According to Bloomberg Intelligence, the United States has already surpassed $28 billion in Socially Responsible Investing funds this year with that number expected to continue in 2021.
While some analysts were skeptical that the coronavirus pandemic might send investors back to more traditional investments, it may have instead awakened the sleeping giant (the United States) to trends that European institutional investors were already going towards…. issues such as climate change and other options under the umbrella of impact investing.
So far, ETFs are leading the way in the United States as private banks, family offices and even pensions start to invest in a meaningful way.
JP Morgan has decided to join the market for the first time with an ESG product. The JP Morgan Carbon Transition U.S. Equity exchange traded fund has already hit the market as the year comes to a close. The fund has a passive management strategy focused on companies looking to reduce the world’s carbon footprint.
A JP Morgan spokesperson stated that the focus on carbon transition is because it is quantifiable and easy to understand. Private clients have been raising the issue, which helped JP Morgan’s decision to launch the product, particularly from sophisticated and informed investors. The three evaluation focuses are risk management, resource management and emission.
JP Morgan is not just looking to find offenders, a spokesman said, but really to find those companies that are proactive and solution oriented. This is not a watchdog fund.
Companies that are transitioning, even if at present are heavy carbon-producing corporations, will be a focus as it shows a forward looking and innovative approach. The focus is not just that the companies are becoming more compliant with standards, but the bet is that they are positioned for future profit growth.
Ironically, some of the world’s largest investors are ahead of public sentiment in the United States when it comes to issues such as climate change. Large pools of capital are recognizing there are opportunities to make impressive returns while also practicing good corporate citizenship.
Private clients and family offices are attracted to these investments because they want investments to reflect their values.