Technology could help sustainable investing turn the corner, says JPMorgan

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.”

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.

“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.

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.

Much work remains in that regard. However, Wu said she is “pretty optimistic.”

“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,” she said.

“Especially this year with Covid, one thing became very clear: There’s just much greater appreciation for how important it is that we need to be ready for something that’s so systemic, that is so big and could disrupt everything,” Wu said. “I’m very happy to have, in my mind, a lot more constructive conversations with clients.”