7 ESG Essentials Investors Need to Know
From consumers to policy makers, many economic actors are backing sustainability—and creating a powerful portfolio opportunity for investors.
The use of environmental, social, and governance factors (altogether known as ESG) is increasingly informing investment decisions. But although ESG investing has grown in prominence in a few short years, there’s a disconnect:
- 69% of retail investors are interested in ESG, yet…
- Only 10% actually invest in products that incorporate ESG factors
To properly capitalize on this trend, it’s important to first fully understand it.
According to J.P. Morgan Asset Management, here are seven essentials that can help investors understand the growing importance of ESG investing.
1. ESG considerations are affecting consumer preferences and attitudes.
The public is paying attention to how companies position themselves, to ensure their purchases will be sustainable.
In a survey, respondents around the world were asked whether they agree with the question, “I buy from companies that are conscious of protecting the environment.”
Here are the trends that emerged:
|🇭🇰 Hong Kong||31%||17%|
Source: J.P. Morgan Asset Management; PwC June 2021 Global consumer insights pulse survey. Data as of June 30, 2021.
Across markets, consumers in China seem to be the most environmentally inclined, but all countries surveyed exhibited a positive shift towards companies that support environmental protection.
Why it matters: Consumers are making decisions based on ESG considerations, and they’re voting with their wallets. This change has ripple effects, and is shifting from individuals to impacting higher levels, such as governments.
2. Policymakers are setting environmental and social goals.
Governments of the world’s top greenhouse gas (GHG) emitters are working towards a net zero future, in which GHG emissions are reduced or offset.
What is the current trajectory of GHG emissions (measured in tonnes per year of CO₂ equivalents, tCO₂e) and what is the gap we need to bridge in the race to net zero?
|Year||🇪🇺 EU (tCO₂e)||🇺🇸 U.S. (tCO₂e)||🇨🇳 China (tCO₂e)|
Source: J.P. Morgan Asset Management; Climate Action Tracker. Data as of June 30, 2021.
Why it matters: Altogether, around 60 countries—representing over half of global GHG emissions—have set ambitious net zero emissions targets for the coming decades.
3. For some, the shift to sustainability may be a headwind.
Traditional energy needs to account for a much smaller proportion of the global energy mix, if we are to achieve the goal of net zero emissions by 2050.
Here’s what each energy source needs to contribute in terms of their share (%) of the primary energy mix, compared to past trends:
Source: J.P. Morgan Asset Management; BP Energy Outlook 2020. Forecast is based on BP’s scenario for global net zero emissions by 2050. Data as of June 30, 2021.
Why it matters: The shift to renewable energy may pose a challenge for industries reliant on fossil fuels. Fortunately, it’s not too late for companies to transition.
4. ESG creates opportunities for those at the forefront of change.
Looking at the movement of global investment, billions of dollars are flowing into the energy transition.
|Year||Renewable energy||Storage, electrification,|
carbon capture, other
Source: J.P. Morgan Asset Management; Bloomberg NEF, BP Statistical, Eurostat, Lazard, METI. Storage, electrification, other includes hydrogen, carbon capture and storage, energy storage, electrified transport and electrified heat. Data as of June 30, 2021.
Why it matters: With interest expanding quickly, this provides a unique opportunity to tap into the nascent ESG market.
5. ESG covers more than climate—Social and Governance is growing too.
As the name suggests, ESG is all-encompassing, with a scope that goes far beyond the environment.
MSCI analyzed the corporate mentions of diversity and inclusion in earnings calls (four-quarter moving average for MSCI ACWI companies)—and found that they have almost doubled in the past two years.
Why it matters: This signals rising interest in the varied criteria that make up ESG investing.
6. ESG is affecting the investment landscape.
The demand for sustainable fixed income strategies is also growing rapidly, with global sustainable bond issuance growing over 25x between 2016-2020:
|Type of Bond Issuance||2012||2016||2020|
Source: J.P. Morgan Asset Management; Climate Bonds Initiative. Data as of 30 June 2021.
Why it matters: Growth and demand is high, and sustainable investing is not limited to equities—environmental and social projects have increasing access to financing.
7. ESG is changing the nature of investment flows.
Looking at the big picture, here’s what proportion of each country’s assets into sustainable strategies has evolved around the world:
J.P. Morgan Asset Management, Morningstar. Data as of 30 June 2021.
Why it matters: Although certain regions are leading the way, overall demand for sustainable funds is expected to continue on this upward trend.
As these seven ESG essentials make clear, sustainable investing is becoming a compelling vehicle for change worldwide. But incorporating ESG criteria into investing is as much about doing well financially, as it is about doing good.
Find out more at J.P. Morgan Asset Management’s dedicated sustainable investing hub.
For the purposes of MiFID II, the JPM Market Insights and Portfolio Insights programs are marketing communications and are not in scope for any MiFID II / MiFIR requirements specifically related to investment research. Furthermore, the J.P. Morgan Asset Management Market Insights and Portfolio Insights programs, as non-independent research, have not been prepared in accordance with legal requirements designed to promote the independence of investment research, nor are they subject to any prohibition on dealing ahead of the dissemination of investment research. This document is a general communication being provided for informational purposes only. It is educational in nature and not designed to be taken as advice or a recommendation for any specific investment product, strategy, plan feature or other purpose in any jurisdiction, nor is it a commitment from J.P. Morgan Asset Management or any of its subsidiaries to participate in any of the transactions mentioned herein. Any examples used are generic, hypothetical and for illustration purposes only. This material does not contain sufficient information to support an investment decision and it should not be relied upon by you in evaluating the merits of investing in any securities or products. In addition, users should make an independent assessment of the legal, regulatory, tax, credit, and accounting implications and determine, together with their own financial professional, if any investment mentioned herein is believed to be appropriate to their personal goals. Investors should ensure that they obtain all available relevant information before making any investment. Any forecasts, figures, opinions or investment techniques and strategies set out are for information purposes only, based on certain assumptions and current market conditions and are subject to change without prior notice. All information presented herein is considered to be accurate at the time of production, but no warranty of accuracy is given and no liability in respect of any error or omission is accepted. It should be noted that investment involves risks, the value of investments and the income from them may fluctuate in accordance with market conditions and taxation agreements and investors may not get back the full amount invested. Both past performance and yields are not reliable indicators of current and future results. J.P. Morgan Asset Management is the brand for the asset management business of JPMorgan Chase & Co. and its affiliates worldwide. To the extent permitted by applicable law, we may record telephone calls and monitor electronic communications to comply with our legal and regulatory obligations and internal policies. Personal data will be collected, stored and processed by J.P. Morgan Asset Management in accordance with our privacy policies at https://am.jpmorgan.com/global/privacy. This communication is issued by the following entities: In the United States, by J.P. Morgan Investment Management Inc. or J.P. Morgan Alternative Asset Management, Inc., both regulated by the Securities and Exchange Commission; in Latin America, for intended recipients’ use only, by local J.P. Morgan entities, as the case may be.; in Canada, for institutional clients’ use only, by JPMorgan Asset Management (Canada) Inc., which is a registered Portfolio Manager and Exempt Market Dealer in all Canadian provinces and territories except the Yukon and is also registered as an Investment Fund Manager in British Columbia, Ontario, Quebec and Newfoundland and Labrador. In the United Kingdom, by JPMorgan Asset Management (UK) Limited, which is authorized and regulated by the Financial Conduct Authority; in other European jurisdictions, by JPMorgan Asset Management (Europe) S.à r.l. In Asia Pacific (“APAC”), by the following issuing entities and in the respective jurisdictions in which they are primarily regulated: JPMorgan Asset Management (Asia Pacific) Limited, or JPMorgan Funds (Asia) Limited, or JPMorgan Asset Management Real Assets (Asia) Limited, each of which is regulated by the Securities and Futures Commission of Hong Kong; JPMorgan Asset Management (Singapore) Limited (Co. Reg. No. 197601586K), which this advertisement or publication has not been reviewed by the Monetary Authority of Singapore; JPMorgan Asset Management (Taiwan) Limited; JPMorgan Asset Management (Japan) Limited, which is a member of the Investment Trusts Association, Japan, the Japan Investment Advisers Association, Type II Financial Instruments Firms Association and the Japan Securities Dealers Association and is regulated by the Financial Services Agency (registration number “Kanto Local Finance Bureau (Financial Instruments Firm) No. 330”); in Australia, to wholesale clients only as defined in section 761A and 761G of the Corporations Act 2001 (Commonwealth), by JPMorgan Asset Management (Australia) Limited (ABN 55143832080) (AFSL 376919). For all other markets in APAC, to intended recipients only.
Our manager seeks to integrate environmental, social and governance (“ESG”) factors in the investment processes. ESG integration is the systematic integration of material ESG factors in company/issuer selection through research and risk management. It involves proprietary research on financial materiality of the ESG factors in relation to the relevant company/issuer and discretion to invest regardless of whether the company/issuer may be positively or negatively impacted by the ESG factors. Integration of ESG factors in investment processes does not imply the funds or strategies incorporate ESG factors as a key investment focus.
For U.S. only: If you are a person with a disability and need additional support in viewing the material, please call us at 1-800-343-1113 for assistance. Copyright 2021 JPMorgan Chase & Co. All rights reserved.
Smashing Atoms: The History of Uranium and Nuclear Power
Nuclear power is among the world’s cleanest sources of energy, but how did uranium and nuclear power come to be?
The History of Uranium and Nuclear Power
Uranium has been around for millennia, but we only recently began to understand its unique properties.
Today, the radioactive metal fuels hundreds of nuclear reactors, enabling carbon-free energy generation across the globe. But how did uranium and nuclear power come to be?
The above infographic from the Sprott Physical Uranium Trust outlines the history of nuclear energy and highlights the role of uranium in producing clean energy.
From Discovery to Fission: Uncovering Uranium
Just like all matter, the history of uranium and nuclear energy can be traced back to the atom.
Martin Klaproth, a German chemist, first discovered uranium in 1789 by extracting it from a mineral called “pitchblende”. He named uranium after the then newly discovered planet, Uranus. But the history of nuclear power really began in 1895 when German engineer Wilhelm Röntgen discovered X-rays and radiation, kicking off a series of experiments and discoveries—including that of radioactivity.
In 1905, Albert Einstein set the stage for nuclear power with his famous theory relating mass and energy, E = mc2. Roughly 35 years later, Otto Hahn and Fritz Strassman confirmed his theory by firing neutrons into uranium atoms, which yielded elements lighter than uranium. According to Einstein’s theory, the mass lost during the reaction changed into energy. This demonstrated that fission—the splitting of one atom into lighter elements—had occurred.
“Nuclear energy is incomparably greater than the molecular energy which we use today.”
—Winston Churchill, 1955.
Following the discovery of fission, scientists worked to develop a self-sustaining nuclear chain reaction. In 1939, a team of French scientists led by Frédéric Joliot-Curie demonstrated that fission can cause a chain reaction and filed the first patent on nuclear reactors.
Later in 1942, a group of scientists led by Enrico Fermi and Leo Szilard set off the first nuclear chain reaction through the Chicago Pile-1. Interestingly, they built this makeshift reactor using graphite bricks on an abandoned squash court in the University of Chicago.
These experiments proved that uranium could produce energy through fission. However, the first peaceful use of nuclear fission did not come until 1951, when Experimental Breeder Reactor I (EBR-1) in Idaho generated the first electricity sourced from nuclear power.
The Power of the Atom: Nuclear Power and Clean Energy
Nuclear reactors harness uranium’s properties to generate energy without any greenhouse gas emissions. While uranium’s radioactivity makes it unique, it has three other properties that stand out:
- Material Density: Uranium has a density of 19.1g/cm3, making it one of the densest metals on Earth. For reference, it is nearly as heavy (and dense) as gold.
- Abundance: At 2.8 parts per million, uranium is approximately 700 times more abundant than gold, and 37 times more abundant than silver.
- Energy Density: Uranium is extremely energy-dense. A one-inch tall uranium pellet contains the same amount of energy as 120 gallons of oil.
Thanks to its high energy density, the use of uranium fuel makes nuclear power more efficient than other energy sources. This includes renewables like wind and solar, which typically require much more land (and more units) to generate the same amount of electricity as a single nuclear reactor.
But nuclear power offers more than just a smaller land footprint. It’s also one of the cleanest and most reliable energy sources available today, poised to play a major role in the energy transition.
The Future of Uranium and Nuclear Power
Although nuclear power is often left out of the clean energy conversation, the ongoing energy crisis has brought it back into focus.
Several countries are going nuclear in a bid to reduce reliance on fossil fuels while building reliable energy grids. For example, nuclear power is expected to play a prominent role in the UK’s plan to reach net-zero carbon emissions by 2050. Furthermore, Japan recently approved restarts at three of its nuclear reactors after initially phasing out nuclear power following the Fukushima accident.
The resurgence of nuclear power, in addition to reactors that are already under construction, will likely lead to higher demand for uranium—especially as the world embraces clean energy.
Showcasing the Strength of Canadian Gold Mining
Canadian gold mining has grown to become a highly prolific industry, thanks to its geological riches and political stability.
Showcasing the Strength of Canadian Gold Mining
Gold mining has long played an integral role in shaping Canada’s cities and its modern day economy. The gold mining infrastructure that was built alongside the country’s towns in the 19th century has grown to provide $21.6 billion worth of exports for Canada in 2020.
When combined with the country’s superb geology, Canada’s jurisdictional strengths make it one of the most prolific and secure locations in the world for mining companies to explore, develop, and produce gold.
This infographic sponsored by Clarity Gold dives into how Canada has grown into a nation built for gold mining. Both in how the country facilitates the production of gold, and how the gold mining industry supports Canada’s economy and local communities.
Canada’s Golden Geology and Production
Gold is scattered across the Canadian landscape in a variety of gold mining regions and districts, with the most prolific located between Ontario and Québec.
The 2 billion year-old Archean greenstone belt that arcs through the centre of the Canadian shield provides the foundation for the Abitibi gold belt, which has produced more than 190Moz of gold.
|Gold Mining District/Region||Provinces/Territories||Gold Produced (million troy ounces)|
|Abitibi Greenstone Belt||Ontario and Québec||>190Moz|
|Trans-Hudson Corridor||Saskatchewan and Manitoba||>40Moz|
|Golden Triangle||British Columbia||>5Moz|
Source: Resource World
The Trans-Hudson corridor in Saskatchewan and Manitoba has produced more than 40Moz of gold, while the Red Lake mining district of eastern Ontario and the Golden Triangle in British Columbia have delivered >30Moz and >5Moz respectively.
Last year, Canada’s top 10 mines produced 3.26 million ounces of gold combined, equating to more than $6 billion worth of the yellow precious metal.
|Mine||Province/Territory||Primary Owner/Operator||2020 Gold Production (thousand troy ounces)|
|Canadian Malartic||Québec||Yamana/Agnico Eagle||569Koz|
|Detour Lake||Ontario||Kirkland Lake||517Koz|
|LaRonde (incl. LZ5)||Québec||Agnico Eagle||350Koz|
|Rainy River||Ontario||New Gold||229Koz|
Ontario and Québec are the powerhouse provinces of Canadian gold production, hosting 30 mines between the two provinces.
A Nation Built for Gold Mining
Canada’s politically secure nature and established permitting process has resulted in five of the 10 largest gold mining companies having projects in Canada. Three Canadian provinces (Saskatchewan, Québec, and Newfoundland & Labrador) are among the world’s 10 most attractive mining investment jurisdictions according to the Fraser Institute’s 2020 survey of mining companies.
Beyond the legal and permitting strengths of the nation, Canada’s extensive network of capital markets has enabled the Canadian companies to dominate the world’s gold mining industry. With Agnico Eagle and Kirkland Lake’s upcoming merger, three of the world’s top five gold mining companies will be headquartered in Canada.
The Canadian equity markets are a key driver of the world’s gold exploration and development funding, with the TSX having raised $7.5 billion in mining equity capital in 2020. Gold still remains the major driver of these money flows, with gold mining companies making up more than half of Canada’s mining exploration budget.
How Gold Mining Gives Back to Canada
Ever since the first discoveries of gold across Canada in the 1800s, the development and production of gold mines has been the foundation for many towns and merchants across the nation.
Today, Canada’s mining industry directly employs more than 392,000 Canadians, with the sector offering the highest average annual industrial rate of pay in the country at $123,000. The industry is also proportionally the largest private sector employer of Indigenous peoples in Canada.
From the nation’s prolific gold deposits to its network of funding through robust public markets for mining equities, gold mining has grown into one of Canada’s most important strengths. The discovery, development, and production of the precious metal will remain an essential pillar of Canada’s economy.
Technology3 weeks ago
Mapped: The Fastest (and Slowest) Internet Speeds in the World
Datastream3 weeks ago
Ranked: The Top 10 Richest People on the Planet
Personal Finance1 week ago
How Does Your Personality Type Affect Your Income?
Markets2 weeks ago
The World’s 100 Most Valuable Brands in 2021
Markets4 weeks ago
The Best Selling Vehicles in America, By State
Datastream2 weeks ago
Visualizing the Fastest Trains in the World
Misc2 weeks ago
A Visual Introduction to the Dwarf Planets in our Solar System
Misc3 weeks ago
Mapped: The 50-Year Evolution of Walt Disney World