At the investment arm of JPMorgan Chase & Co., ESG managers are looking past the old tech behemoths that are this year’s big losers to focus instead on a new era of technology companies they predict will be key in driving returns.
Francesco Conte, a London-based portfolio manager at J.P. Morgan Asset Management, said he and his team are trawling the market for gems whose technology is “about to reach the point where we cannot live without” it.
The approach has led the asset manager to bet big on electric-vehicle charging stations, Conte said. “Demand in this area is going to be incredibly strong over the coming years, and it’s the area we want to invest more in.”
Conte declined to provide details on stocks he’s looking at. But the portfolio he oversees already has a roughly 0.4% stake in ChargePoint Holdings Inc., according to Bloomberg data based on regulatory filings.
JPMorgan’s bets offer some insight into how different fund managers are handling the tech rout and commodities boom that’s upended many ESG strategies this year. That’s against the backdrop of an energy crisis exacerbated by war, which has compounded inflation pressures already fanned by supply-chain disruptions and left central banks much more hawkish.
Conte said he and his team are looking at their environmental, social and governance investments as long-term holdings, and can wait out selloffs. The planet is inevitably heading toward a low-carbon future, and technologies that help achieve that faster will pay off, he said.
“The direction of travel in terms of energy efficiency, in terms of water purification, in terms of resource efficiency is going one-way and it’s not reversible,” Conte said. “We have in our portfolios companies that are traveling in that direction. It’s a long-term theme and we expect strong demand.”
If 2050 net-zero emissions goals are to be met, investment in new technology and renewable energy needs to reach about $140 trillion spread out over the coming decades, J.P.Morgan Asset Management estimates. Last year, the firm launched two funds dedicated to the theme — one in London in June and the other in Luxembourg in December — with combined assets under management of $264 million. Conte and his colleagues have identified 55 companies they think will outperform in delivering climate solutions across energy, farming and transport.
The funds’ top holdings currently include Deere & Co., the world’s largest manufacturer of agricultural equipment, as well as clean-energy provider NextEra Energy Inc. and Trane Technologies, which specializes in heaters, air conditioners and air cleaners.
Like much of the rest of the market, the funds delivered losses over the past year. The older of the two funds is down 13% in sterling terms since it launched last June, or 24% in dollar terms, compared with a 17% decline in the MSCI All Country Global Index, according to Bloomberg data. That’s as growth stocks have taken a beating against a backdrop of rising interest rates.
Conte also is looking for potential future buying opportunities in the market for green hydrogen, he said. It will probably take up to 10 years for the technology to reach a mass adoption phase, but sudden leaps in technology might bring the timeline forward, he said. It’s a question of sitting out the downturns and detecting the societal, scientific and regulatory movements that will shape the next big cycle, Conte said.
“With any innovation and technology, you can get a breakthrough,” he said. “Companies might be able to make big breakthroughs which can accelerate the time at which point these products become commercially viable. We have to monitor these trends closely.”