GLOBAL - JP Morgan Investor Services has extended its compliance reporting services to warn institutional investors when they near or breach their own environmental and corporate governance (ESG) criteria concerning specific assets held.

Details of the launch were unveiled today at the Corporate Governance and Responsible Investment summit in Copenhagen, Denmark, and, more specifically, extend the electronic reporting of all post-trading activity on a client's investment criteria to cover the ESG rules an investor may impose, as well as flag when those limits could be breached.

Rajesh Kumar, executive director for compliance reporting services, told IPE the system is designed to drill down in detail so investors can more accurately see not only whether the firm they meet their ESG policy and how important a potential breach might be, by applying a wide range of ESG criteria.

"One of the common themes has been to invest in ESG but one of the problem has been the objective information to support it. We have tried to help clients putting rules around their investments, so we have been looking at some of the SRI benchmarks, which we believe will see development in the next 6-10 years," said Kumar.

 "This allows them to assess their various factors as we provide a lot more information over whether they are involved in any way in these issues along with additional information around the levels of activity," he added.

More specifically, JP Morgan has developed a post-trading tracking system for custody and accounting records which not only reveals whether limits are close to being breached on 50 categories such as, for example, gambling, weapons, faith values, climate change, but also extends down to 275 "data elements" built around those categories, showing how involved a particular firm might be, perhaps by percentage of revenue for example, or by specifying whether they are producing, distributing or selling alcohol, where it is relevant to the investor.

Under the online system's current calculations, JP Morgan is tracking 600 funds affected by over 21,000 ESG rules thanks to a feed from RiskMetrics and Institutional Shareholder Services (ISS) so it can email the end user and provide automated links for its client accounting systems on a daily basis.

The data is gathered through top-down company-specific screening as well as bottom-up issue-specific analysis of primary source documents, such as reviews of company filings, corporate websites, policy statements and ESG reports.

The service is also available to third-party administration accounting services, said Kumar where JP Morgan is not responsible for their accounting.

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