Environmentally conscious investing has gained traction in the last few years as the focus on climate change grows more urgent and the companies directly involved in combating it become more well known.
But, common investments such as alternative energy and solar stocks aren’t the only way for investors to gain exposure to the growing trend. Take the JPMorgan Climate Change Solutions ETF (TEMP) — it has been active since mid-December and holds several stocks not typically associated with climate change, such as Microsoft, Apple, McDonald’s, Deere and Eaton.
Bryon Lake, head of Americas ETF distribution at JPMorgan Asset Management, sat down with CNBC’s “ETF Edge” to explain the strategy behind it.
“One of the things that we’ve observed is that climate change affects all different industries,” Lake said Wednesday. “It’s not just we need to move from natural resources to solar or renewables or something like that. That certainly plays a big part of it. But it’s also in construction. It’s also in agriculture. It’s also in health care.”
Tech giant Microsoft, for example, has pledged that it will be carbon negative by 2030 and that by 2050 it will have removed the carbon from the environment it has emitted since it was founded nearly 50 years ago.
“That’s why we think this is such a nuanced conversation, and that you can’t just set up a simple rule that screens for some buzzwords that help a stock get into an index,” he said. By “making sure that they do deserve a spot in that portfolio and that they can effect change there, that’s where we think the active management really comes into play.”
It’s not just a feel-good investment, though — the opportunity for growth in the space is huge, according to Lake.
“We estimate there needs to be a $140 trillion investment in energy and global infrastructure in order to get to some of the net-zero targets that many of the countries and regions are talking about by 2050,” he said. “These companies are the companies that are working on those solutions right now.”
Weakness in the broader market, especially high-growth stocks, has put pressure on this new ETF since its inception. The TEMP ETF has fallen 13% in the past month, nearly double the losses suffered by the S&P 500.
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