JPMorgan Chase
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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.
(1)
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, as described in Section E. 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.
(3)
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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