Innovative companies are coming up with climate change solutions – which are also worthwhile investment opportunities.
By Francesco Conte and Sara Bellenda, Portfolio Managers International Equity Group; Yazann Romahi, Chief Investment Officer at Quantitative Beta Solutions; and Katie Magee, Investment Specialist – J.P. Morgan Asset Management
Climate change is one of the greatest social challenges of our time and affects the lives of people worldwide. The chart below shows global greenhouse gas emissions by sector. 
Source: Climate Watch, Our World in Data, World Resource Institute, J.P. Morgan Asset Management. Data as of 31 December 2021.
Solutions must be found to combat these sources of climate change. Along with government incentives, innovative companies are the main contributors to reducing emissions. The following five sectors are especially worthwhile for both climate change and investors.
1. Renewable Energies and Electrification
Fossil fuels used for energy are responsible for almost three-quarters of greenhouse gas emissions. It is therefore essential to make use of alternative energies and to develop them further. Investment opportunities can be found in companies that generate all their revenues from wind and solar power, as well as in established utilities that are shifting their business model towards renewable energies. Other attractive opportunities can be found in companies that build power plants that run on renewable energy.
Electrification is another attractive investment opportunity. Almost all technologies that reduce the need for fossil fuels – including renewable energies, electric vehicles and heat pumps – rely on electricity themselves. The power grid will therefore require heavy investment. Hydrogen-based energy and carbon sequestration are other important investment stories that are still in their early stages but could breakthrough in the future.
2. Sustainable Construction
Residential and commercial buildings are a significant source of greenhouse gas emissions, which explains the worldwide push towards climate-neutral buildings. Heating, ventilation and air-conditioning are especially energy-intensive, and modernizing them helps reduce buildings’ carbon footprint significantly. There are other opportunities in sustainable buildings, including the use of LED lighting, roof and wall insulation, heat pumps and other sources of energy efficiency.
3. Sustainable Agriculture
Agriculture accounts for one-fifth of global greenhouse gas emissions and is also a main cause of water shortages. One way to foster sustainable food production is precision agriculture. Using innovative technologies, farmers can increase their yields while using less herbicide. Water-purification companies are also attractive for investors.
4. Sustainable Transport
Transport accounts for about 16 percent of annual greenhouse gas emissions, with cars the least efficient. Improvements in electric vehicle technology are lengthening battery lifespans, lowering production costs, and building out charging stations massively. The price gap between electric and conventional internal combustion vehicles is narrowing more and more, and electric vehicles are being promoted by subsidies and new regulations.
5. Recycling and Re-use
The last piece of the puzzle is an increased focus on recycling and re-use. The goal here is to re-use already existing materials to develop new products, in order to consume fewer resources. This sector has lots of potentials but is closely dependent on local legislation. Meanwhile, many companies are accelerating the transition towards a more circular economy.
A Climate Change Solutions-Based Strategy That Exploits Opportunities in all Five Segments
All five climate-relevant segments can be found in the J.P. Morgan Funds – Climate Change Solutions Fund. The Article 9 fund invests in forward-looking companies, which are developing and scaling up solutions to combat the causes of climate change. The fund managers combine artificial intelligence with fundamental research and active management. The fund offers a diversified, dynamic portfolio of 50 to 100 stocks of companies that are developing breakthrough solutions for combatting climate change.
- Invest in innovative companies providing solutions to the climate challenge: Find out more
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