Liquidity investors are looking for funds that meet their financial goals while also promoting ESG characteristics, hear how we solve it.
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We have uplifted an EMEA range of global liquidity products
The Global Liquidity team at J.P. Morgan Asset Management is excited to introduce our suite of Article 8 liquidity and ultra-short duration funds. We’ve taken steps to ensure that our process is not only rigorous and transparent, but relevant to the liquidity spectrum.
We begin by leveraging our firm’s general approach to Article 8. We apply norms- and values-based exclusions across portfolio holdings and test that at least 51% of the portfolio is invested in securities that have met our governance standards and additionally have good environmental or social characteristics. Importantly, we use external MSCI data for this test because it provides additional transparency.
We then add a separate step for Global Liquidity solutions. During the assessment phase we made a critical realisation – one that ultimately led to one of the defining and most differentiating aspects of our approach to Article 8. Compared to other asset classes, liquidity portfolios tend to invest much more heavily in financials, many of which often score well on environmental factors. So when we ran exclusions and tests on the portfolios, they didn’t make a huge impact. We wanted to go further and make sure we made a difference, so we decided to add a third step and score companies on social factors, using proprietary data on employee engagement and diversity.
Differentiating our approach with a focus on social factors
We are prioritising transparency and want to share as much information as possible about how we interpret Article 8 for Global Liquidity solutions and what are the defining features of our process.
As I mentioned earlier, we believe our focus on social factors enhances our process and differentiates it. We also think social considerations are going to be an increasing area of focus for clients, building on the work already undertaken to date by regulators who are exploring enhancing the EU Taxonomy to recognize social objectives in addition to the existing environmental ones.
We also engage with the social factor laggards in our universe to share our framework and thinking on diversity while transparently communicating issues that could affect whether they remain on our approved-for-purchase list.
Focusing on liquidity, seeking yield, managing downside risks from ESG factors amongst others
Managing an Article 8 fund requires increased focus on ESG factors – but we believe that this doesn’t have to be at the expense of our core offering to Global Liquidity clients: liquidity, capital preservation and yield.
In our view, there’s enough diversity in the liquidity and short-term bond universe to be selective and be able to tilt funds towards ESG through our process. In fact, all of our funds being uplifted have been managed in line with the Article 8 criteria and process for some time, so we know our approach works and the formal uplift won’t trigger any changes to the portfolios.
We are excited to announce this uplift of Global Liquidity funds and are especially looking forward to sharing more about our process and thinking in this area of sustainable investing.
Differentiating our approach with a focus on social factors
See every step in our process
We strive to be clear and straightforward about how we incorporate environmental, social and governance considerations into our liquidity solutions. Explore the details of our proprietary three step process.
Intro: Our ESG process for liquidity solutions
We’ve created a proprietary three-step process to incorporate environmental (E), social (S) and governance (G) considerations into our liquidity solutions.
Step 1: Exclusions
We start by excluding (or applying maximum thresholds to) certain issuers and sectors based on international norms and values.
Step 2: ESG rankings
After exclusions, all securities are then ranked using separate E, S and G scores from MSCI, allowing us to focus on securities that clear our threshold.
The majority of investments must rank within the top 80% on their G score, and within the top 80% on either their E score or their S score, if not both.
The aim is to ensure that at least 51% of portfolio holdings have “good” ESG characteristics.
Step 3: Proprietary social scores
Concurrently to the ranking of MSCI scores, the securities are also ranked by our proprietary social factor screen.
The Employee Engagement & Diversity (EE&D) was developed by our Sustainable Investing Research & Data team.
We focus on issuers who rank within the top 80% of this social factor screening, ensuring that at least 51% of holdings have “good” social factor scores based on EE&D.
We also actively engage with the lowest EE&D ranking issuers, particularly on activities related to diversity.
Outro: Designed for liquidity investors
The outcome is a clear and rigorous ESG process that is differentiated by a focus on social factors, and is designed specifically to meet the needs of liquidity investors.
Featured solutions
Frequently Asked
Questions
What is an Article 8 investment fund?
The term Article 8” refers to a section of the EU Sustainable Finance Disclosure Regulation (EU SFDR) detailing a class of products that promote social and/or environmental characteristics, but do not have sustainable investing as a core objective.
Article 8 products differ from Article 9 products, which meet a higher threshold by having a sustainable investment objective. Article 6 products do not meet the criteria for Article 8 or Article 9 products.
It s important to understand Article 8 products in the context of the EU SFDR, including its goals and its scope.

What is the EU SFDR and why is it important?
The EU SFDR came into effect on 10 March 2021 and is designed to re orient capital towards sustainable growth and help clients make better sustainable investing choices.

Which types of financial products are impacted by the SFDR?
The scope of the EU SFDR is relatively broad, applying to all financial market participants and financial advisers based in the EU, as well as investment managers or advisers based outside of the EU, who market (or intend to market) their products to clients in the EU under Article 42 of the Alternative Investment Fund Managers Directive (EU AIFMD).

What are Sustainability Risks and Principal Adverse Impacts?
To achieve the EU SFDR’s goal of improving sustainable finance by increasing transparency and creating standards, asset managers and advisers must disclose the manner in which they consider two key factors: Sustainability Risks and Principal Adverse Impacts.
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