JPMorgan purchases ESG investment platform as part of bank’s third fintech acquisition last year


Marie Erdoès

Adam Galica | CNBC

JPMorgan Chase wants to take the trend towards sustainable investing to the next level.

To do this, the largest US bank in assets agreed to buy OpenInvest, a San Francisco-based start-up backed by Andreessen Horowitz and founded by former employees of Bridgewater Associates, CNBC exclusively learned.

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

CEO Jamie Dimon said last year the bank would be “much more aggressive” in seeking potential buyouts to help build capacity and fend off threats from fintech and big tech players. The mainstream banking industry has started to lose ground to fast-growing disruptors including PayPal and Square, while Alphabet and even retailer Walmart have each announced their intentions in consumer credit.

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

“Clients are increasingly focusing on understanding the environmental, social and governance impact of their portfolios and using this information to make investment decisions that better match their goals,” said Mary Callahan Erdoes, CEO of JPMorgan’s asset and wealth management division, in a statement. declaration.

OpenInvest was co-founded in 2015 by Conor Murray, Joshua Levin and Phillip Wei to help financial advisors, large asset managers and individuals create portfolios that more accurately reflect investor values.

Rather than simply investing money in ESG investment funds or excluding certain companies from an equity portfolio, clients can use OpenInvest to create dynamic and highly personalized portfolios based on values. The company extracts data from more than 35 sources to feed the decision engines integrated into its tools.

“Thanks to technology, it is now possible, for example, to give people granular control over how their values ​​are implemented,” Murray said last week in an interview. “It’s not just whether or not you care about gender equality, but whether you want to look more into maternity leave or the gender pay gap or board pay. administration, all the things that matter to the customer. “

Conor Murray, Co-Founder and CEO, OpenInvest.

Source: JP Morgan Chase

JPMorgan approached OpenInvest as the start-up was close to wrapping up its Series B round, according to people with knowledge of the situation who declined to be identified speaking of private negotiations. The company, which was one of the first venture-funded start-ups public utility company designation, had raised approximately $ 25 million in funding to date.

As OpenInvest began to gain traction in asset accumulation, the co-founders said they ultimately chose to join JPMorgan to accelerate their mission to bring ESG investing into the mainstream. The company already manages $ 2.4 trillion in ESG-related assets, and its large consumer bank has customers in half of US households.

“We caught them early in their journey, but I would say just looking at what they built and the path they were on, there’s no doubt in my mind that they were on the fast track to a greater impact and a much greater level of AUM, “said Mike Camacho, Wealth Management Solutions Manager at JPMorgan.

The co-founders hinted that their technology could ultimately be used at JPMorgan beyond the realm of investing. In the future, this could potentially help ensure that customers’ buying decisions and charitable donations match their values, they said.

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

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

Source: JP Morgan Chase

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