J. P. Morgan Asset Management (JPMAM) has unveiled a series of initiatives to boost its commitment to sustainable investments including the development of a proprietary ESG framework, prioritising investment stewardship work in five key areas, as well as signing up to Climate Action 100+.
As asset management firms across Europe look to improve their ESG credentials, JPMAM’s announcement said the firm wants to reinforce its focus on advancing sustainable solutions for clients. Recently, a Charles Stanley Direct survey found that half of the 2,000 UK investors it surveyed want to increase their investments with ESG characteristics.
Firstly, in its investment stewardship process JPMAM will increase its engagement across five prioritised areas; climate risk, governance, strategy alignment with the long term, human capital management and stakeholder engagement.
On climate risk, the group explained it 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).
In terms of governance, JPMAM will focus on companies with a “strong corporate culture” and diverse boards, while also placing emphasis on boards that align themselves with long-term outcomes and in including their compensation arrangements for executives.
Additionally, JPMAM said it will prioritize companies that manage human capital effectively and take into account the broader impact on the communities in which they operate.
Jennifer Wu, global head of sustainable investing at JPMAM, explained: “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.”
Secondly, the group, which has around $2trn in assets under management, is harnessing data science to launch a proprietary ESG scoring system framework, with the financial indicators set by the investment team. It will aim to identify ESG risks and opportunities as well as construct portfolios with an ESG overlay.
“We believe that data science, harnessed intelligently, will greatly enable and advance sustainable investing, in both mitigating risks and generating alpha. Furthermore, it will help to inform focus area for our corporate engagement work,” Wu added.
Finally, JPMAM has become a signatory to Climate Action 100+, an investor initiative to ensure the world’s largest corporate greenhouse gas emitters take necessary action on climate change.
Wu said: “Joining Climate Action 100+ adds another channel to engage with companies on enhancing disclosure of risk exposures, as well as strategy and governance on greenhouse gas emissions reduction and adoption of sustainable business practices.”
As investors demand for ESG characteristics in portfolios increases, asset managers are moving to meet this demand.
In January, BlackRock announced it would be making sustainability its “new standard” for investing in an overhaul of its strategy, while groups such as AXA Investment Management and Allianz Global Investors have also moved towards integrating ESG credentials into their investment research across a broad range of their products.