JP Morgan Asset Management (JPMAM) has labelled its emerging market sovereign debt ETF Article 8 under the Sustainable Finance Disclosure Regulation (SFDR) after enhancing its ESG policy.
In a shareholder notice, JPMAM said the JPM USD Emerging Markets Sovereign Bond UCITS ETF (JPMB) will invest in at least 51% of its assets in issuers with “positive environmental or social characteristics”.
The $537m ETF will now be classified as ‘light green’ Article 8 under SFDR from 14 December.
As part of the changes, JPMB will include ESG analysis on at least 75% of its non-investment grade bonds and 90% of its investment grade securities.
Tracking the JP Morgan Emerging Markets Risk-Aware Bond index, the ETF’s 51% threshold is measured through JPMAM’s propriety ESG scoring methodology and third-party data.
“The board believes that enhancing the sub-fund’s disclosure to reflect the promotion of ESG characteristics, and the application of minimum inclusion and exclusion thresholds is in the best interests of the investors,” the group said.
“It may offer better prospects for growth as demand for products promoting ESG characteristics continues to grow.”
Sovereign bonds and ESG have long been a contentious match-up for ETF issuers due to their lack of ability to engage and influence governments' ESG practices.