Targeting decarbonisation outcomes

Preparing portfolios for a low-carbon world using ETFs

ESG corporates

This is a marketing communication. Please refer to the prospectus of the UCITS and to the KIID/KID before making any final investment decisions. For Professional Clients / Qualified Investors only – not for Retail use or distribution.

With the climate challenge becoming ever more urgent, investors are increasingly looking to include climate investing solutions in their portfolios. The decarbonisation of portfolios is one of the most important objectives for climate investing.

Climate Transition Benchmark (CTB) ETFs or Paris Aligned Benchmark (PAB) ETFs can be an efficient way to achieve portfolio decarbonisation targets.

The JPM Carbon Transition Global Equity (CTB) UCITS ETF (JPCT) has been developed in line with the Paris Agreement and is designed to help investors manage the risks of climate change, capture the opportunities and contribute to solutions.

A framework for investing in the carbon transition

JPCT uses a proprietary research framework that aims to determine how well companies are prepared for the carbon transition by evaluating companies across three key pillars:

  • Managing emissions: Looking at companies’ production of direct (Scope 1) site emissions and indirect (Scope 3) consumer emissions and opportunities, as well as how they plan to manage and reduce emissions.

  • Resource management: How companies manage resources, including electricity (indirect “Scope 2” emissions from electricity usage), water and waste.

  • Managing climate-related risks: Both physical e.g. how well a company is positioned to withstand physical risks as a result of climate change; and reputational e.g. how well it incorporates sustainability considerations into its business.

Analysis of company performance against these three pillars forms the basis of our carbon transition investment framework.

The aim is to provide a comprehensive view of the carbon transition across global sectors and regions that takes into account upside as well as downside risks.

JPMAM April 24 chart 1

Souce: JPMAM

Using alternative data to broaden the opportunity set

Traditional sources of corporate information, such as company reports and analysis from third-party data providers, are useful in analysing whether companies are managing their businesses sustainably. However, this data can be inconsistent.

To address this issue, we rely on our expertise in artificial intelligence and big data, and a proprietary machine-learning tool, ThemeBot.

This tool uses natural language processing to screen more than 10,000 stocks globally, and rapidly analyses hundreds of millions of data sources – such as news articles, company reports, earnings transcripts and broker research – to identify stocks with the highest exposure to a theme.

JPM Carbon Transition Global Equity (CTB) UCITS ETF*

Our research framework is used to construct the J.P. Morgan Asset Management Carbon Transition Global Equity index, a proprietary benchmark that is designed to align with the European Union’s Climate Transition Benchmark standards.

The index leans into companies that are best prepared, and away from companies that are most exposed, to carbon transition.

By closely tracking our carbon transition index, JPCT* aims to provide a core global equity exposure, without taking regional and sector bets, and maintains a low tracking error to the MSCI World.

Our approach ensures at least a 30% reduction in carbon intensity relative to the MSCI World and a 7% year-on-year rate of decarbonisation. JPCT* launched in November 2020 and has assets under management of over $1.2bn.

This article first appeared in ETF Insider, ETF Stream's monthly ETF magazine for professional investors in Europe. To read the full edition, click here.

Important information

(*) FOR BELGIUM ONLY: Please note the acc share class of the ETF marked with an asterisk in this page are not registered in Belgium and can only be accessible for professional clients. Please contact your J.P. Morgan Asset Management representative for further information. The offering of Shares has not been and will not be notified to the Belgian Financial Services and Markets Authority (Autoriteit voor Financiële Diensten en Markten/Autorité des Services et Marchés Financiers) nor has this document been, nor will it be, approved by the Financial Services and Markets Authority. This document may be distributed in Belgium only to such investors for their personal use and exclusively for the purposes of this offering of Shares. Accordingly, this document may not be used for any other purpose nor passed on to any other investor in Belgium. This is a marketing communication and as such the views contained herein do not form part of an offer, nor are they to be taken as advice or a recommendation. 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. Past performance is not a reliable indicator of current and future results. There is no guarantee that any forecast made will come to pass. Investment decisions shall solely be made based on the latest available Prospectus, the Key Information Document (KID), any applicable local offering document and sustainability-related disclosures, which are available in English from your J.P. Morgan Asset Management regional contact or at www.jpmorganassetmanagement.ie. A summary of investor rights is available in English at https://am.jpmorgan. com/lu/investor-rights. J.P. Morgan Asset Management may decide to terminate the arrangements made for the marketing of its collective investment undertakings. Purchases on the secondary markets bear certain risks, for further information please refer to the latest available Prospectus. Our EMEA Privacy Policy is available at www.jpmorgan.com/emea-privacy-policy. This communication is issued in Europe (excluding UK) by JPMorgan Asset Management (Europe) S.à r.l. and in the UK by JPMorgan Asset Management (UK) Limited, which is authorised and regulated by the Financial Conduct Authority. In Switzerland, JPMorgan Asset Management Switzerland LLC (JPMAMS), Dreikönigstrasse 37, 8002 Zurich, acts as Swiss representative of the funds and J.P. Morgan (Suisse) SA, Rue du Rhône 35, 1204 Geneva, as paying agent. With respect to its distribution activities in and from Switzerland, JPMAMS receives remuneration which is paid out of the management fee as defined in the respective fund documentation. Further information regarding this remuneration, including its calculation method, may be obtained upon written request from JPMAMS. 09pr241902093507

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