On Thursday, J.P. Morgan Asset Management launched the JPMorgan Carbon Transition U.S. Equity ETF (JCTR). Aligned with JPMAM’s Sustainable Investment Framework, the fund seeks to capture benefits from transitioning to a lower-carbon economy and provide broader U.S. equity exposure.
The sustainable ETF will offer core exposure to U.S. equities with a low tracking error, compared to the Russell 1000 Index, and aim to have a meaningful reduction in carbon intensity. JCTR will use a forward-looking proprietary research framework to identify which companies, across all sectors, may be best positioned to benefit from the transition to a low carbon economy.
The fund will track the JPMorgan Asset Management Carbon Transition U.S. Equity Index, built to achieve a meaningful reduction in carbon intensity without relying on exclusions or sector deviations. JCTR will seek to offer investors at least 30% less carbon intensity than the Russell 1000 index, and a year-on-year de-carbonization target of at least 7%, in line with the EU Climate Transition Benchmark (CTB) framework for sustainable investing.
JPMAM Carbon Transition 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 a Large Cap US Equity starting investment universe, seeks to differentiate the leaders from the laggards by evaluating:
- Emissions: How companies manage their greenhouse gas (GHG) emissions
- Resource Management: How companies manage their resources, including water, waste, and electricity usage
- Risk Management: How companies manage other climate-related risks such as physical and reputational risks
The framework imports primary data sourced directly from companies and 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 sector bets.
Jennifer Wu, Global Head of Sustainable Investing at J.P. Morgan Asset Management, comments: “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.”
“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,” says 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 suite now features 32 product offerings with more than $40 billion in assets under management. J.P. Morgan Asset Management ranks as a top ten ETF issuer concerning AUM and ranks in the top five in net new assets for 2020.
More information is available at https://am.jpmorgan.com/us/en/
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