JP Morgan’s Sustainable Funds: The Controversy of Investing in Glencore

JP Morgan has invested over £200 million in Glencore through its sustainable funds, raising concerns about misleading definitions of sustainability. Ethical investing is on the rise and expected to exceed $40 trillion by 2030. Critics argue that some funds may violate EU laws and question the effectiveness of Glencore’s environmental compliance, leading to calls for regulatory clarity and oversight.

JP Morgan, one of the largest banks globally, has been actively promoting its environmental and sustainable investment funds, which have reportedly invested over £200 million in the mining company Glencore. This trend of ethical investing is projected to surpass $40 trillion by 2030. However, the industry is facing intensifying scrutiny regarding its adherence to environmental, social, and governance (ESG) criteria.

JP Morgan’s asset management division offers over 500 funds labeled as environmental or sustainable investments, ranging from healthcare to climate change solutions. Current regulations permit some of these funds to hold stakes in companies criticized for environmentally damaging operations. Notably, at least 51% of the investments in these funds must possess positive environmental or social characteristics, while the remaining 49% can be unrestricted.

Jakob Thomä, CEO of climate thinktank Theia Finance Labs, expressed concern, stating, “The overwhelming majority of retail investors, in my view, would feel misled if they knew that was the criteria for labelling something as a sustainable fund.” He has suggested that certain funds may be violating EU laws against misleading commercial practices.

JP Morgan’s sustainable funds have policies excluding companies that generate more than 20% of their revenues from thermal coal extraction. Although Glencore is a significant player in the coal industry, it falls just below this revenue threshold, despite coal mining representing roughly half of its profits.

The investment in Glencore has drawn criticism from environmental campaigners, citing serious breaches of environmental regulations at the company’s mines in South Africa. Reports indicate that Glencore’s Tweefontein coalmine has violated several environmental laws since 2017, including contaminating local water sources and mishandling hazardous waste, raising concerns for the community.

Local residents, such as Daisy Tshabangu, have voiced distrust in the water supply, reporting health issues linked to water quality. Many in the community feel neglected by the mining companies that dominate their surroundings, despite the presence of multiple mines. “We don’t benefit from the mines,” noted Tshabangu.

In response to claims regarding water supply issues, Glencore asserted that it contributes to a municipal water supply but denied direct responsibility for the overall water quality. The company emphasized its commitment to sustainable development and has maintained that it addresses the findings of inspections from the Department of Water and Sanitation (DWS).

Mariette Liefferink, CEO of the Federation for a Sustainable Environment, criticized JP Morgan for supporting Glencore and highlighted significant environmental risks associated with its operations. She encouraged JP Morgan to reassess its investments in Glencore due to ongoing environmental concerns at its operations and noted two funds managed by JP Morgan actively investing in Glencore.

Amidst the growth of ESG investing, there is an increasing demand for transparency and clarity in what constitutes a sustainable investment. Regulatory bodies are working on establishing clear definitions and guidelines to aid investor understanding of these terms, as the scrutiny over such investments continues to grow.

Glencore, being the world’s fifth-largest coal miner, has been the subject of various allegations concerning human rights abuses and environmental harm at its international operations. The firm maintains that it is committed to ethical practices and community engagement while ensuring the well-being of workers and stakeholders.

In summary, JP Morgan’s significant investments in Glencore, a leading coal producer facing multiple environmental infractions, place its sustainable funding initiatives under scrutiny. Critics highlight the potential for misleading practices within ESG investing, calling for greater transparency and adherence to environmental standards. This ongoing controversy emphasizes the need for clear regulatory guidelines to safeguard ethical investment principles and community health. The stark contrast between investment promotion and actual environmental practices continues to surface, prompting calls for reform within the ethical investing framework.

Original Source: www.theguardian.com