Decarbonising iShares' JPM EMB ETF

In previous work we have introduced the AFII Fixed Income Optimisation for Net zero Alignment (FIONA) framework and used it to analyse developed market investment grade ETFs.

In this note we extend the approach to consider sovereigns, and analyse the iShares JPM EMB ETF. It is a US dollar-denominated government bond ETF offered by iShares. It is a passive portfolio, designed to track the J.P. Morgan EMBI Global Core Index (ticker JPEICORE).

By applying FIONA, we show that it is possible to improve the climate footprint of a sovereign emerging market portfolio without a significant impact on its historical performance. Climate improvements are more significant when reweighting between regions.

By considering forward-looking climate data, portfolio enhancement can be focused on transition investment, delivering capital to jurisdictions most in need of investment to progress. This analysis confirms that algorithmic portfolio enhancement methods are useful in the sovereign space, and that it is possible to create passive investments to support transition.

About the authors

Josephine Richardson

Managing Director, Head of Research

Based in London, Jo leads AFII’s research and a global team supporting fixed income investors as they align their portfolios with climate and sustainability goals. She joined AFII after 18 years in fixed income markets at JPMorgan.

Johan Jarnmo

Associate Director, Portfolio Strategy

Johan develops tools and analytics that help fixed income investors invest in a climate- and nature-positive way, including AFII’s portfolio tools Co₂liseum and FIONA. He previously worked in Deloitte’s Risk Advisory practice.