JP Morgan has collaborated with BlackRock to launch new suite of global fixed income indices, JP Morgan ESG index (JESG), which integrates environmental, social, and governance (ESG) factors in a composite benchmark.
The new index is independently managed by JP Morgan and will cater to investors looking to gradually incorporate ESG and responsible investing in their overall fixed income investment strategies by anchoring its methodology around the bank’s widely used flagship indices such as the EMBI, GBI-EM and the CEMBI.
Gloria Kim, head of the Global Index Research Group at JP Morgan 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 look forward to help investors access ESG investments on a global scale through our new index line-up.”
The initial JESG is 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 JESG suite will also overweight green bond issuances.