Industry Updates

JP Morgan AM adds ESG filter to ultra-short bond ETFs

ETFs will introduce a “values and norms-based screening” filter

Theo Andrew

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JP Morgan Asset Management (JPMAM) has added an ESG filter to its three ultra-short income bond ETFs.

The JPMorgan USD Ultra-Short Income UCITS ETF (JPST), the JPMorgan EUR Ultra-Short Income UCITS ETF (JEST) and the JPMorgan GBP Ultra-Short Income UCITS ETF (JGST) will invest at least 51% of its assets through issuers with positive ESG characteristics.

The ETFs will continue to invest in short-term debt securities with an additional ESG scoring methodology and “value and norms-based screening” filter applied.

As a result, the ETFs will exclude issuers involved in the manufacturing of controversial weapons, thermal coal and tobacco, while issuers will be assessed against principles in the UN Global Compact.

It added it will apply “maximum percentage thresholds” for industries that make a certain amount of turnover from production or distribution of certain sectors.

For example, issuers that make over 10% of their turnover from conventional weapons, 5% from tobacco production, 30% from thermal coal and 2% from connections to the nuclear weapons industry.

In a note to shareholders, JP Morgan AM wrote: “The board believes that enhancing the sub-funds disclosures to reflect the promotion of ESG characteristics within the portfolio is in the best interests of investors as it may offer better prospects for growth as demand for sustainable products continues to grow.”

JPMAM said the change would take effect from 21 February, adding there would be “no material change” to how the ETFs are managed or their respective risk profile.

Launched in 2018, the ETFs have a combined €1.5bn assets under management and have a total expense ratios (TERs) of 0.18%, although temporary waivers are currently in place for JEST 0.08% and JGST 0.10%. 

The asset manager expanded its core range last February with the launch of the JPMorgan BetaBuilders US Treasury Bond 0-3 Months UCITS ETF (BB3M) with a TER of 0.07%.

Short-duration ETFs found themselves in favour in H2 2021 as investors started to hedge against the threat of rising inflation.

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