JPMorgan: Funds Focusing on Sustainability Will Double in Asia

Environmental, social, and governance (ESG) investing is no doubt becoming a worldwide phenomenon, with global investment firms like JP Morgan forecasting exponential growth for sustainability funds in Asia.

Per a CNBC report, sustainability funds were able to double last year and “are set to double in Asia again, according to JPMorgan’s head of environmental, social and governance (ESG) research.”

“We’ve seen the amount of asset under management dedicated to ESG investing double in the last year,” said Elaine Wu.

“We expect that to double again, in Asia, for the coming year,” Wu told CNBC’s “Capital Connection.”

Aside from giving investors the opportunity to fund the issues they care about, the strong performance of ESG is an added bonus. Wu cited other reasons for the growth of sustainability funds in Asia.

“The first is that regulators in Asia are requiring public companies to disclose their ESG data,” the CNBC report added. “Second, pension funds and endowment funds are requesting that their asset managers take ESG factors into account during the investment process.”

“What you’re going to see is the ‘E’ pillar of ESG … gaining importance,” she said referring to the environmental criteria.

Wu noted that specific countries like South Korea, Japan, and China have similar goals of obtaining net zero carbon emissions. Additionally, China is looking to reach its carbon neutrality goal by 2060.

“That’s going to create a massive shift in the way China uses energy,” she said. The country will need to cut down its reliance on coal from around 60% to around 2% or 3%, she said.

“In its place, we’re going to see renewable power capacity growing by folds,” Wu added.

“Within renewable power, solar power generation is going to be doubling in the next five years,” Wu predicted.

A Clean Energy ETF Option to Consider

ESG can be sliced and diced into various funds that focus on specific niches. One way to play the renewable energy sector is with funds like the SPDR S&P Kensho Clean Power ETF (CNRG).

Key features of CNRG:

  1. Seeks to provide investment results that, before fees and expenses, correspond generally to the total return performance of the S&P Kensho Clean Power Index.
  2. Seeks to track an index utilizing artificial intelligence and a quantitative weighting methodology to capture companies whose products and services are driving innovation behind the clean energy sector, which includes the areas of solar, wind, geothermal, and hydroelectric power.
  3. Provides ETF investors an effective way to pursue long-term growth potential by investing in a portfolio of companies involved in the transition to lower emission generating power supply.

CNRG Chart

For more news and information, visit the ESG Channel.