JPMorgan Chase aims to take the sustainable investing trend to the next level.
To do that, the largest U.S. bank by assets has 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’s the third acquisition of a fintech start-up by JPMorgan since December, when the bank bought 55ip, a company that automates the process of building tax-efficient portfolios. This month JPMorgan announced that it is acquiring UK-based robo-advisor Nutmeg to advance its digital banking efforts overseas.
CEO Jamie Dimon said last year that the bank will be “much more aggressive” in looking for potential acquisitions to strengthen its capabilities and ward off threats from fintech and big tech players alike. The traditional banking industry has started to lose ground to fast-growing, disruptive players like PayPal and Square, while Alphabet and even retailer Walmart have announced their intentions in consumer finance.
The bank’s latest move on uncertain terms and conditions will help JPMorgan financial advisors adjust client investments in ESG, the broad category that encompasses environmental, social and governance factors. ESG funds have seen record inflows this year, increasing assets under management worldwide 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 implications of their portfolios and using that information to make investment decisions that are more aligned with their goals,” said Mary Callahan Erdoes, CEO of Wealth and Wealth Management JPMorgan, in a statement.
OpenInvest was founded in 2015 by Conor Murray, Joshua Levin, and Phillip Wei to help financial advisors, large asset managers, and individual users create portfolios that better reflect investor values.
Rather than just investing money in ESG mutual funds or excluding specific companies from a stock portfolio, OpenInvest allows clients to create highly personalized, dynamic, value-based portfolios. The company pulls data from more than 35 sources to feed decision engines embedded in its tools.
“Technology now makes it possible, for example, to give people precise control over how their values are implemented,” Murray said in an interview last week. “It’s not just about whether you care about gender equality or not, but whether you want to move more towards maternity leave, gender pay gap or executive pay, everything that is important to the customer.”
Conor Murray, co-founder and CEO of OpenInvest.
Source: JP Morgan Chase
JPMorgan reached out to OpenInvest as the startup neared completion of its Series B funding round, so people with knowledge of the situation refused to be identified and discussed private negotiations. The company, which was one of the first venture capital-funded start-ups to be known as a “nonprofit company,” had raised around $ 25 million in funding to date.
While OpenInvest had started gaining traction in asset building, the co-founders said they ultimately chose 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 huge consumer bank has customers in half of American households.
“We caught them early on their journey, but I would say that in my opinion they were without a doubt on their way to greater impact and a much higher AUM level, if only I had what they built and the way that they were on. “said Mike Camacho, Head of Wealth Management Solutions at JPMorgan.
The co-founders suggested that their technology could ultimately be used at JPMorgan beyond the investing space. In the future, it could potentially help customers’ buying decisions and charitable donations align with their values.
“The scope of this opportunity extends across all financial services,” said Levin. “We are facing the opportunity to fundamentally change finance and the way people deal with money.”
Joshua Levin, Co-Founder and Chief Strategy Officer of OpenInvest.
Source: JP Morgan Chase
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