ETFs are distributed by JPMorgan Distribution Services, Inc., which is an affiliate of JPMorgan Chase & Co. Affiliates of JPMorgan Chase & Co. receive fees for providing various services to the funds. JPMorgan Distribution Services, Inc. is a member of FINRA.

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