FOR INSTITUTIONAL/WHOLESALE/PROFESSIONAL CLIENTS AND QUALIFIED INVESTORS ONLY – NOT FOR RETAIL USE OR DISTRIBUTION

Sustainable InvestingInvestment Perspective on Climate Risk February 2017

“Clients entrust us to manage their portfolios and rely on our deep knowledge of markets, industries and companies. Our investment professionals engage with company management on an ongoing basis to evaluate the drivers of performance, which often include relevant environmental, social, and governance (ESG) factors.

We strive to integrate ESG factors across our investment platforms and communicate transparently with our clients about our efforts. Through our global expertise and industry access, we identify key sustainable investing trends and share best-in-class capabilities from investment approaches to ESG reporting.

Many of our clients have expressed desire to understand and manage climate risk in their portfolios. While approaches and best practices continue to evolve, we believe we are well positioned to help our clients achieve their distinct goals.”

JAMIE KRAMER Head of Strategic Product Management &ESG Lead for J.P. Morgan Asset Management

J .P. MORGAN ASSET MANAGEMENT 3

Our Commitment to Sustainable Investing

Environmental, Social and Governance (ESG) factors are non-financial considerations that are important for stakeholders to keep in mind when assessing a company’s performance.

ENVIRONMENTAL:

Issues relating to the quality and functioning of the natural environment and natural systems, e.g., carbon emissions, environmental regulations, water stress and waste

SOCIAL:

Issues relating to the rights, well-being and interests of people and communities, e.g., labor management, health & safety and product safety

GOVERNANCE:

Issues relating to the management and oversight of companies and other investee entities, e.g., board, ownership and pay

J.P. Morgan Asset Management is committed to putting our clients’ interests first. With decades of investment experience and over 1200 professionals, we have a deep understanding of investment portfolios across multiple dimensions and a goal of producing the best risk-adjusted returns that align with our clients’ objectives. Through our engagement and partnership with various organizations, we continually increase our knowledge and views on key ESG issues and best practices. We have been a signatory to the United Nations’ Principles for Responsible Investment initiative since 2007 and are committed to incorporating ESG factors into our investment practices, where material and relevant.

To help drive our commitment, we have established a Sustainable Investment Leadership Team (SILT) which has begun implementing a coordinated strategy for sustainable investing across J.P. Morgan Asset Management. This cross-functional team is comprised of senior leaders spanning across all regions with a deep and diverse set of expertise across asset classes and client channels.

SILT’s mandate includes:

• Promoting internal best practices, including identification and assessment of ESG issues across asset classes and investment offerings.

• Driving thought leadership and innovation through information, education and partnerships to encourage broader awareness and adoption.

• Deepening and broadening current investment capabilities including portfolio analytics, measurement and reporting.

• Sharing our views on Sustainable Investing and helping clients better understand our capabilities across asset classes and investment strategies.

Implementation of our ESG initiatives is driven by sub-working groups focused on advancing specific agenda items:

• Investment Capabilities group engages across asset classes to support systematic ESG integration into standard research and portfolio construction processes where material and relevant, including product idea generation and development of investment solutions.

• Research, Sponsorships, and Membership group manages relationships with various sustainable investing networks and forums, engages with industry experts and data providers, and trains internal investment professionals on ESG trends, competitive landscape and initiatives.

• Marketing & Communications group promotes consistent, compelling, and timely internal and external communication and engagement.

We strive to increase transparency around our commitment to sustainable investing through engaging with our clients throughout our journey to ESG integration, while we continue to be stewards of their capital.

Source: Definitions, PRI; Examples, MSCI.

4 INVESTMENT PERSPECTIVE ON CLIMATE RISK

J.P. Morgan Asset Management is a trusted fiduciary for clients in many different countries and sectors around the world. In meeting our clients’ needs, we consider a multitude of global market risks and investment objectives including a wide range of environmental risks and the impact they may pose to long-term portfolio returns.

Scientific research finds that an increasing concentration of greenhouse gases in our atmosphere is warming the planet, posing significant risks to the prosperity and growth of the global economy. We recognize that climate change may create investment risks and opportunities across the various entities in which we invest on behalf of our clients including companies, sovereigns, real estate and infrastructure. We believe these risks are multifaceted spanning physical, policy, technology and market impacts. Entities that fail to manage these risks may subject investors to losses. Investors should also bear in mind that winners are likely to emerge as global economies adapt to and address the climate challenge. Policy risk has gained focus more recently as climate change-related laws and regulations emerge globally.

As the table above highlights, the energy and utility sectors may be subject to a number of climate related investment risks. In these and other industries, the nature of climate risk is broad while the timing and geographical impacts are uncertain. Firms are beginning to account for greenhouse gas emissions through carbon footprint analysis and investors can use this information to lower the contribution of their investment portfolios to climate change. However, carbon footprint analysis by itself has limitations and not all carbon emissions contribute equally to prospective investment risk. For instance, regulations may be placed in some regions or industries and not others. Secondly, emissions data are backward looking and so it is useful to consider company policies and other forward looking information to gauge how emissions may change in the future. As such, we believe combining quantitative analysis with qualitative assessment is crucial to effectively managing portfolio risks including climate risk.

Climate change as an investment risk

RISK DEFINITION EXAMPLES HIGHLY IMPACTED SECTORS

Physical Impacts from adverse weather conditions and rising sea level that could cause economic losses

• Economic losses in coastal towns• Reduced food productivity• Adverse health conditions

Real estate, infrastructure, sovereigns, utilities

Policy Policies impacting the operational and financial viability of carbon related assets

• Fuel efficiency standards• Emissions trading systems• Greenhouse gas regulations

Utilities, energy, agriculture

Technology Developments in availability and cost of new technologies

• Renewable energy advances• Carbon capture and storage• Fossil fuel efficiency gains

Renewables, utilities, energy

Market Changes in economic conditions that impact carbon-related assets

• Falling fossil fuel prices• Changes in consumer preferences• Reputational risks

Energy, renewables, financials, consumer

J .P. MORGAN ASSET MANAGEMENT 5

At J.P. Morgan Asset Management, our global scale means we are well placed to help our clients manage various challenges and objectives. Our analysts and portfolio managers integrate a wide range of investment risks, including environmental impacts, into the investment process. We focus on risks that are material to cash flows and prospective returns in client portfolios. In-depth, bottom up analysis provides insight into the long-term sustainability of a business or whether the entities we invest in will remain competitive in the future.

Our analysts conduct independent research and have access to third party ESG data providers as well as in-house specialists who maintain a robust meeting schedule to engage with companies around the world. Where climate risk is deemed material to client portfolios, our analysts seek to answer questions such as:

• How will changing environmental regulations impact the business model?

• What are the risks for environmental waste or accidents?

• What is the risk a company’s assets will become stranded?

• What is the time horizon for material climate risks to play out?

• What is the best measure of an entity or activity’s contribution to climate risk?

• How is management positioned to manage such risks?

Areas of focus for climate risk include the energy and utility sectors. In analyzing organisations in this space, we assess whether the company’s assets are worth less than stated, as well as understanding the strategic initiatives companies are embracing to manage their enterprises. For instance, certain fossil fuel energy reserves and power generation resources may become uneconomic to extract or use (i.e. “stranded”). In addition to the concerns above, specific keys to identifying winners and losers in the space include considering technological advances in energy production and the expected life of energy reserves.

Building on the work of research analysts, our portfolio managers can view integrated ESG information in many of the proprietary systems we use to manage client portfolios. This allows portfolio managers to consider climate risk and other ESG factors within the spectrum of investment risks that our clients face. Where appropriate, methods for managing climate risk include diversification, reducing or eliminating positions, and engagement with company management.

In the changing ESG investment landscape, our Sustainable Investment Leadership Team partners with investment teams to share best practices and develop new products and strategies.

Our approach to managing climate risk

“As coal power plants are one of the largest emitters of CO2, the economic and regulatory landscape has been very challenging. Investing in different parts of a company’s capital structure, our Fixed Income team is able to consider both climate risk and cleaner power opportunities.”

TOM SOCHA Utilities credit analyst for Global

Fixed Income, Currency &

Commodities

“Sustainable investing is not just the right thing to do, it is the right way to invest. Energy and water efficiency retrofits to our existing multi-family properties, for instance, can deliver up to 3x the current returns of our new acquisitions.”

CAVARLY GARRETT Head of Sustainability Task Force

for Global Real Assets

6 INVESTMENT PERSPECTIVE ON CLIMATE RISK

Our Capabilities

We recognize that sustainable investing represents a broad set of opportunities and that clients may choose to implement their views based on explicit portfolio objectives. With that in mind, we offer an array of investment solutions to meet our clients’ financial goals and non-financial objectives. Many of our core investment capabilities incorporate ESG factors into their analysis with the primary goal of delivering exceptional investment returns. Our broad product depth and global research allow us to partner with clients to meet their needs across a spectrum of solutions, including strategies that incorporate a variety of sustainable capabilities.

To help clients lower the impact of their portfolios on climate change and to meet increasing reporting needs, we are able to measure the carbon footprint of investment portfolios, in regions where it’s a regulatory reporting requirement.

In 2016, we began our journey to full ESG integration. Since then we have implemented systematic and explicit consideration of ESG factors in the investment decision making process across ~$200bn in assets under management. This represents approximately 20% of our long-term assets under management, which is a 10% increase since our ESG integration efforts began.*

OUR FLEXIBLE APPROACH SOLVES FOR CLIENT-SPECIFIC GOALS ACROSS A RANGE OF SUSTAINABLE INVESTMENT SOLUTIONS

*Source: JPMAM as of December 31, 2016

MULTI ASSET

EQUITY

BETA

FIXEDINCOME

ALTERNATIVES

SUSTAINABLEINVESTING

CAPABILITIES

ESG INTEGRATION

Systematic and explicit consideration of ESG factors in the investment decision-making process such as:

x Essential services municipals

x Global real assets

x Global Developed Market Equity Research

VALUES/NORMS BASED SCREEN

Avoiding certain companies or industries that do not align with investor values or meet other norms or standards such as:

x Faith-based investing

x Tobacco/firearms screens

BEST IN CLASS

Investment in companies based on positive ESG performance relative to industry peers such as:

x Sustainable equity strategies

THEME BASED/IMPACT INVESTING

Investments based on specific environmental or social themes or assets related to sustainability such as:

x Gender/Diversity

x Ageing population

x Carbon reduction

J .P. MORGAN ASSET MANAGEMENT 7

JPMorgan Chase & Co. Corporate Responsibility

APPROACH TO CLIMATE CHANGE

JPMorgan Chase is committed to providing information to our stakeholders about how we manage and conduct our business, including how we leverage our resources and capabilities to help solve pressing social, economic and environmental challenges, including climate change. We have a dedicated ESG information page on our website to facilitate access to the range of information and resources that we provide. On this page, found at www.jpmorganchase.com/esg, we publish our annual ESG Report, which highlights information about the Firm’s approach to ESG issues that are among the most important to our business and stakeholders. This includes information about our approach to climate change.

JPMorgan Chase recognizes that climate change poses global challenges and risks – as well as opportunities. We leverage our financial capabilities to assist companies seeking to deploy technologies that help reduce greenhouse gas emissions, and manage the risks and opportunities that are emerging from the transition to a lower-carbon economy. We are also actively engaged in discussions about how policy and market trends may impact investors and companies. For example, in 2016, JPMorgan Chase participated as a member of the Financial Stability Board’s Task Force on Climate-related Financial Disclosures, which has released recommendations to guide more effective voluntary disclosure of climate-related risks and opportunities.

We believe that governments have an important role to play in establishing sensible policies that balance the need to reduce carbon emissions with the importance of promoting social and economic growth and development. For this reason, we welcomed the Paris Agreement reached in December 2015, which was a historic global commitment to limit greenhouse gas emissions, and we collaborated with Ceres and other financial institutions to issue a public statement supporting strong government leadership on climate. We also believe that private sector efforts play a critical role alongside government leadership. As a global financial institution, we are committed to working with our clients around the world to help them raise and invest capital in support of new opportunities, including those helping to pave the transition to a low-carbon economy.

2015 ESG REPORT

“Effectively addressing environmental, social and governance issues is a key part of building a great company. Doing so means having strong governance, effective risk management systems and robust controls. It includes delivering exceptional service for our customers in a fair and transparent manner, investing in our employees’ development and fostering an inclusive work environment. It also involves considering environmental and social issues in our business and operations. When we do these things well, it makes our company stronger and more resilient.”

JAMIE DIMON Chairman and

Chief Executive Officer

FOR INSTITUTIONAL/WHOLESALE/PROFESSIONAL CLIENTS AND QUALIFIED INVESTORS ONLY – NOT FOR RETAIL USE OR DISTRIBUTION

TO LEARN MORE

Contact your J.P. Morgan Representativeor visit www.jpmorgan.com/esg

NOT FOR RETAIL DISTRIBUTION: This communication has been prepared exclusively for institutional/wholesale/professional clients and qualified investors only as defined by local laws and regulations.

The views contained herein are not to be taken as an advice or a recommendation to buy or sell any investment in any jurisdiction, nor is it a commitment from J.P. Morgan Asset Management or any of its subsidiaries to participate in any of the transactions mentioned herein. Any forecasts, figures, opinions or investment techniques and strategies set out are for information purposes only, based on certain assumptions and current market conditions and are subject to change without prior notice. All information presented herein is considered to be accurate at the time of writing. This material does not contain sufficient information to support an investment decision and it should not be relied upon by you in evaluating the merits of investing in any securities or products. In addition, users should make an independent assessment of the legal, regulatory, tax, credit, and accounting implications and determine, together with their own professional advisers, if any investment mentioned herein is believed to be suitable to their personal goals. Investors should ensure that they obtain all available relevant information before making any investment. It should be noted that investment involves risks, the value of investments and the income from them may fluctuate in accordance with market conditions and taxation agreements and investors may not get back the full amount invested. Both past performance and yield may not be a reliable guide to future performance.

J.P. Morgan Asset Management is the brand for the asset management business of JPMorgan Chase & Co. and its affiliates worldwide. This communication is issued by the following entities: in the United Kingdom by JPMorgan Asset Management (UK) Limited, which is authorized and regulated by the Financial Conduct Authority; in other EEA jurisdictions by JPMorgan Asset Management (Europe) S.à r.l.; in Hong Kong by JF Asset Management Limited, or JPMorgan Funds (Asia) Limited, or JPMorgan Asset Management Real Assets (Asia) Limited; in Singapore by JPMorgan Asset Management (Singapore) Limited (Co. Reg. No. 197601586K), or JPMorgan Asset Management Real Assets (Singapore) Pte Ltd (Co. Reg. No. 201120355E); in Taiwan by JPMorgan Asset Management (Taiwan) Limited; in Japan by JPMorgan Asset Management (Japan) Limited which is a member of the Investment Trusts Association, Japan, the Japan Investment Advisers Association, Type II Financial Instruments Firms Association and the Japan Securities Dealers Association and is regulated by the Financial Services Agency (registration number “Kanto Local Finance Bureau (Financial Instruments Firm) No. 330”); in Korea by JPMorgan Asset Management (Korea) Company Limited; in Australia to wholesale clients only as defined in section 761A and 761G of the Corporations Act 2001 (Cth) by JPMorgan Asset Management (Australia) Limited (ABN 55143832080) (AFSL 376919); in Brazil by Banco J.P. Morgan S.A.; in Canada for institutional clients’ use only by JPMorgan Asset Management (Canada) Inc., and in the United States by JPMorgan Distribution Services Inc. and J.P. Morgan Institutional Investments, Inc., both members of FINRA/SIPC.; and J.P. Morgan Investment Management Inc.

Copyright 2017 JPMorgan Chase & Co. All rights reserved

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