J.P. Morgan Asset Management ( JPMAM ) announced on February 26 a range of initiatives designed to reinforce its focus on advancing sustainable solutions for clients, including:
1) Enhancing its investment-led, research driven stewardship process to increase its engagement with companies around five specific priorities, including climate change, bringing greater momentum to efforts already underway.
2) Developing a proprietary environmental, social and governance ( ESG ) scoring framework. It will leverage in-house research on the materiality of different ESG factors and utilize data science and artificial intelligence, based on the firm’s conviction that harnessing data will significantly advance sustainable investing.
3) Becoming a signatory to Climate Action 100+, reflecting the firm’s increasing collaboration with companies, investors and regulators on the critical issue of climate risk.
“These announcements serve to strengthen our ongoing commitment to sustainability. ESG considerations are an integral part of investing at J.P. Morgan, with over 200 buy-side research analysts applying ESG factors into the buy/sell decisions on securities. We have applied our learnings and best practices systematically across asset classes so that it is part of our DNA,” said George Gatch, Chief Executive Officer, J.P. Morgan Asset Management.
“Our data science teams and advanced technologies will enable us to better understand how sustainability-related issues impact financial outcomes and to do even more to help our clients navigate this and build stronger portfolios.”
JPMAM enhances its investment-led, research driven investment stewardship process
Leveraging the expertise of more than 1,000 investment professionals working directly with companies, JPMAM will build on the foundation of our longstanding corporate engagement practices in defining and implementing its investment stewardship philosophy, tapping into its investors and using ESG data and research capabilities, to strategically focus on engaging companies where JPMAM believes ESG considerations can play a critical role in creating value for its clients.
To support this, enhanced annual reporting will incorporate key performance indicators in the firm’s engagement policies, providing transparency to clients and clarity in terms of JPMAM’s expectations for the companies in which JPMAM is invested.
The investment stewardship model will prioritize:
• Climate Risk. JPMAM believes climate risks will directly impact the ability of companies to create long-term shareholder value and will engage with companies on embedding and disclosing climate risk considerations into corporate strategy as outlined by the Task Force on Climate-related Financial Disclosures ( TCFD ).
• Governance. JPMAM values a strong corporate culture with a focus on directors who represent all shareholders equally and on companies with diverse boards.
• Strategy Alignment with the Long Term. JPMAM expects companies and boards to align themselves with long-term outcomes, including compensation arrangements for executives.
• Human Capital Management. JPMAM believes managing human capital effectively ( e.g. workplace standards, education & training, diversity and gender equality ) is critical to maintaining an engaged and productive workforce.
• Stakeholder engagement. JPMAM thinks companies’ sustainability depends on companies taking into account the interests of all their stakeholders and the broader impact on the communities in which they operate, including issues such as cybersecurity and privacy, which will be increasingly critical to long-term success.
“We’re concentrating our investment stewardship efforts on the most financially material issues where we can help drive the creation of long-term value; this forms the foundation of our investment stewardship work. Our focus is zeroing in on the issues that influence the growth trajectory of companies in which we invest,” said Jennifer Wu, Global Head of Sustainable Investing, J.P. Morgan Asset Management.
“Our focus on sustainability and value creation has always been an integral factor in our corporate engagement work. Our investment stewardship priorities will be expressed in increased engagement and in our voting, in which we will take positions that promote long-term sustainable business practices,” she added.
