Investing
Sustainable investing: Here’s what you need to know
Key takeaways
- Sustainable investing has seen increasing momentum, driven by the idea that an ethical approach to investing can drive long-term growth while making a positive impact.
- We examine four sustainable investing strategies and consider the role they could play in helping you meet your financial goals.
- It is important to conduct due diligence when evaluating sustainable investments to ensure that they follow through on claims of sustainability.
Sustainable investing allows you to invest with intention by aligning your portfolio with your principles.
Sustainable investing has had increasing momentum. According to the U.S. SIF Foundation’s 2020 Report on US Sustainable and Impact Investing Trends, as of year-end 2019, one out of every three dollars under professional management in the U.S. – $17.1 trillion – was managed according to sustainable investing strategies.
There are several reasons investors are drawn to sustainable investing, including personal values and the belief that sustainable investing can drive long-term growth and have a positive impact. In addition, there are several different approaches that sustainable investors can adopt when using the discipline.
“Extending the sustainability lens to an individual’s finances is something many investors may not have considered. Sustainability is something that people are increasingly considering in all aspects of their lives – the environmental impact of their car choice or the clothes purchases made based on the labor standards of manufacturing companies. So why not your finances?” said Christian Ach, an Executive Director and Financial Advisor with J.P. Morgan Wealth Management. “By better understanding clients’ goals, sustainable investing should be empowering for investors to make their money matter to meet more than just their financial goals and invest with intent.”
Learn which of the four sustainable investing approaches might work for you. Many investors use multiple approaches simultaneously.
Values-based investing
Values-based investing can help you personalize your portfolio to be aligned with your values. As part of this approach, you can exclude single stocks or entire industries and sectors from your portfolio.
For example, Emily decided that she did not want to include tobacco stocks in her portfolio, so she met with an advisor to discuss options for removing these companies. Emily learned that values-based investing does not have to be an all-or-nothing approach. She decided to draw the line at companies that earn at least half of their revenue from the product she doesn’t support, although you might have a different standard you are comfortable with.
Other common negative screens include alcohol, gaming, fossil fuels, and firearms and weapons. But with values-based investing, you can also include positive screens in your portfolio to support causes you are passionate about, like clean energy or proper employer working accommodations.
ESG
Evan wants to integrate environmental, social and governance (ESG) considerations into his investment process to help achieve enhanced risk-adjusted returns over the long term. That’s why he adopted ESG into his investment strategy.
Specifically, ESG investing considers environmental, social and governance issues and risks throughout the investment process. It not only helps align your portfolio with your sustainable investing goals, but it allows you to consider factors that could affect a company’s performance. By evaluating ESG criteria alongside traditional financial considerations, you can identify opportunities to manage risk and invest in sustainably minded companies that position themselves for strong, long-term performance.
Looking at a company’s environmental impact could include evaluating the ways a company uses its resources and sets policies to protect the environment – specifically regarding waste disposal and recycling efforts, carbon emission and pollution, and water usage. Meanwhile, social issues for consideration could include a company’s policies toward health safety and quality standards, employment and pay equity, and human rights. Lastly, investors might look at a company’s governance quality by evaluating corporate policies and procedures, including board composition and diversity, executive compensation, and employee relations.
Impact investing
Impact investing provides the potential for you to generate a positive impact on society while possibly gaining a financial return. Investors who follow impact investing typically consider a company’s commitment to corporate social responsibility and its duty to positively serve society.
For example, Ian wanted an investment opportunity that allowed him to invest in companies that make a positive, measurable social or environmental impact on society. His advisor told him that impact investing could be the best fit for him since investors can choose specific industries where they want to make an impact, like education, health care, clean energy and agriculture.
Impact investments, particularly in the private markets, may be newer and less familiar, but that’s where an advisor can help. According to the Global Impact Investing Network, more than 88% of impact investors reported that their investments met or exceeded their financial expectations.1
Thematic investing
Tina wants to invest in new but lasting megatrends that are experiencing growth as a way to generate returns. That’s why she incorporated thematic investing to her portfolio’s strategy.
Thematic investing focuses on long-term trends versus specific companies or sectors. It allows you to support specific social or environmental issues within your portfolio – including climate change, urbanization and technology breakthroughs – by investing in renewable energy, health care, clean technology and more. You can even apply a gender lens to your portfolio so that it captures efforts specific to women. This approach is attractive to investors who are return focused and to investors who are passionate about a particular cause.
Due diligence
As with any investment, proper due diligence is paramount when evaluating sustainable investments. Because sustainable investing is becoming increasingly popular, some companies are trying to take advantage by greenwashing – or conveying a false impression that their products are sustainably sound.
No matter which form of sustainable investing you choose, it’s important to work with an advisor to conduct your due diligence before investing your money because some companies and investment funds “might not live up to the label or advertising,” Ach said.
Moreover, before you decide on which investment strategy to employ, figure out your investing goals – whether that be retirement, education or buying a home – and discuss those goals with your advisor. These goals, along with your personal values, could help determine which strategy is best for you.
Sustainable investing ("SI") and investment approaches that incorporate environmental social and governance ("ESG") objectives may include additional risks. SI 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 focused on particular sectors may be more concentrated in particular industries that share common factors 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 the investment manager will align with the beliefs or values of the investor. Investment managers can have different approaches to ESG or sustainable investing and can offer strategies that differ from the strategies offered by other investment managers with respect to the same theme or topic. 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. Additionally, 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.
Any name referenced is fictional, and may not be representative of other individual experiences.
IMPORTANT INFORMATION
Investment trends may not materialize. Sustainable Investing and investment return are not always aligned, and may lose value.
This material is for informational purposes only, and may inform you of certain products and services offered by J.P. Morgan’s wealth management businesses, part of JPMorgan Chase & Co. (“JPM”). Products and services described, as well as associated fees, charges and interest rates, are subject to change in accordance with the applicable account agreements and may differ among geographic locations. Not all products and services are offered at all locations. If you are a person with a disability and need additional support accessing this material, please contact your J.P. Morgan team or email us at accessibility.support@jpmorgan.com for assistance. Please read all Important Information.
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 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.
NON-RELIANCE
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.
IMPORTANT INFORMATION ABOUT 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 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.
LEGAL ENTITY, BRAND & REGULATORY INFORMATION
In the United States, bank deposit accounts and related services, such as checking, savings and bank lending, are offered by JPMorgan Chase Bank, N.A. Member FDIC.
JPMorgan Chase Bank, N.A. and its affiliates (collectively “JPMCB”) offer investment products, which may include bank-managed investment accounts and custody, as part of its trust and fiduciary services. Other investment products and services, such as brokerage and advisory accounts, are offered through J.P. Morgan Securities LLC (“JPMS”), a member of FINRA and SIPC. Annuities are made available through Chase Insurance Agency, Inc. (CIA), a licensed insurance agency, doing business as Chase Insurance Agency Services, Inc. in Florida. JPMCB, JPMS and CIA are affiliated companies under the common control of JPMorgan Chase & Co. Products not available in all states.
In Luxembourg, this material is issued by J.P. Morgan Bank Luxembourg S.A. (JPMBL), with registered office at European Bank and Business Centre, 6 route de Treves, L-2633, Senningerberg, Luxembourg. R.C.S Luxembourg B10.958. Authorized and regulated by Commission de Surveillance du Secteur Financier (CSSF) and jointly supervised by the European Central Bank (ECB) and the CSSF. J.P. Morgan Bank Luxembourg S.A. is authorized as a credit institution in accordance with the Law of 5th April 1993. In the United Kingdom, this material is issued by J.P. Morgan Bank Luxembourg S.A., London Branch, registered office at 25 Bank Street, Canary Wharf, London E14 5JP. Authorized and regulated by Commission de Surveillance du Secteur Financier and jointly supervised by the European Central Bank and the CSSF. Deemed authorized by the Prudential Regulation Authority. Subject to regulation by the Financial Conduct Authority and limited regulation by the Prudential Regulation Authority. Details of the Temporary Permissions Regime, which allows EEA-based firms to operate in the United Kingdom for a limited period while seeking full authorization, are available on the Financial Conduct Authority’s website. In Spain, this material is distributed by J.P. Morgan Bank Luxembourg S.A., Sucursal en España, with registered office at Paseo de la Castellana, 31, 28046 Madrid, Spain. J.P. Morgan Bank Luxembourg S.A., Sucursal en España is registered under number 1516 within the administrative registry of the Bank of Spain and supervised by the Spanish Securities Market Commission (CNMV). In Germany, this material is distributed by J.P. Morgan Bank Luxembourg S.A., Frankfurt Branch, registered office at Taunustor 1 (TaunusTurm), 60310 Frankfurt, Germany, jointly supervised by the Commission de Surveillance du Secteur Financier (CSSF) and the European Central Bank (ECB), and in certain areas also supervised by the Bundesanstalt für Finanzdienstleistungsaufsicht (BaFin). In Italy, this material is distributed by J.P. Morgan Bank Luxembourg S.A., Milan Branch, registered office at Via Cordusio 3, 20123 Milano, Italy, and regulated by Bank of Italy and the Commissione Nazionale per le Società e la Borsa (CONSOB). In the Netherlands, this material is distributed by J.P. Morgan Bank Luxembourg S.A., Amsterdam Branch, with registered office at World Trade Centre, Tower B, Strawinskylaan 1135, 1077 XX, Amsterdam, The Netherlands. J.P. Morgan Bank Luxembourg S.A., Amsterdam Branch is authorized and regulated by the Commission de Surveillance du Secteur Financier (CSSF) and jointly supervised by the European Central Bank (ECB) and the CSSF in Luxembourg; J.P. Morgan Bank Luxembourg S.A., Amsterdam Branch is also authorized and supervised by De Nederlandsche Bank (DNB) and the Autoriteit Financiële Markten (AFM) in the Netherlands. Registered with the Kamer van Koophandel as a branch of J.P. Morgan Bank Luxembourg S.A. under registration number 71651845. In Denmark, this material is distributed by J.P. Morgan Bank Luxembourg, Copenhagen Br, filial af J.P. Morgan Bank Luxembourg S.A. with registered office at Kalvebod Brygge 39-41, 1560 København V, Denmark. J.P. Morgan Bank Luxembourg, Copenhagen Br, filial af J.P. Morgan Bank Luxembourg S.A. is authorized and regulated by Commission de Surveillance du Secteur Financier (CSSF) and jointly supervised by the European Central Bank (ECB) and the CSSF. J.P. Morgan Bank Luxembourg, Copenhagen Br, filial af J.P. Morgan Bank Luxembourg S.A. is also subject to the supervision of Finanstilsynet (Danish FSA) and registered with Finanstilsynet as a branch of J.P. Morgan Bank Luxembourg S.A. under code 29009. In Sweden, this material is distributed by J.P. Morgan Bank Luxembourg S.A., Stockholm Bankfilial, with registered office at Hamngatan 15, Stockholm, 11147, Sweden. J.P. Morgan Bank Luxembourg S.A., Stockholm Bankfilial, is authorized and regulated by Commission de Surveillance du Secteur Financier (CSSF) and jointly supervised by the European Central Bank (ECB) and the CSSF. J.P. Morgan Bank Luxembourg S.A., Stockholm Bankfilial is also subject to the supervision of Finansinspektionen (Swedish FSA). Registered with Finansinspektionen as a branch of J.P. Morgan Bank Luxembourg S.A. In France, this material is distributed by JPMorgan Chase Bank, N.A. (“JPMCB”), Paris branch, which is regulated by the French banking authorities Autorité de Contrôle Prudentiel et de Résolution and Autorité des Marchés Financiers. In Switzerland, this material is distributed by J.P. Morgan (Suisse) S.A., which is regulated in Switzerland by the Swiss Financial Market Supervisory Authority (FINMA).
In Hong Kong, this material is distributed by JPMCB, Hong Kong branch. JPMCB, Hong Kong branch is regulated by the Hong Kong Monetary Authority and the Securities and Futures Commission of Hong Kong. In Hong Kong, we will cease to use your personal data for our marketing purposes without charge if you so request. In Singapore, this material is distributed by JPMCB, Singapore branch. JPMCB, Singapore branch is regulated by the Monetary Authority of Singapore. Dealing and advisory services and discretionary investment management services are provided to you by JPMCB, Hong Kong/Singapore branch (as notified to you). Banking and custody services are provided to you by JPMCB Singapore Branch. The contents of this document have not been reviewed by any regulatory authority in Hong Kong, Singapore or any other jurisdictions. You are advised to exercise caution in relation to this document. If you are in any doubt about any of the contents of this document, you should obtain independent professional advice. For materials which constitute product advertisement under the Securities and Futures Act and the Financial Advisers Act, this advertisement has not been reviewed by the Monetary Authority of Singapore. JPMorgan Chase Bank, N.A. is a national banking association chartered under the laws of the United States, and as a body corporate, its shareholder’s liability is limited.
With respect to countries in Latin America, the distribution of this material may be restricted in certain jurisdictions. We may offer and/or sell to you securities or other financial instruments which may not be registered under, and are not the subject of a public offering under, the securities or other financial regulatory laws of your home country. Such securities or instruments are offered and/or sold to you on a private basis only. Any communication by us to you regarding such securities or instruments, including without limitation the delivery of a prospectus, term sheet or other offering document, is not intended by us as an offer to sell or a solicitation of an offer to buy any securities or instruments in any jurisdiction in which such an offer or a solicitation is unlawful. Furthermore, such securities or instruments may be subject to certain regulatory and/or contractual restrictions on subsequent transfer by you, and you are solely responsible for ascertaining and complying with such restrictions. To the extent this content makes reference to a fund, the Fund may not be publicly offered in any Latin American country, without previous registration of such fund’s securities in compliance with the laws of the corresponding jurisdiction. Public offering of any security, including the shares of the Fund, without previous registration at Brazilian Securities and Exchange Commission—CVM is completely prohibited. Some products or services contained in the materials might not be currently provided by the Brazilian and Mexican platforms.
JPMorgan Chase Bank, N.A. (JPMCBNA) (ABN 43 074 112 011/AFS Licence No: 238367) is regulated by the Australian Securities and Investment Commission and the Australian Prudential Regulation Authority. Material provided by JPMCBNA in Australia is to “wholesale clients” only. For the purposes of this paragraph the term “wholesale client” has the meaning given in section 761G of the Corporations Act 2001 (Cth). Please inform us if you are not a Wholesale Client now or if you cease to be a Wholesale Client at any time in the future.
JPMS is a registered foreign company (overseas) (ARBN 109293610) incorporated in Delaware, U.S.A. Under Australian financial services licensing requirements, carrying on a financial services business in Australia requires a financial service provider, such as
J.P. Morgan Securities LLC (JPMS), to hold an Australian Financial Services Licence (AFSL), unless an exemption applies. JPMS is exempt from the requirement to hold an AFSL under the Corporations Act 2001 (Cth) (Act) in respect of financial services it provides to you, and is regulated by the SEC, FINRA and CFTC under U.S. laws, which differ from Australian laws. Material provided by JPMS in Australia is to “wholesale clients” only. The information provided in this material is not intended to be, and must not be, distributed or passed on, directly or indirectly, to any other class of persons in Australia. For the purposes of this paragraph the term “wholesale client” has the meaning given in section 761G of the Act. Please inform us immediately if you are not a Wholesale Client now or if you cease to be a Wholesale Client at any time in the future.
This material has not been prepared specifically for Australian investors. It:
- May contain references to dollar amounts which are not Australian dollars;
- May contain financial information which is not prepared in accordance with Australian law or practices;
- May not address risks associated with investment in foreign currency denominated investments; and
- Does not address Australian tax issues.
References to “J.P. Morgan” are to JPM, its subsidiaries and affiliates worldwide.
© 2022 JPMorgan Chase & Co. All rights reserved.
