JPMorgan is taking the next step in the ongoing trend to take sustainability into account when investing with its acquisition of OpenInvestment.
The biggest bank in America agreed to buy San Francisco-based start-up OpenInvest, a fintech company backed by Andreessen Horowitz and founded by former Bridgewater Associates employees. Under the agreement, OpenInvest will retain its brand and integrate into J.P. Morgan’s Private Bank and Wealth Management client offerings. The exact terms of the deal were not disclosed.
The move is the next step for the bank to further its commitment to environmental, social, and governance (ESG) investments. This is also the third acquisition of a fintech start-up by JPMorgan since December. The other two are U.K.-based robo-advisor Nutmeg and 55ip, which automates the construction of tax-efficient portfolios.
“Clients are increasingly focused on understanding the environmental, social, and governance (ESG) impact of their portfolios and using that information to make investment decisions that better align with their goals,” said Mary Callahan Erdoes, CEO of JPMorgan Asset & Wealth Management.
OpenInvest was founded in 2015 with a core focus on helping advisors unlock the true impact of its clients’ investments. The company labels itself a “Public Benefit Corporation,” which utilizes technology to help clients make value-based investments, i.e., ESG investments.
OpenInvest offers its users an alternative to just plowing money into ESG investment funds or excluding certain companies from a stock portfolio for investors. Instead, the company pulls data from more than 35 sources to feed decision engines embedded in its tools.
“Through technology, it’s now possible, for example, to give people granular control over how their values are implemented. 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,” said Conor Murray, Co-founder and CEO of OpenInvest.
The company’s services can be used by various customers ranging from financial advisors and large asset managers to retail users.
“At OpenInvest, we believe that aligning capital with social and environmental values is a critical driver of widespread change,” said Murray.
ESG investments have attracted more investors in the past year, and JPMorgan’s move will help the bank capitalize on this shift. A report from Morningstar revealed that global assets under management in ESG funds have grown to nearly $2 trillion in 2021.
Not only does the acquisition of OpenInvest grow JPMorgan’s presence in the realm of ESGs, but it also helps the bank stave off non-traditional companies entering into the finance sector, specifically through fintech. Companies such as Square, Alphabet, and even Walmart have made headway into the consumer finance space, disrupting the normal business flow for traditional banks.
“We are looking, and we will be much more aggressive with acquisitions across the board,” said Jamie Dimon, JPMorgan’s CEO, last year about dealing with the growth of competition in the marketplace.