Investing in employees makes good business sense
This key ESG factor is top of mind for investors and companies alike. Learn more about why.Learn More
ESG investing means considering environmental, social and governance issues and risks during the investment process. In addition to helping you align your portfolio with your sustainable investing goals, it’s also consciously investing your capital. That’s because these factors may have a positive societal affect – not just influence a company’s bottom line.
Evaluating the ways companies use resources and set policies to limit environmental effect and protect the environment. Examples include waste disposal, recycling efforts and carbon emission.
Evaluating company policies and practices toward employees, suppliers, customers and communities. Social factors include human rights, employment and pay equality, health safety and more.
Evaluating corporate policies and procedures such as board composition, diversity, business ethics and others. These are all essential tenets of sound corporate governance.
Companies that outperform on ESG factors (so called “ESG leaders”)1 often become more competitive than their peers by more efficiently using company resources, effectively managing human capital and strengthening supply chains.
As seen in the performance chart, companies with higher ESG ratings outperformed those with lower ESG ratings. ESG leaders tend to be more profitable and generate above-average returns, providing opportunities for more cash to be returned to shareholders over time.
Climate and sustainability factors are increasingly material to building stronger, more resilient portfolios for clients. Regardless of strategy, leading investors are taking a research-first approach to integrating these factors into their investment and ownership decisions.
Our outcome-based reporting metrics show clients their exposure to specific values-based considerations. Clients can view certain indicators, such as “tons of carbon avoided” or “number of trees planted” across eligible securities. This information will provide investors with a more nuance view of the ESG exposure of their holdings, which may be used to guide their future investment elections.
*All information is for example purposes only
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Sustainable investing (“SI”) and investment approaches that incorporate environmental, social and governance (“ESG”) objectives may include additional risks. Sustainable investing strategies, including ESG SMAs, mutual funds and ETFs may limit the types and number of investment opportunities and, as a result, could underperform other strategies that do not have an ESG or sustainable focus. Certain strategies, such as thematic strategies focused on a particular sector, may be more concentrated in particular industries that share common characteristics and can be subject to similar business risks and regulatory burdens. Investing on the basis of sustainability/ESG criteria can involve qualitative and subjective analysis and there can be no assurance that the methodology utilized, or determinations made, by J.P. Morgan, or a third party investment manager selected by J.P. Morgan, will align with the beliefs or values of the investor. Additionally, other investment managers, including J.P. Morgan asset management affiliates, can have a different approach to ESG or sustainable investing and can offer strategies that differ from the strategies offered by the investment manager with respect to the same theme or topic. When evaluating investments, an investment manager is dependent upon information and data that may be incomplete, inaccurate or unavailable, which could cause the manager to incorrectly assess an investment’s ESG/ SI performance.
In making investment decisions, J.P. Morgan will use data and information, including but not limited to, industry classifications, industry grouping, ratings, scores, and issuer screening provided by a third party data provider and such data and information will not have been validated by J.P. Morgan and could be incomplete or erroneous. ESG or sustainable investing is not a uniformly defined concept and scores or ratings may vary across data providers that use similar or different screens based on their process for evaluating ESG characteristics. The companies selected as demonstrating positive ESG characteristics may not be the same companies selected by other investment managers that use similar ESG screens or methodologies. In addition, companies selected might not exhibit positive or favorable ESG characteristics. Sustainable investing practices differ by asset class, country, region, and industry and are constantly evolving, and a company’s sustainable investing practices and J.P. Morgan’s assessment of such practices can change over time.
J.P. Morgan takes a global approach to sustainable investing and the solutions offered through our sustainable investing platform meet our internally defined criteria for a sustainable investment. 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 degree of divergence as to 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) certain criteria must be satisfied in order for a product to be classified as a “sustainable investment”. Any references to “sustainable investing”, “SI” or “ESG” in this material are intended as references to our internally defined criteria only and not to any jurisdiction-specific regulatory definition.
GENERAL RISKS & CONSIDERATIONS
Any views, strategies or products discussed in this material may not be appropriate for all individuals and are subject to risks. Investors may get back less than they invested, and past performance is not a reliable indicator of future results. Asset allocation/diversification does not guarantee a profit or protect against loss. Nothing in this material should be relied upon in isolation for the purpose of making an investment decision. You are urged to consider carefully whether the services, products, asset classes (e.g. equities, fixed income, alternative investments, commodities, etc.) or strategies discussed are suitable to your needs. You must also consider the objectives, risks, charges, and expenses associated with an investment service, product or strategy prior to making an investment decision. For this and more complete information, including discussion of your goals/situation, contact your J.P. Morgan team.
Certain information contained in this material is believed to be reliable; however, JPM does not represent or warrant its accuracy, reliability or completeness, or accept any liability for any loss or damage (whether direct or indirect) arising out of the use of all or any part of this material. No representation or warranty should be made with regard to any computations, graphs, tables, diagrams or commentary in this material, which are provided for illustration/ reference purposes only. The views, opinions, estimates and strategies expressed in this material constitute our judgment based on current market conditions and are subject to change without notice. JPM assumes no duty to update any information in this material in the event that such information changes. Views, opinions, estimates and strategies expressed herein may differ from those expressed by other areas of JPM, views expressed for other purposes or in other contexts, and this material should not be regarded as a research report. Any projected results and risks are based solely on hypothetical examples cited, and actual results and risks will vary depending on specific circumstances. Forward-looking statements should not be considered as guarantees or predictions of future events.
Nothing in this document shall be construed as giving rise to any duty of care owed to, or advisory relationship with, you or any third party. Nothing in this document shall be regarded as an offer, solicitation, recommendation or advice (whether financial, accounting, legal, tax or other) given by J.P. Morgan and/or its officers or employees, irrespective of whether or not such communication was given at your request. J.P. Morgan and its affiliates and employees do not provide tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors before engaging in any financial transactions.
YOUR INVESTMENTS AND POTENTIAL CONFLICTS OF INTEREST
Conflicts of interest will arise whenever JPMorgan Chase Bank, N.A. or any of its affiliates (together, “J.P. Morgan”) have an actual or perceived economic or other incentive in its management of our clients’ portfolios to act in a way that benefits J.P. Morgan. Conflicts will result, for example (to the extent the following activities are permitted in your account): (1) when J.P. Morgan invests in an investment product, such as a mutual fund, structured product, separately managed account or hedge fund issued or managed by JPMorgan Chase Bank, N.A. or an affiliate, such as J.P. Morgan Investment Management Inc.; (2) when a J.P. Morgan entity obtains services, including trade execution and trade clearing, from an affiliate; (3) when J.P. Morgan receives payment as a result of purchasing an investment product for a client’s account; or (4) when J.P. Morgan receives payment for providing services (including shareholder servicing, recordkeeping or custody) with respect to investment products purchased for a client’s portfolio. Other conflicts will result because of relationships that J.P. Morgan has with other clients or when J.P. Morgan acts for its own account.
Investment strategies are selected from both J.P. Morgan and third-party asset managers and are subject to a review process by our manager research teams. From this pool of strategies, our portfolio construction teams select those strategies we believe fit our asset allocation goals and forward-looking views in order to meet the portfolio's investment objective.
As a general matter, we prefer J.P. Morgan managed strategies. We expect the proportion of J.P. Morgan managed strategies will be high (in fact, up to 100 percent) in strategies such as, for example, cash and high-quality fixed income, subject to applicable law and any account-specific considerations.
While our internally managed strategies generally align well with our forward-looking views, and we are familiar with the investment processes as well as the risk and compliance philosophy of the firm, it is important to note that J.P. Morgan receives more overall fees when internally managed strategies are included. We offer the option of choosing to exclude J.P. Morgan managed strategies (other than cash and liquidity products) in certain portfolios.
The Six Circles Funds are U.S.-registered mutual funds managed by J.P. Morgan and sub-advised by third parties. Although considered internally managed strategies, JPMC does not retain a fee for fund management or other fund services.
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