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What does it mean to invest sustainably—and is it right for you?Video

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Transcript: <p>Aubre: Sustainable investing means different things for different people.</p> <p>At J.P.Morgan, we have identifiedfive different pathways for clients to take whenthinking about how to invest in sustainable investments. Exclusionary, negative screening.</p> <p>ESG integration, which is environmental,social, and governance factors. Positive screening, thematic, and impact.</p> <p>Exclusionary/negative screening tends to be area that clients want to remove from their portfolio,that can typically be tobacco, gambling, and alcohol stocks.</p> <p>ESG integration, which is also environmental,social, and governance factors, is aligningclients' interests with the types of stocks that they own.</p> <p>This tends to focus on things likeowning companies that are having a lower carbon footprint,where they're better with their employees and how they're paid,and also thinking about governance is are theyvoting their proxies and how is their board made up.</p> <p>Positive screening, you're focusing onowning companies that have the higher rankingsas it relates to the issue factors. So if you think about a sector like energy,you're going to overweight companieswithin the energy sector that have a higher ESG rating because they have a lower carbon footprintwhere you're gonna have less exposureto companies that have fossil fuel exposure.</p> <p>Thematic tends to be a more growing areain the market where it focuses on single areas or themeslike energy efficiency, water utilization,healthcare and AIDS.</p> <p>Then you have impact.</p> <p>Impact is more on the private equity, private debt sideand what that does is really look to invest in projectslike community investment projectsor issues like bringing water to Africa.We typically try to define our search objectives. So what kind of managers are we looking for?</p> <p>Are we looking to fill a gap on the portfolio,whether that'd be a specific asset class?</p> <p>Or is there a type, whether that be an exclusionary manageror an ESG factor integration manager,typically starts the process.</p> <p>Then what we do is we go out and we look forthe best managers that exist within those particular areas.</p> <p>We create a short list of managersthat we feel best fit that need.We go onsite, we talk to the managers,we go and kick the tires.</p> <p>Once we've decided to move forward with that manager,we do a deep dive, creating a presentation,talking through their philosophy and their process. And then we take that to our Investment Review Committee for review.</p> <p>The due diligence process that we use at J.P.Morgan has traditionally been focused on four P's.</p> <p>Those four P's include your people,process, philosophy, and performance.</p> <p>For people, it's about the firm, it's the firm culture,it's the portfolio managers that are there.</p> <p>How much experience those portfolio managers have.</p> <p>How long have they been managing certain portfolios?</p> <p>What does the team structure look like?We really want to understand exactly how the team dynamicworks to create the sustainable strategies.</p> <p>For the philosophy piece, we really want to understand the approach a strategy is taking.</p> <p>Why are they investing the way that they are?</p> <p>What is their objective at the end of the day when thinking about their strategy?</p> <p>And then process ties into that and it's becauseit's how you put that philosophy to work.</p> <p>What approach are they going to take, what steps?</p> <p>Are they going to do fundamental analysis, is it going to be more quantitative, and then how do they utilize those analysts to invest?</p> <p>What steps are they taking when thinking about portfolios?</p> <p>Is it more top-down or bottom-up in the stock selection process?</p> <p>And then finally it's performance.</p> <p>So what does that track record look like?</p> <p>How long of a track record do they have?</p> <p>And when you think about sustainability strategies we also want to know what has the ESG component,has it been additive to the performance over time?<br> </p>

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