SECTION 2 : TRANSITION TO NET-ZERO
Sponsored by designed to help investors reflect the financial risks of climate in their portfolio and contribute to the solutions , while taking advantage of the opportunities presented by the transition to a low carbon economy . JPCT * is designed to be in line with the Climate Transition Benchmark ( CTB ), which requires at least a 30 % reduction in carbon emissions and at least a 7 % year-on-year rate of self-decarbonisation .
To meet these targets , our investment framework seeks to identify companies that are best positioned to benefit from the transition . With this approach , we have created a portfolio that achieves a meaningful reduction in carbon intensity relative to a traditional index . Importantly , we do this without applying sector exclusions , as we want to keep sectors in line with the index . Instead , we achieve the reduction in carbon intensity through individual security selection , investing in companies leading the way in the transition and avoiding those that will lose out as a result .
Our research suggests there are three key ways companies can prepare themselves for the transition to a low-carbon world . Analysis of company performance against these three key pillars forms the basis on our framework ( see graphic ).
Using alternative data to broaden the opportunity set
Traditional sources of corporate information , such as company reports and analysis from third-party data providers , are useful in
Carbon Transition Framework : three key pillars
Managing emissions
Site emissions Reduce direct emissions and shift towards greener forms of energy
Consumer emissions & opportunities Benefit from a shift in consumer demands towards low carbon alternatives
analysing whether companies are managing their businesses sustainably . However , this data can be patchy . Many companies do not report their emissions , and it is challenging to uncover the companies creating the innovative solutions and technologies required for a low carbon world .
To address this issue , we rely on our expertise in artificial intelligence and big data , and a proprietary technology tool , ThemeBot . This tool uses natural language processing to screen more than 10,000 stocks globally , and rapidly analyses hundreds of millions of data sources – such as news articles , company reports , earnings transcripts , and broker research – to identify stocks with the highest exposure to a theme .
For our carbon transition framework , we have selected a number of innovative climate solutions that will be required to spur change towards a low-carbon world .
Managing resources
Electricity management Reduce indirect GHG emissions from the usage of electricity
Water management Improve the sustainability of water flow management
Waste management Reduce waste materials , both hazardous and non-hazardous
Managing climaterelated risks
Physical risk Mitigate impact of physical risks from extreme weather conditions
Reputational risk Improve climate stewardship
We use ThemeBot to identify companies involved in areas such as renewable energy , sustainable food and agriculture and sustainable transport , as well as companies focusing on energy efficiency or offsetting their carbon footprint .
Based on this framework , we evaluate companies to identify those most transitionready . We then take overweight positions in companies taking the necessary steps to ensure they are reducing carbon emissions . We go underweight in those companies that are most at risk as they are failing to prepare their businesses for the transition to a low carbon economy .
JPMCT * provides exposure to a diversified portfolio of approximately 400 equities , globally , was launched in November 2020 and is categorised as Article 9 under the Sustainable Finance Disclosure Regulation ( SFDR ).
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