ENVIRONMENTAL, SOCIAL

& GOVERNANCE (ESG)

FRAMEWORK IN JP
MORGAN CHASE & CO.

ISURI RIMESH KUMAR – 1911100

VALSADA MEDHA LUXMI – 1911348

GHOORUN SHARF-U-DEEN HAMZA – 1912466

SOOMARAH DEEP KUMAR – 1914355

MOOTOOSAMY THESINEE – 1914904

APPADOO VIKSHAY - 1915521

SUBMITTED TO: MRS NEEVEDITAH PARIAG-MARAYE

MODULE NAME: FINANCIAL REPORTING AND ANALYSIS FOR

BANKERS

MODULE CODE: DFA 3259

PROGRAMME: BSC (HONS) BANKING AND FINANCE YEAR 3

SUBMITTED ON: 5th AUGUST 2022

 TABLE OF CONTENTS

List of Abbreviations-------------------------------------------------------------------- ii

Introduction------------------------------------------------------------------------------------------------- 1

Overview of JP Morgan Chase & Co. -------------------------------------------------------------- 2

Aftermath of COVID-19 on JP Morgan Chase & Co. ------------------------------------------ 3

UN Principles for Responsible Banking---------------------------------------------------------- 8

Benefits of being a Signatory Bank--------------------------------------------------------------- 10

Approach to Sustainability – JP Morgan-------------------------------------------------------- 11

Environmental, Social & Governance (ESG)--------------------------------------------------- 12

Environmental-------------------------------------------------------------------------------------------- 14

Social-------------------------------------------------------------------------------------------------------- 19

Governance----------------------------------------------------------------------------------------------- 22

Conclusion------------------------------------------------------------------------------------------------ 27

References-------------------------------------------------------------------------------- 28

Appendix 1-------------------------------------------------------------------------------- 29

i
 LIST OF ABBREVIATIONS
Abbreviation Definition
CAP Chase Advisory Panel

CAR Capital Adequacy Ratio

CECL Current Expected Credit Losses

CEO Chief Executive Officer

Conference of the Parties – 26th annual
COP26
summit
COVID-19 Corona Virus Disease 2019

DEI Diversity, Equity & Inclusion

ESG Environmental, Social and Governance

GHG Greenhouse Gas

HQLA High Quality Liquid Assets

LGBT Lesbian, Gay, Bisexual & Transgender

MTCO2e Metric Tons of Carbon Dioxide Equivalent

MW Megawatt

MWh Megawatt Hour

ROE Return on Equity

PPP Paycheck Protection Program

PRB Principles for Responsible Banking

SDGs Sustainable Development Goals

SDT Sustainable Development Target

U.K. United Kingdom

UN United Nations

U.S. United States

ii
QUESTION 2

The COVID-19 pandemic has shaken in many ways the business sector
including banks. We find even more financial institutions taking the
pledge to the UN Principles for Responsible Banking and even
commitments towards climate change mitigation amongst others. A
main concern if not a major struggle for businesses has been is how to
embed/integrate the ESG into the mainstream business operations.
Using the example of a bank (local or international), investigate and
explain how this particular bank has (successfully or not) embedded
ESG into its operations and risk models?

INTRODUCTION
Climate change is a real menace to the world and it is today more than ever important
to take actions to address this impending doom before it is too late. Following the
COVID-19 pandemic and the most recent Russia-Ukraine conflict, the need to reduce
dependency on non-renewable resources and to shift to renewable ones, has been
highlighted. The climate change summit of the COP26 (Conference of the Parties – 26th
annual summit) held at Glasgow in November 2021 emphasized on limiting global
warming and the financial sector’s role was also discussed: “To achieve our climate
goals, every company, every financial firm, every bank, insurer and investor will need to
change.”

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The COVID-19 has undoubtedly had its repercussions on the operations of most
companies and JP Morgan Chase & Co. was no exception. Though many financial
institutions have signed for the UN Principles for Responsible Banking, it is yet to
determine the extent to which they have been able to infuse ESG in their business
operations. On the other hand, despite not being a signatory bank for the UN Principles
for Responsible Banking, JP Morgan Chase & Co. is consciously engaging into a
responsible approach to reducing carbon emissions and adopting ‘cleaner’ sources of
energy. The Chairman and CEO of the company, Mr Jamie Dimon, is not only
supporting a “greener future”, but is also urging others to move from “empty statements
and lofty intentions to tangible actions”.

OVERVIEW OF JP MORGAN CHASE & CO.

JP Morgan Chase & Co. is a leading financial services firm, not only in the United
States (U.S.), but also throughout the globe. With more than 150 years of history, JP
Morgan Chase & Co. has its headquarters in New York. It is a financial holding
company and a multinational investment bank. In fact, in terms of market capitalisation,
it can be said to be the world’s largest bank with approximately U.S. 466.2 billion. JP
Morgan Chase & Co.’s business segments can be mainly categorised as:

❖ Consumer & Community Banking

❖ Corporate & Investment Banking
❖ Commercial Banking
❖ Asset & Wealth Management

JP Morgan Chase & Co. is listed on the Dow Jones Industrial Average (DJIA), the
Standard and Poor’s 500 (S&P 500) and also the S&P 100, whereby only the largest
and well-established organisations are listed. As at 2021, the company has earned a lot
of awards and achievements, some of which can be seen below:

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AFTERMATH OF COVID-19 ON JP MORGAN CHASE & CO.

The financial highlights of the company can be seen in terms of two phases, pre-
COVID-19 and post-COVID-19 in Appendix 1.

Total Revenue and Net Income

$60,000 $125,000

$50,000 $120,000
$40,000
$115,000
$30,000 Total net revenue
$110,000 Net income
$20,000

$10,000 $105,000

$0 $100,000
2018 2019 2020 2021

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During the peak of COVID-19, the total revenue has increased by 5.73% in 2019 and
continued to increase drastically in the following years at rate of 3.60% in 2020 and
1.86% in 2021. This is because there has been increase in demand in advisory, equity
underwriting debt underwriting and investment banking fees.

From the diagram we can see that in 2020, the net income has fallen by 20.04%, largely
due to the increase in the provision for credit losses as uncertainty of the pandemic
starts to be felt in the economy. However, it has risen by 65.92%.

The provision for credit losses was $17.5 billion in 2020, up $11.9 billion from the prior
year, driven by net additions to the allowance for credit losses of $12.2 billion due to the
deterioration and increased uncertainty in the macroeconomic environment as a result
of the impact of the COVID-19 pandemic.

The Firm’s non-performing assets totaled $10.9 billion in 2020, an increase of $5.9
billion from the prior year, primarily reflecting client credit deterioration across multiple
industries in the wholesale portfolio; and in the consumer portfolio, loans placed on
nonaccrual status related to the impact of the COVID-19 pandemic, as well as the
adoption of CECL (Current Expected Credit Losses), as the purchased credit
deteriorated loans in the mortgage portfolio became subject to non-accrual loan
treatment.

• Capital Adequacy Ratio (CAR)

The purpose is to establish that JP Morgan Chase & Co. has enough capital on
reserve to handle a certain amount of losses, before being at risk for becoming
insolvent. We can say that JPM is well equipped to handle the pandemic as the
higher the CAR ratio, the more likely it is to be able to withstand a financial
downturn or other unforeseen losses. From the table below, during the peak of
COVID-19 (2019 and 2020) the bank has wisely increased the CAR ratio.

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 Formula 2018 2019 2020 2021

𝑇𝑖𝑒𝑟 1 𝐶𝑎𝑝𝑖𝑡𝑎𝑙 + 𝑇𝑖𝑒𝑟 2 𝐶𝑎𝑝𝑖𝑡𝑎𝑙 209,093 + 28,418 214,432 + 28,157 234,844 + 35,079 246,162 + 28,738
𝑅𝑖𝑠𝑘 𝑊𝑒𝑖𝑔ℎ𝑡𝑒𝑑 𝐴𝑠𝑠𝑒𝑡𝑠 1,528,916 1,515,869 1,560,609 1,638,900
= 15.53% = 16.00% = 17.30% = 16.77%

• Net Interest Margin (NIM)

NIM reveals the amount of money that a bank is earning in interest on loans
compared to the amount it is paying in interest on deposits. Net interest margins
have been squeezed since the Federal Reserve’s lowered rates in 2020 to help
deal with the economic crisis caused by the COVID-19 pandemic. While rate
hikes would help to boost JPMorgan's net interest margin, many economists
believe that the economy risks slipping back into recession caused by both the
Fed rate hikes and global supply chain disruptions that are accelerating the pace
of price increases. The risk of recession, they think, is definitely rising. A
recession would hurt JP Morgan's lending activity and, if followed by lower
interest rates, would compress its net interest margin again.

Formula 2018 2019 2020 2021

55,059 57,245 5,5634 52,311

𝑁𝑒𝑡 𝑖𝑛𝑡𝑒𝑟𝑒𝑠𝑡 𝑖𝑛𝑐𝑜𝑚𝑒
2,589,887 2,730,239 3,353,319 3,782,035
𝐴𝑣𝑒𝑟𝑎𝑔𝑒 𝑎𝑠𝑠𝑒𝑡𝑠
=2.13% =2.10% =1.63% =1.38%

• Loan to Deposit Ratio

It is used to assess a bank's liquidity by comparing a bank's total loans to its total
deposits for the same period. During the pandemic period we can see that the
ratio is decreasing because of the drop in loans came due to the raising of cash
from capital markets in form of equity and debt issuance and reducing deposits.
Also the total deposit has risen significantly throughout the years.

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 Formula 2018 2019 2020 2021

1,015,760 997,620 1,012,853 1,077,714

𝑇𝑜𝑡𝑎𝑙 𝐿𝑜𝑎𝑛
1,470,666 1,562,431 2,144,257 2,462,303
𝑇𝑜𝑡𝑎𝑙 𝐷𝑒𝑝𝑜𝑠𝑖𝑡 = 63.85% = 43.77%
= 69.07% = 47.24%

• Return on Equity (ROE)

It measures how efficient a corporation is at generating profit from money that
investors have put into the business generating. We can see that in 2020, ROE
has fallen from 15% to 12%, followed by a rise up to 19%. In 2020, ROE has
fallen due to the pandemic as it has impacted the banking sector as the average
ROE for all U.S banks declined to 3.2%. However in 2021, JP Morgan Chase &
Co. exceeded industry average when it reported an ROE of 19%.

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 • Liquidity Coverage Ratio
It is the requirement whereby banks must hold an amount of high quality liquid
assets (HQLA) that’s enough to fund cash outflows for 30 days. Banks are
required to hold HQLA equivalent to at least 100% of projected cash outflows
during the stress scenario according to BASEL III.

The decrease in the ratio 116% to 110% were predominantly driven by a

decrease in cash from long-term debt maturities, including the early termination
of certain of the Firm's debt. However the increase from 110% to 111% is
primarily due to growth in deposits. Deposits continued to increase during the
year primarily driven by the COVID-19 pandemic and the related effect of certain
government actions.

JPM has performed magnificently during the COVID-19 crisis. They extended a huge
amount of credit, waived fees and postponed debt repayment, and were at the forefront
of delivering Paycheck Protection Program (PPP) loans to small businesses. And they
did it the right way, protecting government money by trying to make legitimate loans to
borrowers in need.

Also, in 2021 was another strong year for JPMorgan Chase, with the firm generating
record revenue, as well as setting numerous other records in each of their lines of
business. They earned $48.3 billion in net income on revenue of $125.3 billion versus
$29.1 billion on revenue of $122.9 billion in 2020, reflecting strong underlying
performance across their businesses.

-7-
During the pandemic JPM has came forward with different services such as:

• In 2020, raised capital and provided credit totaling $2.3 trillion for customers and
businesses of all sizes, helping them meet payroll, avoid layoffs and support
operations.
• Through March 2021, provides more than $40 billion to more than 400,000 small
businesses through the PPP program.
• Since March 13, 2020, they have delayed payments and refunded fees for
customers on over 2 million accounts.
• Committed $250 million in global business and philanthropic initiatives, with
particular focus on the most vulnerable people and communities hardest hit by
the pandemic.

COVID-19 can be said to have positively impacted JP Morgan Chase & Co., as despite
of the delayed payments of customer, interruption in terms of operation and financial
supports to customer, the bank has proven its strength and flexibility. This is why it is
the number one bank for COVID-19 response in U.S., according to ‘JUST Capital’.

UN PRINCIPLES FOR RESPONSIBLE BANKING

The Principles for Responsible Banking (PRB) is a framework that aligns member
banks’ strategy and operation with those of society’s goals as set in the Sustainable
Development Goals (SDGs), Paris Climate Agreement, and such other relevant national
framework. Developed specifically for banks, these principles were formulated by 28
banks from five continents. The PRB framework consists of 6 principles as elaborated
below:

-8-
 1) Alignment

Banks should ensure that they align their business strategy and objectives with those
goals mentioned in the SDGs, Paris Climate Agreement, and such other relevant
national framework; and must publish how they are contributing to the achievements of
these goals. Banks must also identify and assess the consequences, both positive and
negative, of its operations from the environmental, social, and economic aspects.

2) Impact and Target Setting

Banks should minimize their negative impacts whilst maximizing their positive impacts.
The frameworks mentioned above like the SDGs, Paris Climate Agreement, and such
other relevant national framework, can be used for identifying and assessing the
impacts of the bank’s operation. Furthermore, banks must undertake dynamic
assessment for sustainability-related risks, opportunities from operations, and risk
management.

3) Clients and Customers

Banks should identify and develop measures to assist its customers in reducing their
negative impacts while increasing their positive impacts. For instance, the bank can
digitalized its services through the use of technology, adopting new business practice,
or provide sustainability-related incentives. Basically, the bank must promote and
support sustainable behavior and consumption choices to its clients.

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 4) Stakeholders

Banks must communicate and partner with key stakeholders like regulators, investors,
and policy makers, in order to achieve society’s goals. For instance, those stakeholders
can share their expectations and advice related to the material issues in the business
strategies. Finally, banks should also ensure that they are simultaneously adhering to
national regulators and policy makers as well as achieving those societal goals.

5) Governance and Culture

Banks must set out the proper culture regarding sustainability and responsible banking
across the organization. They should have effective policies, management system, and
control measures to ensure that sustainability goals are part of the decision-making.
Banks must demonstrate their commitment towards these principles by assigning
responsibilities across the bank and ensure sustainability objectives are met.

6) Transparency and Accountability

Signatory banks should annually disclose publicly their contribution towards achieving
society’s goals, provide information on the implementation of these principles in their
annual report, and be accountable for their impact, both positive and negative, on
society.

BENEFITS OF BEING A SIGNATORY BANK

The benefit of being a signatory bank is that it allows that bank to be at the forefront of
any innovative development in sustainable financial products. Secondly, member banks
can seize new business opportunities arising from the sustainable development agenda.
Thirdly, it offers signatory banks an identification and mitigation risks framework.
Fourthly, by adhering to these principles and implementing them in their business

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practice, member banks will strengthen the trust that stakeholder has in them. Finally, it
will help to have access to a global community of member banks, to superior
knowledge, and resources to consolidate the bank’s position. Despite having much
importance, JP Morgan is not yet a PRB signatory bank.

APPROACH TO SUSTAINABILITY – JP MORGAN

According to the United Nations Brundtland Commission (1987), sustainability is

“meeting the needs of the present without compromising the ability of future generations
to meet their own needs.” Sustainable finance refers to the concept of taking into
account environmental, social, and governance factors when screening potential
investment; thus, leading to increased longer-term investments in sustainable economic
activities (OECD, 2020).The United Nation has set out global goals, or commonly
termed as the Sustainable Development Goals (SDGs), in 2015 to end poverty, protect
the environment, and promote peace.

For JP Morgan, sustainability means to develop solutions that protect the environment
and help the economy grow. In October 2020, JP Morgan has announced its
commitment to align the main sectors of its financing portfolio with that of the goals of
the Paris Agreement. Furthermore, the bank is also committed to provide and to use
sustainable solutions to its clients and in its operation, with the aim of reducing carbon
emissions.

Along with its low-carbon transition strategy, JP Morgan is also growing a range of
sustainability-focused financing and investing solutions. These are the initiatives taken
by JP Morgan:

▪ Advancing sustainability through investment research

▪ Providing ESG-Related financing solutions
▪ Underwriting Green, Social, and sustainability bonds

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 ▪ Supporting its markets clients with sustainability solutions
▪ Supporting consumer adoption of electric vehicles
▪ Building community resilience to climate change

ENVIRONMENTAL, SOCIAL & GOVERNANCE (ESG)

The financial sector is playing a supporting role to address environmental and social
issues that we are currently facing. Environmental and socially conscious investors are
screening potential investment by looking at both the economic performance and the
extent to which the company is adhering to the ESG standards. Environmental, Social
and Governance (ESG) are a set of standards that define a company’s behavior. The
Environmental aspect looks at how the organization is safeguarding the environment;
for example, implementing corporate policies to address climate change. The Social
aspect considers how the organization is managing relationships with stakeholders like
employees, customers, suppliers, amongst others. The Governance aspect is
concerned with the organization’s leadership, executive pay, audits, and internal control,
amongst others.

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For JP Morgan, the ESG standards are an important part of their business practice that
impact on their way of doing business, the development of its products and services, the
service offered to its customers, and the support given to employees. Given its scale of
operation and business reach, JP Morgan is considered as a major contributor to a
more sustainable and inclusive economy. Furthermore, JP Morgan is leveraging its
expertise, capital, data, and resource to promote inclusive growth, support the transition
to a greener economy, and address key global challenges.

The bank has also set a Sustainable Development Target (SDT) that put the objectives
of the ESG standard into practice. In fact, a huge value of $2.5 trillion has been
allocated as for the achievement of its SDT.

The SDT represents a key aspect of the firm wide approach to ESG at JP Morgan and
its aim is to grow and strengthen the business activities of JP Morgan across the three
important areas below:

• Green: “Accelerating the deployment of solutions for cleaner sources of energy

and facilitating the transition to a low-carbon economy”
• Development Finance: “Mobilizing capital to advance the United Nations
Sustainable Development Goals ("SDGs") in emerging economies.”
• Community Development: “Advancing economic inclusion in developed
markets.”

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The table below summarizes the targets set by JP Morgan.

YEAR OBJECTIVES

2017 Facilitate $200 billion in clean financing by 2025

2020 Finance and facilitate $200 billion for climate action and sustainable
development
2021 Finance and facilitate more than $2.5 trillion for climate action and
sustainable development over 10 years, by the end of 2030

ENVIRONMENTAL

The long-term prosperity of the economy and of people around the world depends on a
healthy environment, but climate change and other environmental issues represent
growing dangers to our future as a society. JP Morgan & Co has a crucial role to play in
addressing environmental issues as a global financial institution with clients in almost
every sector of the economy. As part of JP Morgan & co plan, continue to reduce the
environmental impact of their own operations while also supporting their clients with
strategic guidance and providing financing and investment options to help accelerate
the transition to a low-carbon, sustainable economy.

ADVANCING CLIMATE AND SUSTAINABILITY SOLUTIONS

Protecting the world and fostering long-term, sustainable economic growth depend on
finding answers to environmental issues like climate change. The financial sector has a
special responsibility, especially when it comes to raising the funds required to create
innovative technology and long-lasting infrastructure.

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At JPMorgan Chase, utilizing strengths to support sustainable business practices, assist
their clients in addressing global difficulties, and push the development of fresh
solutions. This includes offering clients sustainable investing and financing options, as
well as collaborating with them to help the transition to a low-carbon economy.

Supporting the Transition to a Low-Carbon Economy

One of the most important issues affecting our world and society is climate change. By
reducing the carbon footprint to their physical operations, JP Morgan is responding.
They are also using their business to promote and promote the transition of the world to
a low-carbon economy. Many governments, corporations, and NGOs have united in
recent years around the shared goal of bringing global emissions to zero by 2050. The
world is not, however, on course to accomplish this. Changing the way important goods
and services are produced and provided, as well as the global energy system, is
necessary to reach net zero by 2050. The financial industry will be crucial in enabling
the huge investment of this change. As a global financial institution, JP Morgan is
committed to assisting clients in adjusting to and thriving in a low-carbon economy by
offering finance, strategic counsel, and investment services.

Supporting consumer adoption of electric vehicles

The automobile industry's shift to EVs has been driven by heightened awareness of
climate change, and many consumers' enthusiasm has risen in tandem. In response,
JPMorgan Chase is assisting customers in navigating this new market area and
obtaining finance to support their purchases. Due to the complexity and swift evolution
of the EV market, buyers may find information and advice to be dispersed and
challenging to locate or comprehend. As a result, Chase Auto is investing in a new
digital resource hub to provide advice, insights, and educational materials for first-time
EV customers. As part of JPMorgan Chase efforts to promote financing for EV adoption,
they are also forming private label partnerships with EV producers to provide

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consumers with flexible financing alternatives. For instance, as part of its drive to rethink
the vehicle buying experience, JPMorgan Chase started a relationship with the EV
business Rivian in 2021 to offer private label financing. Customers can choose the retail
financing arrangement that best suits their needs by starting with the credit application
on Rivian's website.

Building community resilience to climate change

Many communities that are already at risk are being disproportionately affected by
climate change, which leaves them with less resources and a reduced capacity for
coping, responding, and adapting. JPMorgan Chase has invested charitable cash in
projects that help communities increase their resilience to climate change in
communities all around the world. They have committed more than $13 million in grants
since 2019, including more than $5 million in 2021, to help enhance climate change
resilience. Around the world, they have provided support for local organizations' efforts.
Examples of the initiatives backed include:

• Providing training for underserved people and placing them in green jobs. In
order to help 80 unemployed and low-income people, ranging in age from young adults
to people in the middle of their careers who are suffering from the financial effects of the
COVID-19 pandemic, secure immediate employment in the water management and
green infrastructure industries, they are assisting Louisiana Green Corps. In-depth
instruction in fundamental building techniques and technology that improve resilience
are both part of the program.

• Activating Communities to Fight Drought and Protect Biodiversity. JPMorgan

Chase is helping the Greater Cape Town Water Fund to train members of the local
community to eradicate invasive plants in South Africa's priority source water locations
by giving a grant to The Nature Conservancy. The project intends to offer a green
workforce development pipeline to fight unemployment, save water, and protect
biodiversity.

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OPERATIONAL SUSTAINABILITY

Being a more sustainable organization means minimizing the negative effects of JP

Morgan Chase’s physical operations on the environment. Almost 6,000 corporate
offices, bank branches, and data centers are the primary source of JP Morgan’s direct
environmental consequences. They take a two-pronged approach to operational
sustainability: reducing their direct and indirect GHG emissions while managing their
carbon footprint; and improving resource management and efficiency, which includes
careful management of water, waste, and other essential resources across the
operations. Highlights of their emissions reduction efforts in 2021 included the following:

1) Data center efficiency - By moving information technology workload to newer,

more effective data centers, The Firm continues to drive benefits across all of its
data centers. For instance, JP Morgan joined the Low Carbon Patent Pledge in
October 2021. As a result, they will contribute a number of important patents
regarding how we effectively cool and ventilate their data centers in an effort to
hasten the switch to low-carbon technologies and energy sources. In terms of
patenting intellectual property, the Firm has long been at the forefront of the
sector. It also aims to strengthen an innovation culture across tech, business,
and operations firm wide.

2) Solar expansion. They keep increasing the amount of on-site solar electricity at
their corporate headquarters and retail locations around the United States. They
added solar installations at approximately 300 retail locations as of December 31,
2021, throughout nine states, including Arizona, California, Ohio, and New York,
among others. Their objective is to finish installing solar panels at about 400
more branches and 125 carports, for a total solar capacity of about 25 megawatts
(MW). Additionally, they are enlarging the solar systems at our corporate
headquarters buildings, where they anticipate deploying an additional 90 MW of
solar energy.

- 17 -
 3) 24/7 renewable energy. The facilities in the UK will be continuously powered by
renewable energy starting in 2021 thanks to a partnership with energy provider,
EDF. As part of this initiative, their electricity use in the UK will be matched to
renewable energy production every minute of the day, giving them roughly
120,000 MWh of renewable electricity annually - enough to power their three
million square feet of offices there, or the equivalent of about 33,000 houses.

Enhancing Resource Management and Efficiency

JP Morgan's sustainability plan includes responsible resource management, which

helps them lessen impacts while increasing effectiveness and cutting costs. As well as
properly managing the waste they produce, they are committed to decreasing their
water and waste footprint. They are committed to advancing the following areas:

i. Conserving water. By 2030, they want to consume 20% less water than they did
in 2017. By the end of 2021, they had cut the water usage by more than 5%.
They have already implemented a number of water-saving solutions, such as
touch-free faucets, aerators, and low-flow fixtures, across several of our
corporate offices and locations. In order to build on these initiatives, they are
striving to install smart meters across their portfolio, which will enable them to get
more precise and timely data on water use. This will enable more effectively
monitor and manage water use as well as to find and rank more efficiency
potential.

ii. Reducing office materials and waste. By cutting office paper usage by more
than 50% from its baseline level in 2017, they achieved progress in 2021 toward
the goal of reducing office paper consumption by 90% by 2025. Wherever
recycling services are accessible and economically viable, they also try to recycle
paper waste in addition to non-paper waste throughout its facilities and branches.
Additionally, they are looking into ways to introduce composting services to more

- 18 -
 of its corporate locations with cafeterias, as well as ways to improve the recycling
services that already offer, expand them to new locations, and maximize the
services that already offer. They carefully choose vendors to appropriately
dispose of electronic trash in order to further the goal of preventing all electronic
waste (or "e-waste") from ending up in landfills. Its e-waste initiative diverted
more than 490 metric tons of solid waste in 2021 alone, preventing around 3,000
mtCO2e of emissions.

iii. Sourcing responsibly. They understand that the behaviors of its suppliers have
an influence on the environment and society as well. As a result, they look to
work with suppliers who share similar beliefs and dedication to having a
beneficial influence on the communities in which they operate. They collaborate
with their suppliers to evaluate their sustainability initiatives, create fresh internal
initiatives and goals, and promote a sustainable culture. They started formally
engaging with important suppliers in 2021 regarding their sustainability initiatives,
particularly their emissions management plans. They intend to collaborate with
important suppliers through these engagements to understand their climate
activities, disclose their GHG emissions, and assist them in developing the
capability necessary to further reduce their carbon footprint.

SOCIAL

RACIAL EQUITY

Structural barriers in the U.S. have created profound racial inequities, which have
contributed to a marked and persistent racial wealth gap. These and other inequities are
the motivation behind JP Morgan Chase’s $30 billion commitment to help close the
racial wealth gap among Black, Hispanic and Latino communities. Informed by data and
insights that highlight the challenges and point the way to effective solutions, the
company is leveraging its resources as a financial institution to direct capital and

- 19 -
expand opportunities for Black, Hispanic and Latino communities to build, sustain and
pass on wealth.

By the end of 2021, more than $18 billion were deployed toward the $30 billion goal.
This was largely driven by affordable rental housing preservation and homeownership
refinance – areas where it had existing products and processes and could take prompt
action to further our efforts. The firm is building the infrastructure and foundation to
make progress on its commitment.

The firm announced its intention to retain a third-party to perform an audit and plan to
prepare and publish a report based on the results of the audit by the end of 2022. The
Firm’s Community Impact organization serves as the cross line-of-business group
responsible for reviewing and reporting on the activities that align to the Racial Equity
Commitment. The governance team consists of: executive owners from each line of
business with accountability to both the Chief Executive Officer ("CEO") and the
Community Impact team; community teams that are responsible for on-the-ground
implementation in partnership with local market leadership teams; and the executive
leadership team with CEOs from each line of business. The Public Responsibility
Committee of the JP Morgan Chase Board of Directors provides oversight of this work
and is briefed periodically on the Firm’s progress. The Firm's Public Engagement team
is dedicated to connecting with external stakeholders, including civil rights
organizations, consumer policy groups, non-profit organizations, civic leaders, trade
associations and diverse chambers of commerce. In addition to ongoing relationship
building, the Public Engagement team facilitates the Chase Advisory Panel ("CAP")
program, a series of regular conversations between stakeholders and JP Morgan Chase
senior executives. The CAP program is grounded in the Firm's commitment to including
diverse voices in the development of products, services and approaches, including
accountability for racial equity. In 2021, Public Engagement connected with over 200
stakeholders around the Racial Equity Commitment.

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DIVERSITY, EQUITY & INCLUSION (DEI)

At JP Morgan Chase, they believe that a talent-driven company is a diverse one. That
starts, first and foremost, with fostering an inclusive work environment where their
employees are respected, trusted and encouraged to bring their whole selves to work. It
also means actively working to incorporate DEI considerations into how they hire and
develop their employees, design and deliver their products and services, leverage their
purchasing power, invest in their communities, engage on public policy issues and
more. The company has taken a number of steps to build the infrastructure to be able to
deliver on our commitment to DEI. This includes developing and implementing a global
DEI strategic framework with clear objectives, metrics, controls and accountabilities.
They have strengthened and expanded their DEI function, and formalized the ways in
which it works to drive progress on DEI matters within their lines of business and into
how they serve customers, clients and communities. In short, JP Morgan Chase & Co.
is managing and executing on its DEI priorities with rigor and intent, because it knows
that DEI is an important part of its Firm’s ability to deliver the best solutions for its clients
and customers and to be successful in the long term. In addition to making progress
toward our Racial Equity Commitment in 2021, it launched three new DEI Centers of
Excellence during the year: Advancing Hispanics & Latinos, the Office of Asian & Pacific
Islander Affairs and the Office of LGBT+ Affairs. They are committed to both continuing
that work and to being transparent with their stakeholders about their progress.

HUMAN CAPITAL

At JP Morgan Chase, their people drive their success in serving their customers, clients
and communities. Their human capital strategy is focused on attracting, developing and
retaining the diverse talent they need to advance their business today and into the
future. They invest across the employee life cycle – from recruiting and employee
development to engagement, compensation and benefits – to build a diverse team and
inclusive culture where their employees across the globe are welcomed, valued and
able to bring their full selves and best work forward.

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INCLUSIVE GROWTH

The firm believes that business, in partnership with government and community leaders,
has a role to play in helping everyone have the chance to participate and share in the
rewards of economic growth. We are only as strong as the communities we serve, and
the economies they support. The efforts to help build a more inclusive economy are
focused on leverage of the business and expertise to create meaningful impact:

• Building careers and skills

• Fuelling business growth and entrepreneurship

• Catalyzing community development

• Strengthening financial health and wealth creation

Experts are bringing the reach and expertise of the firm to tackle these challenges,
using the power of businesses, combined with philanthropic capital, data-driven insights
and policy expertise.

GOVERNANCE

Robust corporate governance practices help JP Morgan Chase & Co. protect
stakeholders' interests, including customers, clients, employees, shareholders and
communities. The Firm believes that adherence to its Business Principles is one of the
pillars on which the organisation’s continued success rests. Business Principles, for
instance, requires a strong focus on strengthening, safeguarding and growing the
company over time. These principles apply consistently across lines of business and
geographies that JP Morgan Chase & Co. operates.

Responsibility for oversight and management of ESG is considered at multiple levels

within the organisation. Oversight of ESG matters is integral to the Board's work in

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setting the policies and principles. These policies govern the business, including the
Firm's governance-related policies and practices, their risk management and controls
systems, investment in their employees, and how they advance sustainability in the
business and its operations.

In 2020, in addition to the work of the committees, all directors participated in a

complete Board discussion regarding the Firm's approach to COVID-19, racial equity
and climate change. Additionally, the JP Morgan Chase & Co director education
program includes ESG issues. The Board oversees management directly and through
its five standing committees:

• Public Responsibility Committee

• Compensation & Management Development Committee

• Audit Committee

• Risk Committee

• Corporate Governance & Nominating Committee

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Each of the Board's standing committees oversees reputational and conduct risks within
its scope of responsibility and assists the Board in its oversight of various ESG issues
depicted on the following table:

Committees Purpose
Supervises the Firm's effective policies and practices regarding
Public
political contributions, major lobbying priorities and principal trade
Responsibility
association memberships that relate to the Firm's public policy
Committee
objectives while considering its impact on every stakeholder

Compensation Reviews and approves the Firm’s compensation and qualified

& Management benefit programs. It also oversees the Firm’s culture, including
Development reviewing diversity programs, which includes the Accountability
Committee Framework as it applies to members of the Operating Committee.

Oversees management’s compliance with the Firm’s ethical

standards, policies, plans and procedures, and laws and
Audit
regulations. It also reviews the program established by
Committee
management that monitors compliance with the Code of Conduct
and reviews the record of such compliance
Assists the Board in its oversight of management’s responsibility to
implement a global risk management framework reasonably
Risk Committee
designed to identify, assess and manage the Firm’s risks, including
ESG risks
Corporate
Exercises general oversight, concerning the governance of the
Governance &
Board. This includes its composition, nominees and framework for
Nominating
self-assessment
Committee
Source: 2021 ENVIRONMENTAL SOCIAL & GOVERNANCE REPORT

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In line with the Board's responsibility for setting the "tone at the top" to promote a culture
of accountability, ethical conduct and strong corporate values, the senior management
is responsible for driving and implementing the "tone at the top". For instance, by
implementing strategy and execution on ESG matters across the Firm. The Chief Risk
Officer, the Head of Human Resources, the Global Head of Diversity and Inclusion, the
Global Head of Corporate Responsibility, the Global Head of Sustainability and other
senior leaders provide periodic updates on ESG initiatives to the Operating Committee
and Board of Directors. ESG efforts are spearheaded by several specialist teams
across the Firm, with some examples including:

• The Office of the Secretary partners with senior management, control groups,
lines of business and corporate units to promote effective firm governance. It also
works closely with the Board of Directors on ESG matters, including responding
to shareholder proposals.
• Corporate Responsibility team works to design, implement and evaluate
community and philanthropic programs that open new pathways to economic
opportunity for individuals, provide actionable insight to civic and community
leaders and protect the environment. It comprises Government Relations, Public
Engagement, and Sustainability, Global Philanthropy and Research and Policy
teams.
• The Corporate Sustainability team reports to the Global Head of Corporate
Responsibility. It provides advice on the Firm’s approach to managing ESG
matters, supporting the development of sustainability- and climate-focused
business strategies and financing opportunities, engaging with stakeholders and
facilitating external reporting on these matters.

After establishing the tone of the atmosphere of the organization, another essential
aspect of Governance is risk management which considers both internal and external
risks identification and the Management policies and procedures. The board should also
be satisfied that managers take a risk and expected returns into account in their
decision-making.

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The significance of risk management for corporate governance was demonstrated
forcibly by the global banking crisis in 2007–2009. In the United Kingdom (U.K.), the
government reviewed the banking industry's failures, and the resulting Walker Report
was published in 2009. It commented that although there were failures in the banking
industry regulation, much of the blame for the crisis was attributable to poor governance
and inadequate attention to risk management. Risk management is concerned with:

▪ The identification, assessment and prioritization of risks; and

▪ Measures to minimize control and monitor the probability or impact of adverse

risk events or to maximize benefits from opportunities.

The board has overall responsibility for risk management. Responsibility for the
management of risk is delegated to executive management, but the board:

a. decides the risk appetite of the company;

b. requires management to manage risks within the board guidelines for risk
appetite;
c. monitors the performance of management, to ensure that the business is
being managed within the risk guidelines set by the board;
d. monitors the risk management system to ensure that it is effective, and
achieves its purpose.

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CONCLUSION

The phase that humanity has reached today is one where we need to take responsible
actions to ensure the sustainability of the world’s resources for the future generations.
This is only possible if each and every one acknowledges the menace that climate
change poses, and engages in remedial actions. COVID-19 is yet another menace that
has harmed the whole world, but it has also unveiled the interconnectedness among
countries. This interconnectedness does not necessarily epitomise fragility, but it also
demonstrates the union needed to fight this global phenomenon.

It is important for every organisation to engage in this combat and JP Morgan Chase &
Co. is leaving no stone unturned to do so. It is true that signing for the PRB is a good
step towards sustainability; but JP Morgan Chase & Co. has also shown that despite not
being a signatory bank, it can embed successfully the ESG framework in its business
operations. The firm is even considered as a role model for other organisations. It has
been able to take proactive measures to ensure that ESG is inculcated in its employees
and is as well infused in all of its operating activities.

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REFERENCES

Boffo, R., and R. Patalano (2020), “ESG Investing: Practices, Progress and
Challenges”, OECD Paris, www.oecd.org/finance/ESG-Investing-Practices-Progress-
and-Challenges.pdf

JP Morgan: About our Business. Available at:

https://www.jpmorganchase.com/about/our-
business#:~:text=Our%20company%20is%20a%20leading,transactions%20processing
%20and%20asset%20management.

JP Morgan: Sustainability. Available at:

https://www.jpmorganchase.com/impact/sustainability

JP Morgan: Annual Report 2021. Available at:

https://www.jpmorganchase.com/content/dam/jpmc/jpmorgan-chase-and-co/investor-
relations/documents/annualreport-2021.pdf

JP Morgan: Environmental, Social, & Governance Report 2021. Available at:

https://www.jpmorgan.com/content/dam/jpmc/jpmorgan-chase-and-co/documents/jpmc-
esg-report-2021.pdf

UN Climate Change Conference UK 2021. COP26 Goals – Finance. Available at:

https://ukcop26.org/cop26-goals/finance/

United Nations, 2022. Principles for Responsible Banking: Shaping our future. Available
at: https://www.unepfi.org/wordpress/wp-content/uploads/2022/03/Introduction-of-the-
PRB.pdf

United Nations, 2018. Principles for Responsible Banking: Shaping our future.
Consultation Version. Available at: https://www.unepfi.org/wordpress/wp-
content/uploads/2018/12/PRB-consultation-brochure.pdf

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 APPENDIX 1
As of or for the year ended December 31,
Pre Covid-
(in millions, except per share, ratio data Post Covid-19
and headcount) 19
2018 2019 2020 2021
Selected income statement data
Total net revenue $108,783 $115,399 $119,543 $121,649
Total noninterest expense 63,148 65,269 66,656 71,343
Pre-provision profit 45,635 50,130 52,887 50,306
Provision for credit losses 4,871 5,585 17,480 -9,256
Net income $32,474 $36,431 $29,131 $48,334
Per common share data
Net income per share:
Basic $9.04 $10.75 $8.89 $15.39
Diluted $9.00 $10.72 $8.88 $16.36
Book value per share 70.35 75.98 81.75 88.07
Tangible book value per share
56.33 60.98 66.11 71.53
(TBVPS)(a)
Cash dividends declared per share 2.72 3.4 3.6 3.8
Selected ratios
Return on common equity 13% 15% 12% 19%
Return on tangible common equity
17 19 14 23
(ROTCE)(a)
Liquidity coverage ratio (average)(b) 113 116 110 111
Common equity Tier 1 capital ratio© 12 12.4 13.1 13.1
Tier 1 capital ratio© 13.7 14.1 15 15
Total capital ratio© 15.5 16 17.3 16.8
Selected balance sheet data
Loans $1,015,760 $997,620 $1,012,853 $1,077,714
Total assets 2,622,532 2,687,379 3,386,071 3,743,567
Deposits 1,470,666 1,562,431 2,144,257 2,462,303
Common stockholders’ equity 230,447 234,337 249,291 259,289
Total stockholders’ equity 256,515 261,330 279,354 294,127
Market data
Closing share price $97.62 $139.40 $127.07 $158.35
Market capitalization 319,780 429,913 387,492 466,206
Common shares at period-end 3,275.80 3,084.00 3,049.40 2,944.10
Headcount 256,105 256,981 255,351 271,025

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