(Bloomberg) — The asset management arm of JPMorgan Chase & Co. will test a new investment product designed to attract clients who want their money to go into companies at the forefront of the battle against climate change.
The Wall Street giant is launching a so-called Article 9 product, it said on Tuesday. The categorization requires fund managers to prioritize sustainability above all else, as defined under the European Union’s Sustainable Finance Disclosure Regulation. The new fund will target “forward-thinking companies which are developing and scaling solutions to address climate change,” J.P. Morgan Asset Management said on Tuesday.
Europe has moved more aggressively than other jurisdictions in putting together a regulatory framework designed to steer capital away from industries with unsustainable business models, and toward activities that promote environmental and social goals. SFDR, also known as an anti-greenwashing rulebook, was enforced in March this year and applies to all investment managers with European clients.
The EU’s ESG disclosure rules force asset managers to divide funds into three main categories: Article 8, for products that promote sustainable goals (often dubbed light green). Article 9, for products that must rank sustainability as their top priority — even higher than pure financial returns (often dubbed dark green). And Article 6 for products that neither have ESG characteristics nor targets; managers must still disclose ESG risks, if any.
Money moving into funds tackling environmental, social and governance issues in Europe jumped by more than 25% in the third quarter to make up over half of all new inflows, according to figures compiled by Morningstar Inc. Assets in Article 8 — or so-called light green products — and Article 9 funds totaled 3.32 trillion euros ($3.85 trillion) at the end of September, according to the market research firm. The darker the shade, the more sustainable the product.
JPMorgan said its Article 9 product — the Climate Change Solutions fund — will be run by two London-based managers, Francesco Conte and Sara Bellenda, and will put money in sectors such as renewable energy, sustainable construction and transport as well as recycling.
The firm also plans to launch a UCITS ETF in 2022 that will be based on the same investing strategy, subject to regulatory approval, it said. In a separate announcement on Tuesday, JPMorgan said its asset management unit was also unveiling its first actively managed exchange-traded fund that focuses on sustainability, the Climate Change Solutions ETF.
Read More: JPMorgan Expands Green ETF Suite With Actively-Managed Fund
The asset manager will use artificial intelligence to screen close to 13,000 stocks globally and then have its research analysts go over the results before a selection is made, it said. The fund will run a portfolio of between 50 and 100 names.
“By combining artificial and human intelligence, our strategy seeks to capture innovative investment opportunities and technologies facilitating the low carbon transition,” Massimo Greco, head of EMEA funds at J.P. Morgan Asset Management, said in the statement.
(Adds reference to new green ETF in seventh paragraph)
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