JP Morgan AM launches carbon transition global equity ETF in Europe

JP Morgan AM launches carbon transition global equity ETF in Europe

J.P. Morgan Asset Management (JPMAM) today launched the JPMorgan Carbon Transition Global Equity UCITS ETF (JPCT).

The sustainable ETF will offer core exposure to global equities with a low tracking error, compared to the MSCI World Index, and have a meaningful reduction in carbon intensity.

JPCT will track the JPMorgan Asset Management Carbon Transition Global Equity Index, which was built to achieve a meaningful reduction in carbon intensity without relying on exclusions or sector deviations. JPCT uses a forward-looking proprietary research framework to identify which companies, across all sectors, are most aligned with the transition to a low carbon economy. JPCT will offer investors at least 30% less carbon intensity than the MSCI World index, and a year-on-year de-carbonization target of at least 7%, in line with EU Climate Transition Benchmark (CTB) framework for sustainable investing.

Investing in carbon transition-aware strategies needs to start now."

Created by JPMAM's Sustainable Investing and Quantitative Beta Solutions (QBS) teams, the carbon transition quantitative investment framework underpinning the new index helps to mitigate the risks of climate change by reducing carbon emissions and leaning into the opportunities and technologies required for a successful transition to a low carbon world. The framework, which can be applied to any starting investment universe to create customized solutions for professional and institutional investors alike, seeks to differentiate the leaders from the laggards by evaluating:

  • Their production of direct ("scope 1") and indirect ("scope 3") emissions and how companies plan to manage and reduce emissions.
  • How companies manage resources, including electricity ("scope 2" emissions), water and waste.
  • Other climate-related risk management considerations such as physical and reputational risks.

The framework imports primary data, sourced directly from companies, as well as alternative data sources from ThemeBot, JPMAM's proprietary natural language processing tool, which can capture a range of innovative signals, such as a company's green capital expenditure. The framework's ratings will then determine which companies are emphasized, through underweight and overweight positions, without taking region or sector bets.

Olivier Paquier, head of ETF Distribution in EMEA, commented: "Many investors are considering the carbon transition readiness of their portfolios, coupled with a need to maintain broad diversification, a low tracking error and cost-efficiency. Our carbon transition global equity ETF should help meet those needs, as clients look to integrate low carbon transition considerations when investing in global equities."

Jennifer Wu, global head of sustainable investing at J.P. Morgan Asset Management, commented: "Investing in carbon transition-aware strategies needs to start now. Differences are emerging, between the potential winners and losers in the low carbon transition, and by acting early, before climate risks and opportunities are fully priced in, investors can capture potentially significant returns as prices continue to adjust. We've had interest from a range of clients looking to leverage our framework to help meet their specific sustainable investment goals."


Author spotlight

Christopher Copper-Ind

Christopher Copper-Ind is editor-in-chief of International Investment. Before this, he was editorial director of The Business Year, from 2014 to 2017.