Double materiality allows investors to not only understand the environmental, social, and governance risks facing their portfolios, but also the ESG impacts that those assets could have on the wider world. The more forward-looking, comprehensive principle is already baked into EU regulation, and is starting to gain traction in the US (while also facing blowback from conservatives).
JPMorgan is doubling down on double materiality through its partnership with software firm Datamaran, which powers its new ESG Discovery tool.
“This holistic view enables investors to make a more informed decision about how and where their investment is deployed in a way that goes much further than the traditional financial tools they might have relied upon until now,” Donato Calace, SVP of innovation at Datamaran, told Insights Distilled, adding that the analysis gives users a “longer-term perspective” on the “value drivers of the future.”
Datamaran’s software uses natural language processing to automatically identify and monitor these risks.
Beyond providing double materiality – which is more forward-looking than standard ESG – the software notably doesn’t try to provide a rating or score for any given company. This was a key reason JPMorgan chose to work with Datamaran, as other AI-powered platforms simplify the complexity of ESG too much, an exec said of the partnership.
Instead, Datamaran compiles and centralizes information about hundreds of ESG risks and opportunities, paired with analysis that includes input from JPMorgan researchers, so that clients can see the underlying data when making decisions.