ESG delivers performance above all else

As Massimo Greco, the head of European funds at JP Morgan AM, recently reminded, the asset manager has initiated a radical transformation of his activities in the direction of sustainable financing. Patrick Thomson, CEO of Asset Management, returned to the topic at the annual JP Morgan AM European Media Summit in London from 7 to 8 June. “I think our ability to give clients a choice in the field of sustainable financing is a source of opportunity. This is probably our most important initiative, and it affects all our investors. “

For his part, Jennifer Wu, global head of sustainable investment at JP Morgan AM, believes that climate change is “an unprecedented problem that we must face as a community, because no person, company or organization can solve it. alone. ” To do this, she does not hesitate to mention the role of everyone. Politicians have a responsibility to lead and manage the economy by cooperating internationally. In turn, companies need to find ways to mitigate their risks, even if it means adapting.

I think our ability to offer clients a choice in the field of stable financing is a source of opportunity. This is probably our most important initiative, and it affects all our investors.

Patrick Thompson

Patrick Thompson, CEO, JP Morgan AM

As for asset managers, “our role as investors is to understand these risks and their time horizons,” says Jennifer Wu. He adds: “We want to avoid companies that could potentially face fines or damage their reputation. Collecting signals that suggest potential disputes remains a constant challenge for analysts.

“Profit adjusted for risk”

And those who talk about risks talk about opportunities. “Our job as investors is to find potential prospects for better profits for our clients.” Thus, JP Morgan AM considers each investment goal in terms of operational efficiency. “If a company is able to produce the same level of goods at lower costs because it manages natural resources better, we expect it to produce better ones.” Thus, the very goal of integrating ESG principles is to “achieve better risk-based returns.” An element that Jennifer Wu wants to emphasize, in particular: “There are some misunderstandings in the market that make some people think that we are used to worrying about saving the world.”

There are some misunderstandings in the market that make some people think that we are used to worrying about saving the world.

Jennifer Wu

Jennifer Wu, Global Head of Sustainable Investment, JP Morgan AM

Therefore, JP Morgan AM ESG’s investment approach is to identify companies that can outperform their counterparts in terms other than traditional management. This requires a long-term vision. “Companies that focus on improving their performance through better retraining, better human capital management or better training of their staff, as well as companies that focus on building a solid board of directors (ради), are companies that are formed over time,” says Jennifer. Wu. .

“Forensic understanding”

The identification of companies that meet such criteria undoubtedly involves the collection and analysis of data based on the disclosure of business entities. “Data is essential to ensure that we receive accurate information so that we can accurately represent what we do in the funds,” said Patrick Thompson, CEO of JP Morgan AM. He does not hesitate to mention the need to gain a “forensic understanding” of each company’s compliance with the ESG. “We are a trustee. (…) We do not act in our own interests, but on behalf of clients. ” In fact, many of them want to receive detailed reports with data that help them understand the reasons for the investment and the expected results.

We are a trustee. (…) We do not act in our own interests, but on behalf of clients.

Patrick Thompson

Patrick Thompson, CEO, JP Morgan AM

Over time, regulatory changes also become a problem for ESG data. The availability of high-quality data already makes it possible to answer regulators’ questions more effectively. The introduction of the SFDR (Sustainable Finance Disclosure Regulation) requires asset managers to classify their assets according to whether they are sustainable or not, whether they contribute to environmental and social characteristics, or have a clear goal of sustainable investment. This regulation will introduce an additional level in January 2023. The regulatory revolution is aimed at reducing the possibility of greenwashing, which, on the one hand, puts pressure on companies to improve the accuracy of the data they report, and on the other hand, forces asset managers to systematically consider data analysis.

On the other hand, Jennifer Wu reminds us that data processing is only an aid to decision-making: “The most important part of our research operations is managed by our analysts and our portfolio management.”

This article is taken from the bulletin Paperjam + Delano Finance, a weekly meeting to follow financial news in Luxembourg.
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