JP Morgan has announced a partnership with BlackRock that has seen the launch of a suite of global fixed income indices that incorporate ESG factors.
In a statement, JP Morgan said the newly launched JP Morgan ESG (JESG) suite was launched to meet bond investor demand for “a benchmark that targets emerging market issuers with strong ESG practices”.
The suite incorporates environmental, social and governance factors in a composite benchmark and is aimed at investors seeking to incrementally integrate responsible investing into their fixed income strategies, the statement said.
Commenting on the launch, JP Morgan head of global index research group Gloria Kim said: “Responsible investing is becoming the cornerstone of many of our clients’ strategies and having access to a proper global fixed income benchmark that integrates ESG is essential.
“We are pleased to help investors access ESG investments on a global scale through our new index lineup,” she said.
Head of BlackRock Emerging Markets Fixed Income Sergio Trigo Paz added that up until recently, the presence of ESG considerations in emerging market debt (EMD) had tended towards being “bespoke and project-based as opposed to providing solutions at scale”.
“Establishing these benchmarks will be instrumental in redefining the investment universe and setting an industry standard to help make ESG investment within EMD more broadly accessible to all investor types,” Mr Paz said.
According to the statement, the JESG suite has so far been made available for the EMBI Global Diversified, GBI-EM Global Diversified and CEMBI Broad Diversified.
“There are five components in the JESG methodology once the baseline index is selected: define the data inputs; establish JESG index scores; apply integration mechanics; consider ethical factors and exclusion and calculate new ESG weights.
“These newly calculated JESG index scores will be systematically applied to determine the new ESG weights in the index, and issuers with better ESG scores will have their weights increased relative to their baseline index weights,” the statement said.
“The JESG suite will also overweight Green Bond issuances."