JPMorgan Chase

From Lauraibm

Current revision as of 10:55, 30 July 2007

MI Summary

JP Morgan Chase has a comprehensive environmental policy which applies high environmental standards to the firm’s global business activities. The Policy will be implemented with an Environmental Management System which includes planning, training, implementation, measurement, reporting and review. The firm has adopted the Equator Principles, this serves as a framework for determining, assessing and managing environmental and social risk in project financing.

JP Morgan Chase has adopted a precautionary approach to climate protection by working to reduce greenhouse gas emissions in the present day; the corporation are working with their industry, clients and policy makers to establish a policy framework for direct and indirect greenhouse gas emissions reduction. JP Morgan Chase clearly display their policy, covering a variety of aspects including carbon mitigation and research to explore the business risks associated with climate change and opportunities for greenhouse gas reductions. The company’s policy also addresses issues including sustainable forestry, the protection of critical natural habitats and illegal logging.

Internally JP Morgan Chase has set a goal of reducing its greenhouse gas footprint by 5-7% by 2012. In addition to this they are working towards maximising the use of environmentally friendly paper.

With regards to environmental initiatives JP Morgan Chase is a signatory to the United Nations Environment Programme Finance Initiative and is also participating in the Northeast Business Climate Collaborative to learn about the various solutions available to reduce greenhouse gas emissions in business operations.

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Office of Environmental Affairs

In 2004, JPMorgan Chase established the Office of Environmental Affairs to increase the company's focus on the environment and to allocate dedicated resources to examining environmental issues as they relate to the company. The office guides the firm's use of resources and the management of environmental issues related to our global business activities. The office also engages with various stakeholders, including peers, shareholder groups, experts in nonprofits and academia to help JPMorgan Chase meet its responsibilities as an environmentally-sensitive corporate citizen.

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Environmental Policy

Environmental risk management policy

JPMorgan Chase is adopting the Equator Principles for business in our Investment Bank and Commercial Bank. Based on the policies of the World Bank and its private sector arm, the International Finance Corporation, the Equator Principles serve as a framework for determining, assessing, and managing environmental and social risk in project financing. These principles apply to projects with a total capital cost of $10 million or more. The specific procedures including categorization of projects and application of safeguards can be viewed at www.equator-principles.com.*

In addition, JPMorgan Chase will apply the Equator Principles, as appropriate, to all loans, debt and equity underwriting, financial advisories and project-linked derivative transactions where the use of proceeds is designated for potentially damaging projects.

Private equity investments Our private equity divisions conduct an environmental review as part of their investment decision process for direct investments in companies in environmentally sensitive industries. The review process analyses our prospective portfolio companies' compliance with applicable environmental laws, regulations and international norms. The environmental review process is an integral part of our private equity area's thorough due diligence review of companies and their management.

Once an investment is made, through their membership on a portfolio company's board of directors, our private equity divisions monitor their portfolio company's operations with respect to environmental compliance issues. (2)

Climate change policy and commitments

The scientific evidence provided by the Intergovernmental Panel on Climate Change (IPCC), a body created by the United Nations and the World Meteorological Organization, concludes that climate change is linked largely to the emissions of greenhouse gases caused by human activity, from the burning of fossil fuels, and deforestation. While there remains uncertainty regarding the severity of impacts, we believe that it is appropriate to adopt a precautionary approach to climate protection by working to reduce greenhouse gas emissions today.

JPMorgan Chase will assume a leadership role in the financial services industry by helping to reduce greenhouse gas emissions in our value chain and internally. We believe we cannot accomplish significant reductions alone; we need the support of our clients, as well as public policy that establishes certainty for investors and allows significant investments in greenhouse gas mitigation. We will therefore work with our industry, clients and policy makers to establish a policy framework for direct and indirect greenhouse gas emissions reductions.

The following policy is applicable to our Investment Bank and Commercial Bank.

I. Risk management policy

Carbon mitigation JPMorgan Chase will encourage clients that are large greenhouse gas emitters to develop carbon mitigation plans. The plans will include measurement and disclosure of greenhouse gas emissions and descriptions of plans to reduce or offset emissions. We will add carbon disclosure and mitigation to our client review process.

In project transactions in the power sector, we will quantify the financial cost of greenhouse gas emissions and integrate them into financial analysis of the transaction. Internalizing the cost of carbon in this way may alter investment choices, and we will encourage clients to evaluate alternative energy technologies.

II. Supporting commitments

a. Advancing the public discourse JPMorgan Chase will arrange meetings with other financial institutions to advocate for reductions of greenhouse gas emissions. We will work with these peers, the electric utility industry, climate policy experts in NGOs and academia, states, and the US government. This dialogue will focus on specific projects to alter the emission trajectory of the US economy. The projects will include:

• A policy dialogue to advocate that the US government adopt a market-based national policy on greenhouse gas emissions, which includes all sources of emissions and is fair. Options include either a cap-and-trade or tax policy to reduce greenhouse gas emissions at the lowest possible cost.
• Seek to form a coalition to explore financing the greenhouse gas mitigation of coal-fired generating capacity.

b. Products and research to address climate change

• Carbon reduction We will work with clients to develop favorable financing solutions to fund development of relatively lower carbon emitting technology solutions and investments in greenhouse gas reduction.

• Research JPMorgan Chase will use its leadership position in corporate research to explore the business risks associated with climate change and opportunities for greenhouse gas reductions. Our corporate research will explore the potential financial liabilities of carbon emissions to large direct emitters. We will re-examine valuations in the oil, gas, power and transport sectors in light of the operating constraints posed by limits on carbon emissions, and the emergence of alternative clean technology. Conclusions of our research should encourage disclosure, mitigation and new business development of affected companies. In specific sectors, we will also explore the possibility of having our JPM analysts incorporate climate risk into their regular research.

We will research the financial implications of higher costs of carbon emissions to the electric power industry. Particularly for coal-fired electricity generation, investment choices could be materially influenced by carbon-constrained future scenarios.

• Carbon reporting JPMorgan Chase will annually report the aggregate greenhouse gas emissions from our power sector projects.

• Renewable energy investment As part of its energy practice, our private equity group has invested in renewable energy generation projects and will continue to consider other investments in profitable renewable energy generation and technology.

• Energy efficient mortgage In our mortgage loans products, we will accommodate higher debt to income ratios for homes that are considered energy efficient.

• "Green" housing We will continue to seek investments in low-income "green" housing that conserves energy and natural resources, promotes health, and provides easy access to jobs, schools, and services.

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Forestry and biodiversity policy and commitments

Forests are home to more than half of all terrestrial species and support the livelihoods of millions of people. They are sources of food, medicine, lumber, and aesthetic benefits. They sequester carbon, clean water and cycle nutrients. In spite of their critical importance, forests are under threat; half of the world's forests are gone and well over 30 million acres more are lost each year. In addition, the decline in our high ecological value forests results in the loss of critical biodiversity as natural habitats are destroyed.

To address this decline, we will apply the following policy to our Investment Bank and Commercial Bank.

Risk management policy

a. No go zones JPMorgan Chase believes that there are certain places on earth with cultural and natural values so great that we as a global citizen must take extra precautions to protect them. JPMorgan Chase prefers to only finance preservation and light, nonextractive use of forest resources for projects in forests whose high conservation values are endangered. In addition, we will not finance extractive projects or commercial logging in World Heritage sites.

Further, as part of our implementation of the Equator Principles:

• JPMorgan Chase will not finance commercial logging operations or the purchase of logging equipment for use in primary tropical moist forests.

• JPMorgan Chase will finance plantations only on nonforested areas (including previously planted areas) or on heavily degraded forestland.

• JPMorgan Chase will not finance projects that contravene any relevant international environmental agreement which has been enacted into the law of, or otherwise has the force of law in, the country in which the project is located.

b. Global endangered zones JPMorgan Chase will not finance any project or provide loans where the use of proceeds is designated within critical natural habitats, unless the sponsor or borrower, as appropriate, has demonstrated to JPMorgan Chase's satisfaction the following:

• They have considered economic and technically feasible alternatives to avoid such areas and have addressed these issues in a publicly available Environmental Assessment;
• The project will not significantly convert or degrade the critical natural habitat;
• Project management has adequate capacity and willingness to ensure biodiversity protection and respect for the rights of indigenous communities whose livelihoods or cultural integrity could be adversely impacted;
• Indigenous peoples and local communities affected by the project, whether directly or by induced impact, have the opportunity and if needed, culturally appropriate representation, and have access to relevant information, to engage in informed participation;
• The governmental authorities at the local, regional or national level have provided mechanisms for the affected communities to be represented or consulted, and international, national and local laws have been upheld;
• An Environmental Assessment has been prepared that takes into account such consultations and is publicly available.

c. Sustainable forest management JPMorgan Chase will adopt specific policies to protect the highest conservation values in forests. The process of protecting high conservation values includes scientific assessment of species, cultural assessment, and conservation plans to protect species or cultural sites that are unique, rare, threatened or endangered. The Forest Stewardship Council (FSC) is one of the most robust high conservation value assessment processes. We prefer FSC certification when we finance forestry projects that impact high conservation value forests, unless a comparable assessment process underpins a conservation plan. For operations that are not already certified, we will introduce them to credible experts who can help establish a rigorous, time-bound, step-wise approach to achieve certification.

We will review and understand the merits of the different internationally accepted forestry certification standards to better understand best practices.

d. Illegal logging

We will not finance companies or projects that collude with or are knowingly engaged in illegal logging. Clients that process, purchase, or trade wood products from high risk countries(11) will have certifiable systems in place to ensure that the wood they process or trade comes from legal sources. Due diligence will include company representations as to its practices, monitoring and, by 2007, chain of custody certification (e.g. FSC controlled wood standard) for illegal logging.)

We will not finance companies or projects that do not have an explicit policy against the uncontrolled and/or illegal use of fire in their forestry, plantation or extractive operations.

e. Land conservation If JPMorgan Chase acquires significant amounts of environmentally sensitive land as a result of a default or debt work-out situation, we will work with conservation groups and local stakeholders to consider conservation alternatives, including donation, environmental management plans or protective easements.

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Indigenous communities

JPMorgan Chase recognizes that the identities and cultures of indigenous peoples are inextricably linked to the lands on which they live and the natural resources on which they depend. We recognize the rights of these communities regarding issues affecting their lands and territories, traditionally owned or otherwise occupied and used. JPMorgan Chase prefers to only finance projects in indigenous areas where free, prior informed consultation results in support of the project by the affected indigenous peoples. Such projects will include measures to:

• (a) avoid potentially significant adverse effects on the indigenous peoples' communities; or
• (b) when avoidance fails, minimize, mitigate, and compensate for such affects.

JPMorgan Chase's due diligence will include an assessment of the impact on indigenous peoples, as follows: For such projects, which impact indigenous people in sensitive areas, whether directly or by induced impact, the project sponsor or borrower, as appropriate, will have demonstrated the following:

• They have given indigenous people the opportunity and, if needed, culturally appropriate representation to engage in informed participation and collective decision-making;
• Provided information on the ways in which the project may have a potentially adverse impact on them in a culturally appropriate manner at each stage of project preparation, implementation and operation;
• Given adequate time to study the relevant information;
• Provided access to a grievance mechanism.

In addition, the project sponsor or borrower, as appropriate, will have demonstrated the following:

• Consultation approaches that rely on existing customary institutions, the role of community elders and leaders, and the established governance structure for tribal and indigenous communities;
• Governmental authorities at the local, regional or national level have provided mechanisms for the affected communities to be represented or consulted, and international and local laws have been upheld; and
• Major indigenous land claims are appropriately addressed.

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Internal resource management

a. Internal greenhouse gas reductions JPMorgan Chase will assess its greenhouse gas footprint based on our 2005 US baseline, and set a goal of a 5-7% reduction by 2012. We will enhance existing energy management programs to include best practices across various facilities.

b. Paper procurement JPMorgan Chase is working to maximize the use of environmentally friendly paper, such as post-consumer waste recycled content paper. Our first focus is on copier and office printer paper. We have recently begun to utilize duplex printing on copiers and office printers to help reduce the volume of paper consumed. We are investigating the use of environmentally friendly paper, including recycled paper, used in other types of printing. We will also examine using paper suppliers that source their products from independent third-party certified, well managed forests.

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Implementation and reporting

a. Implementation and capacity building JPMorgan Chase will take necessary steps to train staff and provide tools and resources, so that environmental objectives are met and that procedures, policies and standards are implemented.

b. Corporate sustainability reporting and review JPMorgan Chase will publish an annual sustainability report that includes JPMorgan Chase's sustainability profile. In addition to the implementation of its sustainability policies and objectives, JPMorgan Chase will use a common framework for sustainability reporting such as the Global Reporting Initiative. JPMorgan Chase aims to also perform periodic environmental policy reviews to ensure compliance with existing policies and assess the need for additions to, or changes in, such policies. The annual environmental and sustainability reports will set goals for the following year and report on progress made on achieving the previous year's goals.

c. Governance structure The Office of Environmental Affairs reports to a member of the Executive Committee and is overseen by the Public Responsibility Committee of the Board. In addition, a firm-wide Environmental Oversight Committee made up of key business leaders is responsible for guiding the Office's initiatives.

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Sustainability commitment

JPMorgan Chase recognizes that balancing non-financial factors such as environmental and social issues with financial priorities is an essential part of good corporate citizenship, in addition to being fundamental to risk management and the protection of investors.

We have a direct impact on the environment through our daily consumption of energy and paper resources. We also potentially have an indirect effect on the environment through the provision of financial services to projects in environmentally sensitive areas.

Protecting the natural systems upon which all life depends while lifting people out of poverty and advancing economic development are among the greatest challenges confronting humanity. These three pillars of sustainable development are central to the UN Millennium Development Goals adopted in 2000. We recognize that the policies and practices we adopt today will shape not only our lives but also those of future generations. We therefore have an opportunity to make a positive contribution to environmental and social concerns by enacting policies designed so that our business operations do not degrade the environment or cause social harm. Such policies not only indicate positive environmental stewardship, but also present business opportunities such as innovative financial products and investments in sustainable forestry and renewable energy. This will help us better manage our risks, attract and retain critical talent, develop expertise, and provide clients with solutions to evolving exposures.

To demonstrate our commitment, JPMorgan Chase has adopted a comprehensive environmental policy. The policy will be implemented with an Environmental Management System that includes planning, training, implementation, measurement, reporting and review, and will apply to new business and existing business that comes up for renewal or extension. Specifically, we will integrate environmental and social awareness into the credit analysis and financing decision process, and incorporate it, where appropriate, as part of our due diligence review. We will train relevant employees to take responsibility for and implement these policies. Finally, we will publish an annual sustainability report using the Global Reporting Initiative(1) framework.

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Environment Initiatives

JPMorgan Chase has become a signatory to the United Nations Environment Programme Finance Initiative (UNEP FI).* The initiative is a global partnership between the United Nations Environment Programme (UNEP) and the private financial sector. It provides practical research, technical expertise and exposure to sustainable development practices across regions in addition to networking services by convening international conferences and events that bring together professionals from around the globe.

Corporate Council - JPMorgan Chase has become a member of the World Resources Institute's Corporate Council. The Council helps organizations identify environmental trends relevant to their industry, leads discussions on current issues, and provides cutting-edge information on business ideas.

JPMorgan Chase is also participating in the Northeast Business Climate Collaborative to learn about the various solutions available to reduce greenhouse gas emissions in our business operations. The Collaborative is a WRI initiative to help service and retail sector companies in the Northeast to develop specialized strategies and tools to address climate change. The initiative assists participating companies advance solutions to climate change while learning key lessons on developing and implementing their own profitable climate change strategies.

JPMorgan Chase is adopting the Equator Principles for business in our Investment Bank and Commercial Bank. Based on the policies of the World Bank and its private sector arm, the International Finance Corporation, the Equator Principles serve as a framework for determining, assessing, and managing environmental and social risk in project financing. These principles apply to projects with a total capital cost of $50 million or more. The specific procedures including categorization of projects and application of safeguards can be viewed at www.equator-principles.com.

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Press Release

JPMorgan Chase Announces Environmental Policy

New York, April 25, 2005 - JPMorgan Chase announced today that it has adopted a comprehensive policy that applies high environmental standards to the firm's global business activities. As part of JPMorgan Chase's broad commitment, the firm has adopted the Equator Principles, guidelines that promote environmental and social responsibility in project financing. In addition, the firm will apply the Principles to projects that are $10 million or above in environmentally sensitive industries, exceeding the threshold of $50 million set by the Equator Principles. In addition to the Equator Principles, the company's new policy also addresses issues including climate change, sustainable forestry, the protection of critical natural habitats, illegal logging, and the needs and concerns of indigenous peoples. Highlights include:

• JPMorgan Chase advocates the reduction of greenhouse gas emissions. In addition to reducing its own emissions, the firm will work with clients to develop new financial products that facilitate emissions reductions, conduct research into the financial implications of the rising cost of carbon, and deploy investment capital to businesses that reduce or mitigate greenhouse gases.
• JPMorgan Chase is taking significant steps in protecting biodiversity and critical habitats by instituting certain "no-go" criteria in forests whose high conservation values are endangered. In addition, the firm will not finance companies or projects that are knowingly engaged in illegal logging.

The policy is the first of any financial institution to incorporate environmental risk management into the due diligence process of its private equity divisions. "A policy of this magnitude illustrates our commitment to preserve and protect the world around us," said Amy Davidsen, director of environmental affairs. "We recognize that the policies and practices we adopt today will shape not only our lives, but also those of future generations."

• JPMorgan Chase set up its Office of Environmental Affairs in April 2004 in order to evaluate the firm's own use of resources and to integrate environmental and social awareness into its risk management process. The office carefully considered the viewpoints of various constituents before developing the policy, including customers, business and community leaders, environmental groups such as Rainforest Action Network, and a shareholders group, which includes Christian Brothers Investment Services, Domini Social Investments, F&C Asset Management, Friends of the Earth, and Trillium Asset Management.

"Conducting business with the highest standards and supporting the communities we serve is part of our firm's culture," said William B. Harrison, Jr., Chairman and CEO. "As a leader in global finance, we recognize our responsibility to the environment and will support and encourage projects aimed at sustainable development. This is a policy that our employees, shareholders, and clients can be proud of."

JPMorgan Chase's policy can be viewed in full at Http://www.jpmorganchase.com/environment.

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Sources

• 1. Office of Environmental Affairs
• 2. Environmental Risk Management Policy
• 3. Climate Change Policy and Commitments
• 4. Forestry & Biodiversity Policy and Commitments
• 5. Indigenous Communities
• 6. Internal Resource Management
• 7. Implementation and Reporting
• 8. Sustainability Commitment
• 9. Environment Initiatives
• 10. Press Release