Sustainable investing: What are the opportunities in a post COVID-19 world?

SUSTAINABLE INVESTING: WHAT ARE THE OPPORTUNITIES IN A POST COVID-19 WORLD?

OLIVER GREGSON:

Good afternoon and good evening to all of you with us today. On behalf of my partners, Ricardo - who runs our Italian business, Mateo - our Swiss business, Jorge - at Spain and Tara - the Middle East. Thank you for joining us today for our European webinar on 'Sustainable Investing: What Are the Opportunities in a post COVID-19 World?'

My name is Oliver Gregson, I'm the Head of the Private Bank for the UK, but I'm joining you today under the guise as co-lead of our Sustainable Investing Vision at the International Private Bank. And really, I could not be more excited today than to join you to talk about a subject which is something of a personal passion. As a member of the UK Finance Sustainable Committee and WEF's Sustainable Market Council I'm absolutely convinced that sustainability and ESG in its most widest sense is absolutely the most pressing issue of our times.

But let me first pause and start by recognising the difficulty that the past several months have caused us. Beyond the historic market volatility the personal nature of COVID has affected us all, I'm sure, in one way or another, so sincerely on behalf of everyone at J.P. Morgan I do hope you are all well and your families are safe.

As a firm we take our responsibilities with regards to COVID extremely seriously and are very conscious that we play our part in behind there and being part of the solution and we've been hugely proactive in our response. 45 billion in new loans provided to clients who have been most impacted by this globally. We issued a billion in new loans for small business clients in the first 60 days of the crisis. We've contributed over 30 billion to 250,000 businesses via various global support schemes. Our pre-eminent investment banking franchise has absolutely been at the vanguard in helping public and private companies access capital, well over a trillion dollars of issuance in the capital markets. And from our perspective, from our own balance sheet, over 250 million to help under-served small businesses, non-profit partners and philanthropic organisations deal with the impact of this awful pandemic.

At its core, COVID-19, the COVID-19 recession and impact is a health and societal crisis, but as the dust settles and the broader ripple effects are starting to become clear, there is really a multitude of factors that are being amplified by this pandemic which are combining, we think, to drive sustainability to, frankly, become the "new normal", with the "E" of ESG, that's Environmental, Social and Governance now being supported very much by the "S" and the "G", and they're concomitant and really exciting investment opportunities.

You really don't have to look very far to see this manifesting itself right now in the world around us, whether that's in the reaction to COVID in Canada, in part requiring disclosure for all companies leveraging the TSFD framework or, for example, closer to home in France, with the requirements that France placed on the bailout of Air France, KLM around their sustainability. Or, indeed, in the UK with Project Birch, which is going to look to require companies to behave, act and address a wide range of sustainability needs if they take any form of government and policy support.

It's clear for some time that the signs on this has become unequivocal, but now the policy, regularity and legal agenda is very much starting to catch up, and the EU is placing this right at the centre of their COVID response and their post COVID agenda and planning. I would go so far as to say you cannot be a long term investor without doing so through an ESG lens. And I think, quite frankly, in 10 years time you won't call it sustainable investing, it'll just be the way that things are done.

So I'm delighted to be joined today by Ilaria Calabresi. Ilaria is our sustainable investing lead for EMIR. She's going to moderate the conversation between two fantastic partners who are joining us today - Mark Hempstead of Head of Alternatives for EMIR. Mark is active right now on raising a really fascinating ecosystem private equity opportunity, and Lance who is our Senior Portfolio Manager and Head of our Sustainable Equity Strategy and our Sustainable Fixed Income Strategy, and has delivered nearly 400 basis points of out-performance on the equity strategy since inception.

But before I do hand over, I did just want to touch on a couple of things. Firstly, slide 3, please, Mohesh.

This is such an opportunity that we are going to make this very much a campaign. Many of you will have joined us for the inaugural Sustainable Investing Summit we hosted in London last year, joined by the likes of Mark Carney and many others. And we're going to replicate that, but in a virtual format in September and October. Some dates are on the slide in front of you, so please watch out for invites to that. Or, indeed, if you are interested please do reach out to your relationship manager.

But just before I hand over to Ilaria to get the conversation going it would be remiss of me, frankly, not to just cover what the firm is doing, particularly around diversity and sustainability.

So if we could just please quickly go to the Diversity slide on slide 6, and I think this is really important in the context of what is happening in cities across America and across the world in reaction to the murder of George Floyd. We take this really importantly, and you can see here what the firm is doing around diversity and inclusion, women, LGBT and veterans. And I just want to call out a few things because I think we're very proud of some of the steps that we've taken.

50% of the firms operating committee, that's Jamie Dimon's direct reports are women. 25% of our senior leadership are women, and nearly half of all our employees are women. The 'Women on the Move' initiative is also close to extending 10 billion in credit by the end of 2021 to female-led and female-owned companies. In terms of diversity and inclusion, again, some significant commitments that we have made both in response to recent events and in providing pathways for our employees and colleagues in advancing black pathways and advancing black leadership.

And then, equally, LGBT and veterans. In terms of sustainability just let me briefly touch on slide 7. I think it's important to start by saying that as a function of our size, our energy and our transportation portfolio there is much more as an organisation that we have to do. We have consciously taken the decision that divestment is not the right solution. We want to sit at the table, we want to play a part in helping accelerate the transition and guiding people to do so in a fair and just way as the Paris Accord obliges.

But we are also the world's biggest green bank. In 2017, we committed to deliver 200 billion in clean and renewable financing by 2025 and to source 100% of our own global energy needs from renewal sources by the end of 2020.

I'm really pleased to share with you all that both of these will have been met by the end of 2020. And now the firm is extending additional steps to address climate change and further promote sustainable development, and I want to highlight some of these just before I close.

Firstly, we've committed 200 billion, another for transactions that support Climate Action and the UN Sustainable Developments Goals by the end of 2020. We've joined something called the Climate Leadership Council, which calls for a revenue neutral carbon tax and dividend framework in the US. We've created our own development finance institution focused on scaling up finance for developing countries with over 100 billion a year committed. We've established an ESG solutions group to advise clients on reducing their carbon emissions. A new energy transition team to provide strategic and financial advice to corporate clients to support their carbon optimisation projects.

We've also expanded a whole host of financing restrictions, and I think these are important. No longer providing lending, capital markets or advisory services to companies mainly involved in coal, with a commitment to phase out existing exposure by '24. Not providing project finance or other forms of asset specific financing for coal power. And no project or asset specific financing for the Arctic. And lastly, we've also importantly signed the Climate Action 100 group to contribute over 2 trillion in our AUM to enhance stewardship, voting and company engagement.

This is not the end though. This really is the start of something and there's going to be more that we will share with you over the coming months.

And so really to close, there is more that we need to do, but I think it's an exciting time. And so to help tell you how you can get involved in what we see as one of the biggest megatrends and biggest investment opportunities, I'm going to hand over to Ilaria to moderate the conversation.

Ilaria, thanks so much. Over to you.

ILARIA CALABRESI:

Great. Thank you, Oliver. And good afternoon everyone. I'm very excited today to be joined by Mark and Lance, two experts in the sustainable investing field. And what we plan on doing today is discussing some of the trends that we've been seeing in the sustainable investing market, as well as the implications that we'll see on this market from the COVID crisis, as Oliver was alluding to.

We'll also go through some of the key ways to capitalise on these trends, both in the public as well as private markets.

So if I start maybe giving everyone a reminder of what sustainable investing is as a broader term. We effectively define sustainable investment as those investments that include environmental and social considerations alongside the financial return objective. And there are many different ways to approach sustainable investing and how we define this within the private bank is in four ways. First of all, exclusionary screening, and this is typically where investors who started to tap space many years ago started. And it means excluding certain types of stock so, for example, tobacco or weapons from an investment portfolio. There's an ESG integration which has become much more popular in the past few years, which means integrating ESG, environmental, social and governance considerations into portfolio analysis.

And so Lance, who's here today, manages two ESG driven multi manager portfolios. There's then thematic investing so, for example, investing in targeted certain areas such as the environment. And finally, impact investing, which really means investing with the intent of creating a social or environmental impact alongside seeking a return.

And if we think about it really this is often very well accessed in the private markets, and so we'll have here today Mark discussing some opportunities in this space.

So if we start focusing on some of the trends that I was referring to that we've seen in this market. So first of all, I'd say that we believe that sustainability and sustainable investing are not simply trends that will be here for a few years and then ago away. We actually refer to these as the new normal. And so what do we mean by this? We mean, as Oliver was saying before, we strongly believe that today you can't be a long term investor without integrating ESG considerations into investment analysis.

And so I think it's important to understand some of the drivers behind sustainable investing, and what has really been driving capital and interest towards this space.

So first of all, I'd say if you think about it, and many of you must have been reading and hearing about this macro trend, so things such as population growth and climate change, which are very relevant today. On top of this I would say performance, and this is something that we'll go through in a few minutes, but I'd really like to call your attention to because in the past what investors believed was that in order to invest sustainably one had to forego some returns, and this is absolutely not the case.

And then I'd also mention regulators, as Oliver was just saying. Definitely the regulatory attention has been driving more and more interest and focus on this space.

And finally, institutional investors. So if you think about it, institutional investors are definitely not new to this space, they've been here for decades, but definitely they've accelerated the move and transition to sustainable investing over the last few years, allocating big amounts to capital, and also becoming much more vocal about it.

And so, as I said, it's not surprising to see the assets in  the space grow exponentially, and so from 2016 to 2018 we saw assets in the sustainable investing space jump 34%, reaching over $30 trillion. Our own investment bank also predicts that by the end of this year, 2020, these will reach $45 trillion. So really a growth that is definitely exploding.

And what we'd like to do today, as Oliver was alluding to, is go through some of the implication that COVID will have, and definitely one of the things that we have observed is the increase in interest for ESG considerations and ESG investing. And we think this is particularly timely because of the fact that this crisis has really created some ripple effects on many different stakeholders. And so as we were discussing regulators, for example, they were focused on the space before, they're going to be much more focused today and we've been hearing this in many of the things that Oliver was mentioning.

And so on this slide I'd like to call out something that I think I was talking about the assets, but also it's pleasing to see that this year, despite the crisis, despite the draw down in markets, on slide 12, you've seen that actually investors have been drawn to the sustainable investing space. In fact, over the first quarter of this year we saw $45 billion flow into sustainable investing funds, and this is compared to the 390 billion that we saw flowing out. So as you can see on the chart, a big slump when markets were drawing down from outflows from traditional funds, and continuously positive flows into sustainable ETFs and funds.

So Lance, at this point I'd like to involve you in the conversation and really ask you about your observations on the implications of the COVID crisis and what this will mean for the sustainable investing market. And in your role, Lance, you're very close to managers as well as to watching companies, so can you shed a bit of light on what you believe the companies that will be successful over a longer term are doing right now and what they're doing well.

LANCE SCHIFF:

Oliver, first of all, that was a fantastic introduction. And Ilaria, thank you for your comments as well, and I want to thank all the clients and prospects joining today also.

Let me start off with a survey that our investment bank recently did as it related to ESG investing, and they determined through the survey that more than half of investors think post COVID-19 that this will reinforce the shift to ESG investing. And our investment bank is one of the many investments banks that are out there that are doing a tremendous amount of research into this space, and producing really, quite frankly, just a ton of content which is in my sense certainly reinforcing the longevity of this trend, as Oliver and Ilaria both described, as a megatrend.

Additionally, I want to talk about the UNPRI, which is the principle for responsible investing. They are the world's leading proponent of responsible investing. And I listened to the CEO of that organisation speak recently and she pointed out that through this COVID crisis they had the biggest up-tick in asset managers reaching out to them to rely upon their resources to really kind of understand from the PRI's perspective the best ways to be engaging with companies themselves. Again, very clear evidence that the trillions of dollars of signatories that are following the UNPRI are very engaged today in thinking more broadly beyond just the "G" and the "E", but really very much focused on a lot of the "S" issues, including issues of safety.

And I also want to kind of lastly say that from my perspective governance has always been an important aspect of what investment managers consider when they are making investment related decisions. [INTERRUPTION PHONE RINGS]

But more recently, at the beginning of this year, in particular 2019 and early 2020 when you had Davos, very clearly the environmental considerations have raised to the fore as the prominent issue that investors need to consider as investors consider both the transition issues, including a transition to a lower carbon economy as well as some of the physical risks associated with the environment, whether it be related to municipalities, considerations around floods, droughts, wild fires, et cetera.

But what we've seen with COVID is we've seen as opposed to social considerations move to the front seat and environmental considerations move to the back seat, you've seen social considerations join environmental considerations in the front seat.

And so, Ilaria, some of the observations that we've seen are some that certainly our clients have observed as well, key decisions that need to be made as it relates to furloughing employers, key decisions that need to be made adroitly to pay in general. We've observed across a number of issues whether it was a result of regulatory pressure or just really the companies themselves really being very proactive in doing things like suspending their employee buy-backs. All of these are happening real time and, quite frankly, COVID is not going to be a one-time event, this is going to be, in our opinion, something that companies need to really kind of consider on a go-forward basis.

ILARIA CALABRESI:

Great. Thank you, Lance.

So greater connectivity between the "E", the "S" and the "G", and therefore the environment is not getting put back on a back seat.

So I think based on some of these things that we were discussing and some of the trends that we're seeing within sustainability more broadly I think two big ones stand out to me, being clean energy and the circular economy.

So clean energy, first of all, and this is something that's very close to my heart, this is where I started my career years ago, and I think I'm really excited about this space, and this is because it's very different from when I started in that space. And so why is this? If we think about it, over a decade ago renewable energies weren't cost competitive with traditional fossil fuels, and so it was very nice to have, but it was very challenging for investors. You needed an oil price of $140 for renewable energies to be cost competitive 10 years ago. Today, the costs have come down massively, by 70 to 90% over the past 10 years for wind and solar. And so really it's interesting to see this come and play out in the market.

And, in fact, last year for the European Union and this year for the US and the UK, wind and solar have surpassed coal as major sources of electricity generation. And so I think a big milestone. And I would say, why do we still think there's great opportunity, hasn't this already then happening, hasn't the ship sailed?

And I think it's important to consider that today less than 20% of electricity generated comes from renewables, so there's still massive opportunities. And in fact, there are estimates that by 2030, renewables will reach 40% of electricity generated, and by 2050 it will reach over 60%. So there's still a lot of opportunity for investors to look at the space, for sure.

On the other topics, circular economy, and this is something that maybe some of you are less familiar with, I'd say. Something that the European Union, for example, is very much focused on. And what is a circular economy? As opposed to a linear economy a circular economy is a model of consumption and production in which materials and products are reused, repaired, recycled, all these, to avoid creating great amount of pollutions and waste, and so to have a positive impact on the environment, and also obviously using renewable energies.

And so why is this beneficial, not only for the environmental impact, which seems clear, but also the benefits are really higher profitability and greater economic growth. And, in fact, the European Union, what I was just referring to, was a big plan around this, has actually done estimates that there will be greater cost savings for companies, as big as 600 billion euro of cost savings for companies, and over 580,000 jobs possibly created by stepping off to a circular economy.

And so again, why we see opportunity, because this is something that is still at very early stages. Just 9% of the global economy today is actually put on our circular model, and so we see a lot of upside here.

So Mark, I'd like to pull you into the conversation here, can you help us to understand how an investor today can look to capitalise on some of these themes, and really where do you think the greatest opportunities lie to do so.

MARK HEMPSTEAD:

Sure. Thank you. I would probably start out by saying that I think across the spectrum of potential investment opportunity the private markets or investing in individual private companies I think gives you the most direct way to invest in a lot of these themes that you've just mentioned. It's impact with intent investing. From all these different themes that you went through, different statistics, the fact that economics are now a catalyst to many of these opportunities, sustainability transformation, everything we've been talking about we think represents one of the single highest growth opportunities for investment today. This is happening across industries, it's happening in different sizes of companies, but the real innovation, the transformative growth that you're seeing is taking place in younger growing innovative companies. And these companies can become the next big thing in their own right. They could also become a major solution for larger corporations who are looking to become more sustainable over time. So in trying to achieve this positive measurable direct impact, private markets I think provide an extremely large opportunity.

Getting back to your direct question of where we think there's opportunities, the environment and the energy ecosystem I know there - I very much agree with Lance - that now a lot of the focus on social issues is coming more in line with the environment, but still think that it represents a significant opportunity for the long term.

When you look at this, innovation, technological advancements are usually the result of or a response to a challenge. You have a challenge and then you have an opportunity to figure out how to try to do something faster, more efficient, more cost effective, simply better overall. When you think about this in the concept of the environment we are faced with the challenge of satisfying growing populations and all of the increased consumer demands that come from that, and that has to be done against a world of finite natural resources and a continued over-dependence on the resources which continue to add to the problem.

And what is amazing in the world of private investments is how technology and scientific innovation is being used to address this challenge. So it's a long term shift, it is being driven by environmental necessity, but it's also being driven by economics and that's a big change.

So renewable energy, Ilaria, you showed that chart, solar, wind, hydro is now cheaper than coal and natural gas. You talked about the cost coming down. With that in mind it's not so much trying to find some new innovative or disruptive technology for solar, it's really about increasing that 20% number of the amount of energy that is powered by renewables today. So how it's how can technology, how can software be used to scale and increase adoption so that 20% number increases.

You have the future of transport, electric vehicles. It's not necessarily about trying to invest in Tesla or any future competitor, but how can you make charging more efficient, so more consumers adopt this? How can you look at electric vehicles being used in industrial or construction sites so they don't have to rely on large diesel combustible engines? So all of these are opportunity.

Agriculture for technology - this is a fascinating individual area for investment. We invested with a company last year that uses the confluence of technological and scientific innovation to grow plants using hydroponic farming, basically growing plants in skyscrapers. It uses less water, it reduces waste. It can be using non-toxic pesticides. It can be sustainable animal feed, which is a massive industry which today basically relies on cutting down forests to grow soy or over-fishing the oceans. So all different things that can be achieved through this innovation.

Circular economy is another one. We're looking at a company right now which has a post consumer recycled packaging company that is replacing Styrofoam. There are so many different opportunities within this space where actually, as Oliver mentioned, working with the fund right now that is focused on this broad environmental ecosystem.

And then I would also say that there are different opportunities. This is more of the social angle of increasing economic opportunity and reducing inequalities globally. And if you think of how you can solve some of the greatest problems that we have in the world today it is more of an access to basic healthcare and financial services, access to quality education.

At the end of last year less than half of the world had reliable access to the internet. If you can start to address some of these things at the base level using things like technology, software to help accelerate that growth these can be major changes. Impact investing is about finding interesting companies, supporting them and helping them grow so you open them up to the broader financial or capital market. So it's the multiplication impact of that original dollar, euro, pound that you're spending which can then grow and grow with further investment.

LANCE SCHIFF:

And it should be added in addition to Mark's points that these aren't just private companies, and obviously public companies as well, but also through the debt markets. There's been a big increase in bond issuance tied to achieving sustainable goals. And back to your earlier question, Ilaria, some of that is certainly tied to what we've seen as a result of COVID.

OLIVER GREGSON:

Ilaria, you might be on mute.

MARK HEMPSTEAD:

I'm happy to keep going, I've lots of ideas.

OLIVER GREGSON:

We're always happy to hear from you, Mark.

MARK HEMPSTEAD:

There are so many opportunities across the spectrum, and what is also interesting, and this is where public companies also come into play, is if you are a large corporation looking to make these transitions the private markets can be the main area which you can look to for strategic acquisition of different companies. So if you're looking to try to become more long term sustainable you can do that internally or you can look to the private markets and look to individual businesses that can help overall. A utility company buying software to help better manage their electricity grid and to increase adoption of electric vehicles. A consumer brand that is taking on healthier consumer based products, just all different ways in which the public and private markets interplay together as well.

OLIVER GREGSON:

Thanks Mark.

Ilaria, I think we have you back. Maybe we could bring in Lance a little and think about some of the ways that he and his investment process works and some of the performance that's delivered, if you're back with us.

ILARIA CALABRESI:

Thank you, yes. I'm not sure why you couldn't hear me anymore. Yes, thank you Oliver.

If you can hear me now, Lance, I think something in particular I'd like to tag on, maybe we can go over your strategy within that, I think is addressing the myth of sustainable investing under performance. And I think in the past investors had always looked at sustainable investing strategies and thought that in order to invest sustainably they had to forego some returns.  And we've seen a growing body of research actually show that this is not the case.

And in fact, if we can pull off slide 14 what I'd like to show here, and as I was saying, a growing body of research shows that by integrating ESG factors into investment analysis, investors may enhance portfolio endurance by reducing volatility and limiting draw downs.

And so as you can see here, what we've put on this chart is global sustainable equities versus traditional equities. And global sustainable equities have outperformed traditional equities by 80 basis points per annum with lower volatility since before the financial crisis. We've seen this out-performance actually continue this year.

So Lance, what I thought it would be helpful is to have you discuss some of this, in discussing your ESG multi manager equity portfolio. Your strategy has seen over 300 basis points of out-performance here today, so amazing results. Can you talk a little bit about how you've done this, what the portfolio's objectives are.

LANCE SCHIFF:

Great, Ilaria, yes. So whether it be the equity portfolio or the fixed income portfolio both of our strategies are a benchmark to traditional benchmarks. So in the case of the equity strategy we're using MSCI to measure our out-performance. And there are ESG benchmarks out there but the reality is that the industry standard is to compare yourself to a traditional benchmark.

In terms of the way we think about our strategy and the excess performance we've been able to generate thus far, I would just make a couple of points. 1) - when you look at our portfolio we very much believe in ESG leaders, and by that I mean companies that are showing to be, quite frankly, better than their industry peers in areas of either the "E", "S" or the "G". So "E" could be things like energy efficiency, "S" could be things like safety or how you're dealing with suppliers, and the "G" could be whether it be accounting or traditional measures of other forms of governance, such as the composition of the board of directors and what not.

That emphasis in investment has often resulted in the businesses that you own being of a higher quality. And you can measure quality by metrics such as profitability, think return on equity, return on assets or it could be terms of lower levels of leverage. Those attributes which investors like myself often refer to as factors have been beneficial in and of themselves as measures of quality have out-performed the broader market here today.

Additionally, where you fish certainly matters in your ability to, quite frankly, catch fish. And so we have a couple of considerations outside of ESG that lead us to be in higher weights and areas, like industrials or in higher weights and areas like technology, and we've been under weight areas such as energy. All of that from a sector position prospective has additionally been helpful this year.

But then there are very company specific issues, such as idiosyncratic risk, and we've had tremendous success in investment such Clorox, which has had tremendous demand for their product, sanitary wipes for your home. Companies like 3M have done very well, which is a major manufacturer of protective gear and masks. And it's not always what you own, but it's also what you avoid. And so our portfolio hasn't owned things, businesses such as Wells Fargo and Boeing, both of which have remained challenged in this environment.

ILARIA CALABRESI:

Right. Thank you, Lance.

Just to bring it back to the product side, Mark, back to you. So we discussed some of the things that you've been observing in the product markets, but really if one were investing in sustainability in a product market for the first time how would you do this today?

MARK HEMPSTEAD:

Where we have been investing today is through funds, fund managers. There's obviously opportunity to invest directly into companies. We believe that the best way to invest, the most diversified approach is through fund managers. It's a significant opportunity [inaudible] but many of the opportunities are still younger companies, they're in a particular area of the market which requires a unique expertise to understand and that can mean higher risk. And so we have been focusing on doing extensive research and diligence on who we think are expert managers, operators, entrepreneurs themself who are investing in funds that then go out and try to find some of these individual portfolio companies.

We're partnering with a manager right now, which Oliver mentioned at the beginning. We've been tracking this team for 2 years. We are doing a diversified solution at the end of the year with six or eight fund managers. We met with more than 150 individual funds to get to that six to eight.

So while I have a lot of excitement about the potential within it's a disparate universe too, and you want to make sure that you're partnering with those that are still delivering you those premium financial returns, but also delivering on the impact side as well, because that's an area where there is a lot of dispersion in terms of how impact is measured and reported, and these are all crucial factors. I think that doing so via some of the smartest fund managers is the best way to do it.

OLIVER GREGSON:

I can see that Ilaria's been having great fun, everyone, with internet, the joys of working from home.

ILARIA CALABRESI:

Can you hear me now? I think my internet is patchy, apologies, everyone.

So Mark, I was saying why don't you then give us an example of one of the companies that the manager will invest in. So you don't invest directly in companies, but the managers will do. And maybe if we pull up slide 17, which ties us back to some of the themes we were discussing, could we call out an example of a company as one of these?

MARK HEMPSTEAD:

Yeah, sure. There's many. Look at transportation. So we talked about the future of transport. You showed a chart earlier which talked about the potential increase in sales of electric vehicles. The fund that we're partnering with now looked at this and said okay, we look 10 years into the future and think there'll be more electric vehicles on the road, but then we look at consumer demand and don't feel that adoption has met that overall demand. So in research with consumers they found that it was because charging was a bit of a pain, there wasn't enough charging stations and infrastructure in local communities. And when they did more research they found out that utilities were actually ones that kind of pushed back a bit because they feared increasing the number of charging stations would overwhelm their local energy grids. So this manager tried to combat the solution. They went out and basically they found a software company which - I'm skipping through a lot of this or over-simplifying - but it helps to manage the charging demand across a utility grid, so it can take strain from one area and balance it out with another. It essentially avoids that problem that they thought would come of overwhelming the electricity grid. You clear that hurdle and now it allows for increased charging stations to be put in communities, increased adoption overall.

So that's one quick example, but it's taking the broad electric vehicles, which we know is a theme in the future, but then looking at a specific problem that is perhaps prohibiting or slowing growth in adoption and seeing how you can use technological innovation to address that.

LANCE SCHIFF:

Ilaria, when I look at this chart one of my immediate reactions is these things aren't necessarily mutually exclusive. When I think of renewable energy, efficiency and transportation there are certainly companies that are participating effectively in all that, and the managers who are making these investments are certainly considering that as a broader theme.

And when I think back to your question that you posed earlier, and I mentioned some of the sector relative bets that we have in the portfolio it's because...

ILARIA CALABRESI:

I'm very sorry, Lance, to interrupt, maybe if we can go to slide 22 on that, so we can see how some of these are embedded in your portfolio, thank you.

LANCE SCHIFF:

Yeah, thank you. We certainly haven't raised this concept of a transition to a lower carbon economy. And if I think back to a portfolio I ran years ago, focused on emerging markets, we took this long term view that what you see in emerging markets was a growth of the emerging market consumer. The consumer sectors were at the time - this is 10 years ago now - very under-represented in the index. And I would say similarly you have a number of companies that are under-represented as it relates to their potential to providing solutions, whether revenue generating or cost savings, and the transition to a lower carbon economy.

So when we look at our portfolio we have more companies that have better sustainable impact than the board index, as we've made investments with managers such as Impax, as well as with Mirova that have more of a dedicated focus towards some of these themes. And examples would include companies like Schneider Electric or Waste Management or American Water Works to kind of name a few. Not that I'm endorsing those businesses, but those are examples of companies that the managers that we invest with have had investments in today.

MARK HEMPSTEAD:

Lance, I'd make one more comment, I know I'm jumping in, but I think the most striking thing about across public and private markets is we say this is not a trend, this is not a sector vertical of I can invest in sustainability or other sectors. This is a horizontal covering every single sector. It is a mobilisation of capital across industries and I think that is what is so promising and so exciting about trying to find investment opportunities as it can be from industrial to consumer products to healthcare, to technology, software, e-commerce. It really is seen across the spectrum and that's what it is so exciting about trying to find opportunities toady, because they are robust.

ILARIA CALABRESI:

Great. Thank you, Mark.

I just want to be mindful of time. I was checking we had received a question from the line around the UN sustainable development goals. Mark, so I think this is more linked to you - how the UN sustainable development goals can be used as investors, especially in the private market, as an investment framework. And so maybe broadening this question, Mark, can you help us to understand how does investment opportunities that you were just talking about really create an impact and how one can measure, actually, the impact that is being created?

OLIVER GREGSON:

And maybe pop up slide 16, Mohesh.

MARK HEMPSTEAD:

So the UN sustainable development goals are a fantastic thing. I mean it sets the guide posts, it's the blueprint, it's the generally agreed consensus on what are the most important factors that we need to advance. It's also broad. It covers a number of different areas. So we've taken those and you can see a lot of these here and tried to segment them into tangible areas of potential investment. So climate solutions, the environment, that's one I talked about. Health and wellness that I think incorporates a lot of the food systems which is a massive issue and a massive, I guess, opportunity for improvement going forward. And then inclusive growth, that's financial services, that's quality education, gender equality, all these different factors.

So this is giving the blueprint for where we try to find opportunities and that feeds into that page which we showed before with those individual investment teams which permeate through public and private markets.

I think an important factor which maybe isn't your direct question, but impact investing has seen a number of new entrants, increased engagement by investors, that's all incredibly promising, but that also comes with challenges. It's easy to measure financial return, it's far more difficult to measure impact in trying to distinguish genuine impact versus with the term that people use as green washing.

UN sustainable development goals give the necessary focus on where to look, but I can invest in McDonald's in the name of Zero Hunger, that's a much different story from trying to really look at the broad impact that you can have. I think it's crucial to get that piece right. A lot of the funds are participating in ways to try to reach some type of guidelines or a consensus in measuring the impact. But it's also where we're spending a lot of time. You speak about trying to have direct positive measurable impact against strong financial performance. The latter's easy, the former is what really takes digging and what we spend a lot of our time and diligence and research in looking at when we're considering who to partner with.

ILARIA CALABRESI:

Great, thank you.

LANCE SCHIFF:

Ilaria, I just want to comment. Many of Oliver's comments up front, one of which talked about J.P. Morgan, which as everyone knows is one of the world's largest and most prominent companies, as noted earlier some of what we're doing are specifically tied to the sustainable development goals. The sustainable development goals give companies a framework in the same way that the Sustainable Accounting Standards Board does, in the same way that the TCFD does. So what you've really observed here and the way I think about this, and regulators were mentioned up front, is regulators whether they be non-government organisations or true government based regulators, they are very much recognised that account owners, so think endowments, foundations, et cetera, asset managers, that they can impact them to ensure that money is being directed to and energy is being directed towards environmental, sustainable - excuse me - ESG, environmental, social and governance related goals.

And so that is very much impacting how investment is being made today, including in areas tied to sustainable development goals.

OLIVER GREGSON:

I would also just add, if I may, Ilaria, that on slide 20 I think we sort of capture both the theoretical, practical, quantitative, qualitative element of actually how we go about trying to onboard investment opportunities and managers within this space. I think the team have absolutely put right at the very centre of the manager selection process which Lance and his managers leverage, this process here which walks through the requirements that we ask of fund managers if they want to be part of our platform and part of our opportunity set for our clients to invest in.

This is a really rigorous process where we make sure that things like green washing, which is an issue where investments or opportunities can be made out to look more sustainable and more orientated to ESG than they actually are. And with the growth that we have seen and will continue to see for all of the underlying structural reasons that we will mention, that represents a very big risk I think for our audience listening today. So making sure that you've got a strong, rigorous and robust process that ensures the impact and application of the investment is true and that the integrity is there I think is very valuable.

ILARIA CALABRESI:

Great. Thank you, Oliver.

And I think you're right and this is absolutely a thing that we very much focus on. We have today more than $8 billion in our sustainable investing platform at J.P. Morgan, with over 96 strategies. And this process that Oliver was describing is really key to this.

And I'd add also to what Lance and Oliver were saying before, that this is something that will integrate much more also in the analysis of our traditional funds, because this is something that we believe that is not going away, as we said, and it's important to understand also how traditional managers are addressing some of these very important considerations.

So I just want to pause a second, unless there are other questions or comments from Oliver, Lance or Mark, any of you on the line, because in the interests of time, if not, I think we wrap it up here.

So maybe we do wrap it up. And what I'd like to say is I'm very glad we had this time today with Oliver, Mark and Lance to go through some of these very interesting and timely topics. And I think what we all walk away with today, and personally I think it's very clear to me, is that there are a lot of trends within the sustainable investment market, and there are tremendous opportunities for investors to capitalise on these. And so we believe, as we said, that this is the new normal, and a great way to achieve both successful long term outcomes, as well as strong risk adjusted returns.

OLIVER GREGSON:

Sorry, go on Ilaria. I just had a few final thoughts at the end if that's alright.

ILARIA CALABRESI:

Why don't you go ahead, Oliver.

OLIVER GREGSON:

I wanted to take the opportunity to thank really you, Mark and Lance for joining us today. The conversation is super interesting. There's so much content on this and it's clear that we could have talked much more. So I do want to take the opportunity also to thank all of you joining us today. We've got a wide-ranging audience from across Europe.

There is a lot more here to this. If this is of interest we have absolutely produced a number of very interesting thought pieces, investment opportunities and solutions that you can engage in this subject and in this content with. So please do take a moment to reach out to your relationship manager or your advisors to ask for any further information.

We will make the slides and the replay available. And perhaps just to close, going back to slide 3, as I mentioned at the beginning because of the opportunity that we see from this we are absolutely going to continue talking about this megatrend, the new normal, and these will be other opportunities for you to engage on this subject matter with us and a whole host of well-known third party speakers and experts on this subject matter.

Thanks very much for joining us, and hope to see you all again for our series starting in September. Have a good day. Thank you.