JPMorgan is buying an ESG investment platform in the bank’s third fintech acquisition last year

JPMorgan Chase wants to take the sustainable investment trend to the next level.

To do that, America’s largest bank by assets agreed to buy OpenInvest, a San Francisco-based start-up backed by Andreessen Horowitz and founded by former Bridgewater Associates employees, CNBC has learned exclusively.

It is the third acquisition of a fintech company by JPMorgan since December, when the bank bought 55ip, a company that automates the construction of tax-efficient portfolios. This month, JPMorgan said it was acquiring UK-based robo-advisor Nutmeg to help boost its overseas digital banking efforts.

Chief Executive Officer Jamie Dimon said last year that the bank would be “much more aggressive” in pursuing potential acquisitions to help it leverage capabilities and fend off threats from fintech and Big Tech players alike. The traditional banking industry has started to lose ground to fast-growing disruptive players including PayPal and Square, while Alphabet and even retailer Walmart have announced consumer finance intentions.

The bank’s latest move, for terms of the deal that could not be determined, will help JPMorgan’s financial advisers personalize clients’ investments in ESG, the broad category that includes environmental, social and governance factors. ESG funds have attracted record inflows this year, bringing global assets under management to nearly $ 2 trillion.

Mary Callahan Erdoes at Delivering Alpha 2015 in New York.

David A. Grogan | CNBC

“Clients are increasingly focused on understanding the environmental, social and governance impact of their portfolios and using that information to make investment decisions that better align with their objectives,” said Mary Callahan Erdoes, CEO of the division. asset and wealth management team of JPMorgan. statement.

OpenInvest was co-founded in 2015 by Conor Murray, Joshua Levin, and Phillip Wei to help financial advisers, large asset managers, and retail users create portfolios that more accurately reflect investors’ values.

Rather than simply investing money in ESG mutual funds or excluding certain companies from a stock portfolio, clients can use OpenInvest to create highly personalized, dynamic and value-based portfolios. The company pulls data from more than 35 sources to feed the decision engines built into its tools.

“Through technology, it is now possible, for example, to give people granular control over how their values ​​are implemented,” Murray said in an interview last week. “It’s not just about whether or not you care about gender equality, but whether you want to lean more towards maternity leave or the gender pay gap or pension compensation, whatever the client cares about.” .

Conor Murray, co-founder and CEO of OpenInvest.

Source: JP Morgan Chase

JPMorgan reached out to OpenInvest as the startup was nearing the conclusion of its Series B funding round, according to people with knowledge of the situation who declined to be named speaking about private negotiations. The company, which was one of the first company-backed startups to have public benefit corporation designation, had raised about $ 25 million in funding to date.

While OpenInvest had started to gain traction in asset accumulation, the co-founders said they ultimately chose to join JPMorgan to accelerate their mission of bringing ESG investing into the mainstream. The company already has $ 2.4 trillion in ESG-related assets under management, and its massive consumer bank has clients in half of American households.

“We captured them early in their journey, but I would say that just by studying what they built and the trajectory they were on, I have no doubt that they were on a fast track to greater impact and a much higher level of AUM, “Said Mike Camacho, director of wealth management solutions at JPMorgan.

The co-founders hinted that their technology could ultimately be used at JPMorgan beyond the realm of investment. In the future, it could possibly help ensure that customers’ purchasing decisions and charitable donations align with their values, they said.

“The scope of this opportunity extends to financial services,” Levin said. “We are faced with the opportunity to fundamentally change finances and the way humans interact with money.”

Joshua Levin, Co-Founder and Chief Strategy Officer of OpenInvest.

Source: JP Morgan Chase

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