Industry Updates

JP Morgan to remove Russia from fixed income ESG indices

The bank currently undertaking an “observation period” on Russian bonds

Theo Andrew

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JP Morgan is lining up the removal of Russia from its emerging market debt ESG indices and could see sanctioned bonds and issuers removed from its indices altogether.

The bank said it is reviewing the impact of the sanctions on the $38bn JP Morgan ESG emerging market indices adding that both Russia and Belarus could be removed from the suite of indices from 31 March.

JP Morgan said the review was part of an “observation period” due to the sanctions imposed on Russia following its invasion of Ukraine.

It also confirmed that new debt from sanctioned Russian entities will not be eligible for JP Morgan indices from 1 March.

It is expected to review the inclusion of Russia in its wider emerging market debt benchmarks.

Currently, JP Morgan’s Emerging Market Bond index, which is tracked by $415bn assets, has a 0.89% weighting to Russian sovereign bonds.

Other flagship indices include the $245bn Global Bond Index-Emerging Market indices and the $140bn Corporate Emerging Market Bond index with 1.84% and 0.66% allocated to Russian securities, respectively.

The Moscow Exchange remained closed on Tuesday and the restrictions on trading Russian securities mean that index providers will no longer be able to provide the minimum liquidity requirements required for their inclusion in benchmarks.

It follows an announcement by MSCI that it was seeking feedback from investors on the investability of the Russian market following the closure of the Moscow Exchange.

The world’s largest index provider said a blanket removal of Russian securities from its indices could be a “potential next step”.

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