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JP Morgan ends dedicated ESG research coverage

US bank to include SRI research in mainstream equity coverage.

A second broker has ended its dedicated coverage of SRI research in the space of a week as a result of staffing cuts at investment banks. JP Morgan has told clients that its specific ESG (environmental, social and governance) service was being discontinued. It follows last week’s decision by Citigroup to disband its in-house SRI research team. Claudia Kruse, the Europe ESG analyst at JPMorgan Europe for the global ESG research team has already left the company. Kruse’s colleagues in the dedicated global ESG research included Marc Levinson at JPMorgan US and Wai-Shin Chan at JPMorgan Asia. JPMorgan said it would no longer provide dedicated ESG research to clients, instead offering access to its broader equity research coverage including areas such as renewable energy. Sources close to JP Morgan said the bank would still work on ESG themes in its broader equity research teams, but without the direct ESG co-ordination. A spokesman for the bank declined to comment on the disbanded dedicated ESG service or the future of staff. Last week, Responsible Investor revealed that Citigroup’s top-rated SRI team, which last month scooped the award for the best European SRI broker firm in the Thomson Reuters Extel/UKSIF
2008 Socially Responsible Investing & Sustainability Survey, was being cut. A senior broker in a rival ESG team said the disbanding of SRI teams in other houses was a cause forconcern: “These are not good signs because they can send the wrong message to management at a time when we believe there is a very strong case based on client demand for improving and expanding the way ESG research is produced.” Rory Sullivan, head of responsible investment at Insight Investment, said “Given the emphasis that has been placed by the investment community on integrating ESG issues into investment processes and the increasing appetite for this type of research, it is both surprising and disappointing that two of the leading ESG teams appear to have been disbanded. There is an important message in these changes: unless we – asset managers and asset owners – proactively and clearly communicate to the sell-side the importance that we assign to this type of research, they will not properly value the research that these teams provide.” Last week, the United Nations Principles for Responsible Investment (UNPRI) announced that it would shortly launch what should quickly become the largest independent database of environmental, social and governance (ESG) reports produced by sell-side brokerage research houses, as the first step of the recently announced merger between the UNPRI and the Enhanced Analytics Initiative (EAI). The PRI said the database, which will be free to signatories, is expected to be fully operational in spring 2009 following a test period by investors.