(Bloomberg) -- 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.”
Enthusiasm for ESG-based investing continues to grow, with assets under management in socially responsible ETFs reaching $11 billion, according to JPMorgan. However, despite interest in the concept, performance for funds that stress ESG factors continues to lag behind, according to research from Bloomberg Intelligence.
To contact the reporter on this story: Joanna Ossinger in New York at jossinger@bloomberg.net.
To contact the editors responsible for this story: Tracy Alloway at talloway@bloomberg.net, Cormac Mullen, Christopher Anstey
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