This week, J.P. Morgan Asset Management, the investment management arm of financial services giant J.P. Morgan Chase with $2.3 trillion in managed client assets, announced the launched of JPMorgan Carbon Transition U.S. Equity ETF. Trading under ticker JCTR, the sustainable ETF will offer core exposure to listed U.S. companies with a low tracking error, compared to the Russell 1000 Index, and that aim have a meaningful reduction in carbon intensity.
“Investing in carbon transition aware strategies needs to start now,” said Jennifer Wu, Global Head of Sustainable Investing at J.P. Morgan Asset Management, upon the launch announcement. “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.”
Fund components are identified by JCTR, using a forward-looking proprietary research framework (developed in-house) to identify companies, across sectors, that may be best positioned to benefit from the transition to a low carbon economy.
JCTR will track the JPMorgan Asset Management Carbon Transition U.S. Equity Index, which was built to achieve meaningful reduction in carbon intensity without relying on exclusions or sector deviations. JCTR will seek to offer investors at least 30 percent less carbon intensity than the Russell 1000 index, with a year-on-year de-carbonization target of at least 7 percent, in line with the EU Climate Transition Benchmark (CTB) framework for sustainable investing.
The carbon investment framework Created by JPMAM’s Sustainable Investing and Quantitative Beta Solutions (QBS) teams, the carbon transition investment framework underpinning the new index is constructed to help 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 was applied to an initial investable universe of Large Cap US Equities, seeks to differentiate the leaders from the laggards on three criteria. First is house companies manage their own greenhouse gas (GHG) emissions. Second is how companies manage their own resources (e.g., water, waste, and electricity usage). Finally, companies are assessed on how they manage other climate-related risks, physical or reputational.
Sector-neutral
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 determined which companies are emphasized, through underweight and overweight positions, without taking sector bets.
“As investors ready portfolios for the transition to a lower-carbon future, we’re excited to meet our clients in the new decade with JCTR,” said Bryon Lake, Head of Americas Client ETF, J.P. Morgan Asset Management. “Our sustainable strategy allows investors to embrace long-term carbon transition trends and consider the most relevant risks and opportunities across all sectors, while maintaining a low tracking error and cost-efficiency.”
With the addition of JCTR, J.P. Morgan Asset Management’s U.S. ETF offering now features 32 products with more than $40 billion in assets under management. J.P. Morgan Asset Management ranks as a top ten ETF issuer as measured in AUM and ranks in the top five in net new assets for 2020.
