Will JP Morgan’s share price gain from ESG ambitions?

JP Morgan’s [JPM] share price has surged in line with the reopening of the global economy. Now in an effort to fend off competition from rivals, fintechs and to tap into the increasing importance of responsible investing, JP Morgan has acquired OpenInvest, a start-up specialising in ESG investing.

We look at JP Morgan’s recent share price performance, the ESG landscape and how it is busy acquiring new companies as part of its ongoing growth strategy.

What’s happening with JP Morgan’s share price

Over the past 12 months, JP Morgan’s share price has surged by more than 68.4% (as of 2 July close), having accelerated at the end of September following the news that a vaccine for the coronavirus was on the cards.

However, June was a tricky month for the stock. Between 4 June and 18 June, its value went from around $166 to just under $148 — a blot on what has been an impressive recovery as the global economy begins to recover from the pandemic.

Since the mid-June lows, JP Morgan’s share price has steadily recovered, having closed at $156.03 on Friday. Upcoming second-quarter earnings due in mid-July could help the stock. Last time out, the bank easily topped Wall Street expectations, posting earnings of $4.50 a share on revenue of $33.12bn.

Analysts seem confident that there is some upside left in JP Morgan’s share price, with the stock carrying an average $167.44 price target on Yahoo Finance — hitting this would see a 7.3% upside on Friday’s close.

JP Morgan ups its ESG ambitions

JP Morgan’s share price might make it the biggest bank in the world by market cap, but that doesn’t mean the bank can get complacent. One front is the changing expectations about how online banking services are delivered. The other is investors becoming more savvy when it comes to their investment choices.

Jamie Dimon told CNBC in February last year that that bank will be ‘much more aggressive’ with acquisitions. The JP Morgan boss added that competition is coming from not only fintechs and other banks, but also the likes of Amazon [AMZN] and Google owner Alphabet [GOOG].

This aggressiveness has led to JP Morgan’s acquisition of OpenInvest, a start-up that was created in 2015 by Conor Murray, Joshua Levin and Phillip Wei to help clients create personalised portfolios that reflect their outlook, rather than pump money into ESG funds. JP Morgan’s own financial managers will now be able to use the technology to tailor customer funds.

“It’s not just whether or not you care about gender equality, but whether you want to tilt more towards maternity leave or gender pay gap or board compensation, any of the things that matter to the client,” Conor Murray, co-founder and CEO of OpenInvest, told CNBC in an interview.

According to CNBC’s Hugh Son, JP Morgan approached OpenInvest when it was completing its Series B funding round. Before the acquisition, OpenInvest had already raised $25m in funding.

JP Morgan’s other recent acquisitions include online asset management platform Nutmeg, and 5ip, which automates the creation of tax-efficient portfolios. In the UK, JP Morgan will also be launching its own retail banking service under the Chase brand to compete with the likes of Monzo.

ESG funds continue to see record inflows

You don’t have to go far in the financial press right now to read about ESG investing — a broad category that takes a holistic approach to the way companies are run and investors’ interest in these areas.

Assets in sustainability-focused funds went from over $1trn in the second quarter 2020 to just under $2trn by the end of the first quarter as inflows hit record levels, according to a Morningstar report. On a quarter-on-quarter basis, inflows jumped 17% between the fourth quarter of 2020 and the first quarter of this year. In the US, net inflows more than doubled to $21.5bn in 2020 compared with the previous year.

“2021 began where 2020 left off with record demand for sustainable investment options across the globe,” noted Hortense Bioy, global director of sustainability research at Morningstar.

In JP Morgan’s 2020 ESG report, Jamie Dimon wrote that the bank is looking to invest $2.5trn over “10 years to advance climate action and sustainable development”. Dimon added that the bank would be “aligning key financing portfolios with the goals of the Paris Agreement and working with our clients to finance their decarbonisation strategies”.

JP Morgan’s latest acquisition could see it well placed to benefit from the increasing importance of ESG investing.