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Sustainable Investing

How a sustainable investing focus can deliver resilience and returns

After last year’s strong market performance punctuated by volatility, we see signs of growing geopolitical tensions, policy shifts and climate shocks. This makes a wider range of outcomes, positive and negative, seem possible, and many investors are looking to diversify and bolster portfolio resilience.

As we guide clients through changes, we see evidence that sustainability data1 can potentially provide insights into a company’s ability to weather a crisis, an important consideration for resiliency.2 Increasingly, the focus on portfolio resilience is leveraging sustainability information and data, which can provide insights into how well a business is managed, how it stacks up against peers, and its capacity to adapt and thrive in challenging environments.

For example, consumer products that are made sustainably, with an eye toward minimizing negative impact on the environment and society, have historically retained stronger customer loyalty during economic downturns, potentially protecting revenues.3 Companies with more transparent supply chains experience fewer disruptions from resource scarcity, extreme weather and trade tensions.

There are two general approaches to investing sustainably: Some take a risk-based approach and use sustainable criteria to bolster portfolios against drawdowns. Others use sustainability signals to seek outperformance by identifying early movers and leaders.

At J.P. Morgan Private Bank, we don’t think you need to choose between these styles--we meet you where you are, helping you find an approach that fits your unique circumstances and preferences. Whether sustainable investing is the foundation of your financial strategy or a meaningful complement, we can help you build portfolios that systematically apply sustainability data, and are designed to be resilient across market cycles.

Mitigating potential downside

Companies failing to manage risks can erode shareholder value and put a drag on performance. Conversely, effective risk management can protect a business during times of stress and has the potential to create value through competitive differentiation.

For instance, when companies maintain poor data privacy standards, it can impact their stock prices. Research indicates that the shares of health care companies that experienced a data breach underperformed the Nasdaq by 10 percent over the six months after they disclosed the incident; financial services companies in the same situation lagged by six percent.4 Sectors less exposed to the risks of sensitive data, such as retail and media, experienced milder impacts. 

Over the last five years, companies that performed well on governance measures were less likely to endure sharp declines in share price. The importance of governance often played out in industry-specific ways: for financial and industrial companies, accounting mattered. The effectiveness of the board of directors was key for health care, technology and utilities firms. This resilience carries over to investment portfolios, where tactically overweighting well-governed companies enhances overall portfolio stability.

Identifying first movers

Sustainability information may help companies move into market niches that competitors have yet to explore. This can lead to early opportunities as consumer preferences shift, and as new technologies and sustainability-related policies emerge. Identifying these opportunities can potentially enhance long-term portfolio resilience, while strategically investing in industry leaders may also reduce exposure to companies that lag behind.

Take investing in human capital. A McKinsey study found that companies that also make significant investments in their people achieve more consistent results and have greater earnings.5 Not surprisingly, these ”performance plus people” leaders are better at retaining talent, an important advantage at a time when companies are facing economic headwinds and skills shortages.

Ultimately, these approaches are complementary, as reducing exposure to potential laggards and identifying companies that could present outsize growth opportunities are both ways to support outperformance in our client’s portfolios.

Measuring the effects

Sustainable investing is best evaluated over the long term, as it’s designed to deliver lasting value and resilience—even if short-term results may vary, the real benefits of sustainability integration become clearer with time.

In fixed income, sustainability information led to a material impact in three out of every 10 investment cases, with 22% related to downside protection and 6% percent to capturing unpriced upside in bond prices. Incorporating sustainability into stock picking positively contributed to 22% of their strategy’s excess equity returns.6 Sustainability can also be used in portfolio construction: The S&P 500 Scored and Screened Index is made up of companies that excel on industry-relevant sustainability issues, and it excludes those with significant controversies or reputational risks. It maintains industry group weights that are similar to the benchmark S&P 500.

Over the past 10 years, this index has outpaced the parent S&P 500 Index in price appreciation, equating to an additional 37 basis points of performance annually. Notably, during early market shocks of the COVID-19 pandemic, the Scored & Screened Index fared better than the S&P 500 with an additional 170 basis points of downside protection.7

Leaning into sustainability characteristics has worked for the S&P 500 Scored & Screened

10-year of price appreciation of the S&P 500 Scored & Screened Index v. parent index
Source: Bloomberg Finance LP; data as of April 1, 2025. S&P 500 Index- The S&P 500 Index is a widely recognized benchmark of the U.S. equity market. It tracks the performance of 500 of the largest publicly traded companies in the United States, representing a broad cross-section of industries. S&P 500 Scored & Screened Index- The S&P 500 Scored & Screened Index is a subset of the S&P 500. It includes companies that score highly on industry-relevant sustainability (ESG) issues and excludes those with significant controversies or reputational risks. The index maintains sector weights similar to the parent S&P 500 Index, aiming to provide a sustainability-focused alternative while closely tracking the broader market.

Past performance is no guarantee of future results. You may not invest directly in an index.

There is evidence that this benefit was not a one-off. A recent study from MSCI reinforces the connection between sustainability, risk and performance, highlighting the resilience of portfolios during times of market stress.8 It found that companies with robust sustainability practices outperformed their peers, even after controlling for region, size and equity style factors. For example, in the US, companies with higher ESG scores outperformed those with lower ESG scores by as much as 8% during the COVID-19 downturn.

Sustainability can bolster portfolio resilience during times of crisis

Annualized ESG factor returns for US and global equity markets (using MSCI USA and MSCI ACWI indices)
Source: MSCI ESG Research, data as of April 14, 2025. The factor return represents the performance of companies with higher ESG scores relative to those with lower ESG scores, after controlling for well-known systematic sources of return — such as size, volatility, industry or country membership — but also for numerous other potential factors. Ukraine crisis refers to period from Feb. 23, 2022, to May 31, 2022; COVID-19 refers to period from Dec. 31, 2019, to April 30, 2020. MSCI USA Index- The MSCI USA Index is designed to measure the performance of the large- and mid-cap segments of the U.S. market. It covers approximately 85% of the free float-adjusted market capitalization in the United States. MSCI ACWI Index (All Country World Index)- The MSCI ACWI Index is a global equity benchmark that represents large- and mid-cap stocks across 23 developed and 24 emerging markets. It covers approximately 85% of the free float-adjusted market capitalization in each country, providing a comprehensive view of global equity market performance.

Past performance is no guarantee of future results. You may not invest directly in an index.

A personalized approach

Our advice begins with understanding our client’s goals. Adopting a new investment approach is not always straightforward, as decision makers must align on their views. A gradual transition – blending risk-based strategies with early movers and dynamically adjusting exposures over time – can help portfolios adapt to evolving priorities and increase comfort with new strategies. With this flexibility, sustainable investing does not need to be an all or nothing conversation. Whatever your objectives, we can help you to design a portfolio that fits your needs.

We can help

To learn more about sustainable approaches to investing, and how they can be incorporated into your portfolio in a way that serves your priorities, contact your J.P. Morgan team.

 

1Jay Gelb, ”Investors Want to Hear from Companies about the Value of Sustainability,” McKinsey & Company, September 2023.

2Tensie Whelan, ”ESG and Financial Performance: Uncovering the Relationship by Aggregating Evidence from 1,000 Plus Studies Published between 2015 – 2020,” NYU Stern Center for Sustainable Business and Rockefeller Asset Management, 2021.

3Randi Kronthal-Sacco, and Tensie Whelan, ”Sustainable Market Share Index,.” NYU Stern Center for Sustainable Business, April 2024.

4“Data Breach Share Price Analysis,” Comparitech, June 2024.

5Anu Madgavkar, et al. “Performance through People: Transforming Human Capital into Competitive Advantage.” McKinsey Global Institute, February 2023.

6Robeco, “The Big Book of Sustainable Investing”. August 2023.

7COVID-19 refers to period from Dec. 31, 2019, to April 30, 2020.

8Guido Giese and Drashti Shah. "MSCI ESG Ratings in Global Equity Markets: A Long-Term Performance Review." MSCI ESG Research LLC, March 2024.

Key Risks

Environmental, social and governance (“ESG”) or sustainable investing strategies, including SMAs, mutual funds and ETFs, may include additional risks and can limit investment opportunities potentially underperforming other strategies that do not have an ESG or sustainable focus. Strategies focused on a specific theme or sector can be more concentrated in particular industries or sectors with common characteristics and are often subject to similar business risks and regulatory burdens. Because investing on the basis of ESG/sustainability criteria can involve qualitative and subjective analysis, there can be no assurance that the methodology utilized by, or determinations made by, J.P. Morgan, or an investment manager/adviser selected by J.P. Morgan, will align with the beliefs or values of the client. Additionally, other investment managers/advisers, including our affiliates, can have a different approach to ESG or sustainable investing and can offer varying ESG or sustainable investing strategies on the same theme or topic. ESG and sustainable investing are not uniformly defined concepts and scores or ratings may vary across data providers that use different screens or processes for evaluating ESG characteristics. Investment managers/advisers rely upon information and data that might be incomplete, inaccurate or unavailable, which could cause them to incorrectly assess an investment’s ESG or sustainable attributes.

The evolving nature of sustainable finance regulations and the development of jurisdiction-specific legislation setting out the regulatory criteria for a “sustainable” investment or “ESG” investment mean that there is likely to be a difference in the regulatory meaning of such terms. This is already the case in the European Union where, for example, under the Sustainable Finance Disclosure Regulation (EU) (2019/2088) (“SFDR”) certain criteria must be satisfied in order for an investment to be classified as a “sustainable investment.” Unless otherwise specified and where permitted by applicable law, any references to “sustainable investing” or “ESG” in this material are intended as references to our internally developed criteria only and not to any jurisdiction-specific regulatory definition.

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Any views, strategies or products discussed in this material may not be appropriate for
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We view sustainability as a flexible approach that has the potential to protect wealth and help investors achieve their goals.
Published Jan 26, 2026

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