JPMorgan Quants Develop Model for Socially Responsible Investing

Wednesday, March 7, 2018

In a further sign that socially responsible investing is going mainstream, JPMorgan Chase & Co. have developed a quantitative tool to help investors pick compliant stocks.

Strategists at the firm have built an “ESGQ” quantitative metric that combines a company’s long-term corporate responsibility score with faster-moving data that isolates newsflow on potential controversies. The analysis then tracks momentum in the ESG scores to measure changes in market sentiment and price behavior.

According to JPMorgan, their quantitative approach could help improve returns in the environmental, social and governance (ESG) space.

The model improves on a “key frustration” of ESG investing — that relevant data can be slow moving and infrequent, strategists including Khuram Chaudhry wrote in a note Tuesday. “Slow- and fast-moving metrics together complement each other when trying to seek alpha from a responsible approach to investing.”
Photo courtesy of Ken Teegardin.

Source: Bloomberg Markets (link opens in a new window)

data, ESG, impact investing