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Morningstar

JPMorgan Hedged Equity I JHEQX Sustainability

Morningstar Medalist Rating
| Medalist Rating as of | See JPMorgan Investment Hub

Sustainability Analysis

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Sustainability Summary

 | Morningstar Manager Research  

JPMorgan Hedged Equity Fund is likely to concern sustainability-focused investors given certain substandard ESG attributes.

JPMorgan Hedged Equity Fund has an average Morningstar Sustainability Rating of 3 globes, indicating that the ESG risk of holdings in its portfolio is similar to that of its peers in the Options Trading category. Investors concerned about ESG risk may be better off with funds in the category that receive 4 or 5 globes, as they tend to invest in securities less exposed to ESG risk. Unlike impact, which measures positive environmental and societal outcomes attributable to an investment, ESG risk reflects the degree to which investments could be affected by material ESG issues like climate change and inequalities.

JPMorgan Hedged Equity Fund has a Carbon Risk Score of 7.71, indicating portfolio companies face low carbon-related risks in the transition to a low-carbon economy.

One potential issue for a sustainability-focused investor is that JPMorgan Hedged Equity Fund doesn’t have an ESG-focused mandate. Funds with an ESG-focused mandate would have a higher probability to drive positive ESG outcomes. Currently, the fund has 7.94% involvement in fossil fuels, which is higher than 7.44% for the average peer in its category. Companies are considered involved in fossil fuels if they derive some revenue from thermal coal, oil, and gas. The fund exhibits relatively high exposure (9.56%) to companies with high or severe controversies. Companies with high or severe controversies may be involved in incidents such as corruption, employee abuses, environmental incidents, and corporate scandals that pose serious business risks to the company.

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ESG Commitment Level Asset Manager

 | Basic , 

Despite substantial progress, sustainable investing has yet to fully take root.

Over the past few years, JPMorgan has more fully embedded the consideration of environmental, social, and governance-related risks in its investment process, developed a strong climate strategy, and expanded its sustainability-focused offerings. JPMorgan joined the Net Zero Asset Managers initiative, committed nearly half the firm’s assets to the effort, and acquired Campbell Global forestry—a sustainable timberland investing company with more than $5 billion in assets under management—to support the firm’s net-zero ambitions. JPMorgan has also built a suite of sustainable funds focusing on long-term themes such as sustainable infrastructure, climate change solutions, and social advancement. However, these funds remain a small part of the firm’s overall strategy.

By the end of 2021, all the firm’s actively managed funds were certified as “ESG-integrated,” an internal process that required demonstration of ESG risk considerations. Following the inaugural round of certifications, this oversight resides with investment directors and escalates to a sustainability-focused oversight committee as necessary. Still, it remains difficult to assess the true depth and intensity of this framework’s application. Investors in JPMorgan’s sustainability-focused funds gain access to topnotch reports of portfolio-level carbon and ESG risk exposures. However, these metrics are not widely available for conventional funds, so investors who may be on the fence about investing sustainably lack ESG statistics for comparison.