JPMorgan Sustainable Infrastructure ETF BLLD Sustainability

This strategy holds securities with low exposure to ESG risk relative to those of its peers in the Morningstar Infrastructure Sector Equity category, earning it the highest Morningstar Sustainability Rating of 5 globes. ESG risk provides investors with a signal that reflects to what degree their investments are exposed to risks related to material ESG issues, including climate change, biodiversity, product safety, community relations, data privacy and security, bribery and corruption, and corporate governance, that are not sufficiently managed. ESG risk differs from impact, which is about seeking positive environmental and social outcomes.

JPMorgan Sustainable Infrastructure ETF has an asset-weighted Carbon Risk Score of 8.3, indicating that its companies have low exposure to carbon-related risks. These are risks associated with the transition to a low-carbon economy such as increased regulation, changing consumer preferences, technological advancements, and stranded assets. The fund aims to avoid, or limit exposure to, companies in violation with international norms, such as the UN Global Compact or the Universal Declaration of Human Rights.

Currently, the fund has 45.5% involvement in fossil fuels. It is considered high in absolute terms, albeit comparing favorably with 50.7% for its average category peer. Companies are considered involved in fossil fuels if they derive some revenue from thermal coal, oil, and gas. By prospectus, the fund aims to avoid, or limit its exposure to, companies associated with controversial weapons, thermal coal, and and small arms. Yet this goal is far from achieved, as the fund exhibits 4.02% exposure to thermal coal. This compares with 10.55% for its average peer in the Infrastructure Sector Equity category.

The fund has a modest level of exposure (2.01%) to companies with high or severe controversies. Companies with controversies are involved in incidents such as corruption, employee abuses, and that pose some degree of business risks to the company. Severe and high controversies can have significant financial repercussions, ranging from legal penalties to consumer boycotts. In addition, they controversies can damage the reputation of both companies themselves and their shareholders.