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J.P. Morgan Doubles Down On Double Materiality With Datamaran Partnership

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J.P. Morgan Doubles Down On Double Materiality With Datamaran Partnership

On the 7th of September, J.P. Morgan, the largest US bank, and Datamaran, an ESG risk management platform, announced a strategic collaboration to provide insights into investment opportunities using a double-materiality approach to ESG integration. Both firms will jointly work to deliver insights through J.P. Morgan’s new “ESG Discovery” digital platform. The platform aims to provide investors with timely and high-quality information on material ESG risks and opportunities at both a company and sector level. Datamaran and J.P. Morgan’s assessment leverages artificial intelligence (AI) technologies to analyse data from mandatory and voluntary corporate disclosures, voluntary policy initiatives and online media to understand sentiment and anticipate emerging material impacts on financial markets.

The ESG discovery platform establishes an ESG integration process based on double materiality, which encourages a firm to consider how the business impacts ESG and how ESG impacts the business. The shift towards double materiality assessments will require enhanced intra-organizational collaboration between Sustainability and Finance functions within firms to produce the required information. Firms are increasingly turning to software to improve the rigour of the data collection and reporting process to produce audit-ready disclosures. As a result, firms such as Datamaran are enjoying significant tailwinds working with large corporations such as ERM to automate the materiality process.

The finance sector has become a key player for funding and promoting climate action in recent years (see Market Overview: Investor Focus On ESG Will Transform Sustainability Strategies). The announcement by both firms is timely as all financial market participants are under sustained pressure to integrate ESG criteria into investment decisions, comply with SFDR regulations, disclose against the TCFD recommendations and produce roadmaps to achieve net zero by the middle of the century with time-bound interim milestones.

To put the announcement into context, ESG remains a contentious issue in the US. On the one hand we are starting to see substantial momentum with investment firms taking steps to execute net zero strategies. However, on the other hand, prominent members of the GOP have accused major investment firms like BlackRock, State Street and Vanguard of promoting ‘woke’ investment strategies.

The concept double materiality is already well-established in EU ESG regulations such as the corporate Sustainability Reporting Directive (CSRD) but has yet to take off in the US. The partnership between J.P. Morgan and Datamaran is a significant milestone. They will be key players in ensuring double materiality becomes mainstream in the US due to the great sway firms like J.P. Morgan hold in corporate boardrooms. CEOs will ignore the concept of double materiality at their own peril and must begin to set and execute strategies to apply the double materiality concept.

To stay ahead of rapidly evolving ESG landscape, read the latest report by Verdantix on Integrating ESG into Financial Disclosures and to understand the software tools available to your organization read the Strategic Focus: Mastering TCFD Disclosures report by Verdantix.

Luke Gowland

Industry Analyst

Luke is an Industry Analyst in the Verdantix ESG & Sustainability practice. His current research agenda focusses on emerging technologies and trends in the ESG software space. Prior to joining Verdantix, Luke worked as an analyst at GlobalData where he gained experience in ESG and key business technologies. Luke holds an MSc in Sustainability and Management from the University of Bath.