Technology and big data could drive sustainable investments

The JP Morgan Chase & Co. headquarters, The JP Morgan Chase Tower in Park Avenue, Midtown, Manhattan, New York.

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SINGAPORE — While there’s “nothing new” to sustainable investing, technology has made it easier to state the financial case for considering non-financial metrics, according to JPMorgan.

“The amount of data that we’re able to leverage as investors to help the dialogue that we have with companies is more than ever,” said Jennifer Wu, the bank’s global head of sustainable investing, during a panel session at Singapore’s FinTech Festival.

From artificial intelligence to big data and machine learning, the information is now there to better measure environmental factors and their economic implications, she said. Satellite images, for instance, can now be used to observe and measure a company’s true environmental impact, such as pollution levels.

“That’s something very powerful,” said Wu, noting a marked shift over the past three or four years. “It’s not something that we had access to (previously), but it’s possible now.”

Showing the money

That could spell positive change for the sustainability agenda, which has long fallen behind economic gains.

Ultimately, investors remain largely driven by financial returns, Wu noted. But the prevalence of data means banks can now do a better job of demonstrating to clients the potential gains and losses of such investments.

Jennifer Wu, JPMorgan’s global head of sustainable investing.

JPMorgan

“The debate is not so much ‘I just don’t care’,” said Wu, noting that the debate is about whether the assumptions are right.

“Am I really looking at a potential loss in value in my portfolios or businesses over the next five years? Or is it more like three years, or 10 years?,” she explained.

Policy remains key

Still, public policy remains important to ensuring environmental practices are appropriately implemented and rolled out.

“The policy environment matters a lot here,” fellow panelist Elsa Palanza, Barclays’ global head of sustainability and ESG, said.

Barclays has seen increased interest for sustainable products from clients of its corporate bank, who are largely based in the U.K. and Europe, where environmental policies are advanced, Palanza said. Yet requests from clients of its investment bank — which is largely focused on the U.S. — remain lacking, said Palanza.

“We can probably reasonably expect there to be some change, but we also can’t lean into that entirely,” she noted, referring to the upcoming change in the U.S. administration as President-elect Joe Biden prepares to take over in January.

Today, the policy directions are much clearer and commitment from governments, policymakers, as well as corporations, are just much, much more prevalent than I would say three, four years ago.

Jennifer Wu

global head of sustainable investing, JPMorgan