J.P. Morgan: Partner in the Global Pursuit of Sustainability

J.P. Morgan: Partner in the Global Pursuitof Sustainability

By Eric M. Lowitt and Jim Grimsley

August 2009

Case Study

(what Accenture calls “future value”)and by the portion of the industry totala company’s future value represents

Consistency—as measured by thenumber of years (out of seven) thepeer set median in profitability,growth and positioning for the futurewas beaten

Longevity—as measured by the durationof out-performance in total returnto shareholders

Following a brief overview of J.P.Morgan’s history, this case study willexamine how the company’s sustain-ability initiatives have performedalong these five dimensions of high-performance business.

Environmental Affairs (which wasformed in 2004), states. “If there wereno climate change issue, no sustain-ability concerns and no naturalresource constraints, it would stillmake perfect sense to use resourcesmost efficiently.”

J.P. Morgan’s sustainability effortsmap clearly to Accenture's provenHigh-Performance Business model.As defined by Accenture, a high-per-formance business demonstratesquantitative superiority along fivekey dimensions:

Growth—as measured by revenueexpansion

Profitability—as measured by thespread between the return on capitaland the cost of capital

Positioning for the future—as repre-sented by the portion of share pricenot explained by current earnings

The bulk of the company’s sustainabilityinitiatives are not, however, charitable.The goal of making a positive social andenvironmental impact, while important,is secondary to that of ensuring thestability and profitability of J.P. Morgan,its partners, and clients. While thecurrent economic crisis is leading manycompanies to abandon, postpone orscale back their sustainability projects,J.P. Morgan recognizes that sustainabilityis no longer a buzzword of environ-mental activists but rather a necessarycomponent of success and longevity.

“The business case for J.P. Morgan toaddress sustainability is that doing sowill lead to both improved profitabilityand responsible corporate citizenship,”Jim Fuschetti, the Managing Directorof J.P. Morgan’s Office of

2 | Accenture Institute for High Performance | Copyright © 2009 Accenture. All rights reserved.

J.P. Morgan: Partner in the Global Pursuit of Sustainability

With J.P. Morgan’s long and storied history of shepherding America throughnew economic frontiers, it should be no surprise that the company is emergingas a leader in sustainability. Among its many social and environmentalinitiatives, the firm is leveraging its expertise and resources to help clientsnavigate environmental markets, extend the rewards of entrepreneurshipthrough microfinance, and improve the quality of life for the communitiesin which the company operates.

unit is fully independent of thecompany’s philanthropic foundation; ittaps J.P. Morgan’s existing investmentand emerging-markets expertise tobring financial services—capital markets,structured products and principalinvestments—to the base of the eco-nomic pyramid. Rather than create anew service-delivery unit, J.P. Morgansupports existing local, domestic, andinternational microfinance and socialenterprise organizations with capitalraised through the investment bank.1

Christina Leijonhufvud, who runs theSocial Sector Finance unit, explains thedecision to structure the unit this way:

“We seek to support the best-run MFIs[microfinance institutions] in the worldby bringing our full range of investmentbanking products and services to thesector; we’re not looking to intermedi-ate microfinance products directly tocustomers. That’s a retail activity thatwe are not well set up to do in theemerging markets at this stage. Butwe can support existing MFIs in abroad variety of ways: through directequity stakes or equity stakes viafunds; credit capacity; advisory services;help with raising capital; help withtransforming nongovernmental orga-nizations (NGOs) to commercial banks;help with consolidation in the microfi-nance sector by helping MFIs merge;help selected MFIs go to public markets.This is not quasi-philanthropy.”

The Social Sector Finance unit’s workincludes partnerships with microfinanceand entrepreneurship organizationsincluding ACCION New York, GrameenFoundation, and TechnoServe toengage employees in the firm’s efforts.In 2008, the firm also partnered withthe China Foundation for PovertyAlleviation to bring awareness to rural

Company historyAs J.P. Morgan looks to take on aleadership role in the amorphous andevolving field of sustainability, itspioneering history supplies a usefultemplate for future endeavors. Thecompany’s origins date back to 1799,when the Manhattan Company—thefirm’s earliest precursor—beganbanking operations in New York City.Over a half century later, in 1861, J.Pierpont Morgan established J.P.Morgan & Co., which served as thesales and distribution office for theEuropean securities underwritten bythe firm owned by J. Pierpont’s father.

The mercantile and credit crisis of1895 marked the first of manymoments when J.P. Morgan steppedinto the public realm and madeAmerican history. As the US govern-ment teetered on the brink of default,the company worked with PresidentGrover Cleveland and American andEuropean banks to form a syndicatethat purchased gold from Europe andbrought it to the US. These efforts arelargely credited with saving the goldstandard—and the US governmentfrom default.

A few decades later, in 1940, the com-pany went public, becoming J.P. Morgan& Co., Inc., and J.P. Morgan, Jr., becamechairman. Half a century later, in 1989,the company received permission fromthe US Federal Reserve to begin under-writing and dealing in corporate debt.The following year, J.P. Morgan beganproviding a full range of securitiesservices to its clients—the first USholding bank to do so since the 1930s.

Just as it entered the last century witha splash, J.P. Morgan welcomed thetwenty-first century with a historicmerger with the Chase Manhattan

Corporation, creating JPMorgan Chase& Co. After merging with Bank Onein 2004 and acquiring Bear Sternsand Washington Mutual in 2008,JPMorgan Chase & Co. has become avenerable banking giant: With $2.1trillion in assets under management,the company’s services include invest-ment banking, financial services forconsumers, small business and com-mercial banking, financial transactionprocessing, asset management andprivate equity under its J.P. Morganand Chase brands.

J.P. Morgan’s scale and globalreach underscore to the firm theimportance of being an honest brokerand strategic advisor to its clients,partners, competitors, and publicentities to help enable the globalpursuit of sustainability.

Growth

J.P. Morgan is pursuing growth byentering new markets and expandingexisting client relationships throughinvestments in new sustainability-related services, such as microfinanceand trading renewable energy andgreenhouse gas allowances and instru-ments. The company is also expandingmany of its existing services—in windpower, for example—further enhancingits credibility among its clients seekingsolutions to sustainability’s challenges.

Entering new markets and expandingexisting relationshipsFew companies share J.P. Morgan’slegacy of expanding into—and evencreating—new markets. In the field ofsustainability, the company is similarly apioneer, carving roads into new marketsthrough its Social Sector Finance unit.Launched in November 2007 as partof J.P. Morgan’s investment bankingoperations, the Social Sector Finance



By establishing an in-house carbon-trading business, J.P. Morgan is wellpositioned for growth as a cap-and-trade system takes hold in the US: Withthe ability to bypass the “middleman,”the company can expect even greatershort- and long-term profitability inthe cap-and-trade market, which isexpected to reach $1 trillion by 2020.10

Leveraging existing services toenhance credibility among clientslooking for sustainability solutionsCreating new services is an essentialcomponent of J.P. Morgan’s sustain-ability strategy, but the companybelieves leveraging existing servicesand expertise is the most effective andefficient way to extend into unchartedterritory. Investment banking hasproved to be a viable home not onlyfor the Social Sector Finance unit butalso for renewable energy investments.Eric Fornell, vice chairman of energyinvestment banking, says: “My role inthe investment bank is to think abouthow sustainability—which we think ofas alternative and renewable energy—allows us to grow and make money.”

Recently, J.P. Morgan executed anumber of successful IPOs in the areaof wind power. “Wind is a great businessbecause it’s gone from little egg beatersto giant, 35-story instruments; eachblade is the length of a football field.They’re slow moving and they generatea lot of power,” Fornell says.

The renewable energy business iscomplicated and tied tightly to thebourgeoning carbon-trading market. “Inpower, it’s all about CO2 and under-standing what the CO2 costs might bewithin various CO2 regimes, whether a

emissions regulations in Europe.4 Giventhe swift growth of the carbon-tradingmarket, which is estimated to increaseto more than $550 billion each yearthrough 2012,5 J.P. Morgan is not theonly major bank establishing a foothold:Barclays Capital, Credit Suisse andMorgan Stanley–to name just a few–arealso involved in carbon trading.6

To position itself as a leader in thisnascent market, J.P. Morgan is devel-oping financial products and solutionsthat help clients mitigate the risksassociated with climate change andcost-effectively reduce their greenhousegas emissions. For example, the com-pany’s Environmental Markets businessprovides carbon-trading expertise toclients with support ranging fromproject development through to sales,as well as support through ClimateCare,a risk-management company acquiredby J.P. Morgan in March 2008.78

Founded by Mike Mason, a Britishentrepreneur, in 1997, ClimateCarepioneered the concept of carbon off-setting.9 “ClimateCare has differentiateditself as being one of the most envi-ronmentally responsible and innovativein the voluntary carbon-market space,”explains Blythe Masters, head of J.P.Morgan’s global commodities business.She describes the impetus behind theacquisition: “We decided to acquireClimateCare when we saw that anincreasing number of our clients neededto be involved in carbon markets, andwe recognized that, over time, thedistinction between voluntary andcompliance markets would erode. Thescope of voluntary markets was small,though, and obviously there’s not alarge amount of voluntary moneyfloating around. We looked at theprojects that ClimateCare has beeninvolved in and were very impressed, assome of those projects were extremelyinnovative and had application in theclients’ space.”

microfinance programs in China’sHuai’an County; J.P. Morgan jump-started the initiative with a $33,750pledge to support microfinance inthe area.2

Another area of sustainability gen-erating growth for J.P. Morgan is thecarbon-credit-trading market. In 2007,the United Nations IntergovernmentalPanel on Climate Change found “un-equivocal” evidence of global warming,citing human activity as a likelycontributor. Although climate changeremains a somewhat controversialtopic, increasing public, government,and private sector awareness aroundgreenhouse gas emissions and limitednatural resources has shifted theclimate change debate from whetherit exists to what to do about it. Indeed,as the problems of limited naturalresources and greenhouse gas emissionsincreasingly affect businesses, J.P.Morgan sees opportunities to becomea top player and adviser to companiesdealing with complex environmentaland emissions trading markets.

Increased focus on the environment isfueling a growing carbon-tradingindustry. As Caroline Angoorly, Head ofEnvironmental Markets in NorthAmerica for J.P. Morgan says, “Usingthe cap-and-trade mechanism in themarket of greenhouse gases is thebest way to cost-effectively reduceemissions and achieve global emissionsgoals.” J.P. Morgan predicts that,within the next 18 months, the US willimplement a cap-and-trade systemthat covers 85 percent of the nationaleconomy.3 In 2008, more than 12,000companies and 20,000 emissions sources(for example, power generators andheavy industries such as glass, metalsand mining) were subject to carbon



Indeed, the company views investmentin microfinance as potentially verylucrative. “There are some really bank-able institutions here,” saysLeijonhufvud. “The great revelation inthe microfinance industry has been thatyou can serve the poor commerciallyand make a decent profit, and you cando so sustainably and have a reallymaterial impact on people’s lives.[Our efforts] are not philanthropicbut are intended to demonstrate thecommercial viability of double-bottom-line opportunities.”

Leijonhufvud believes the dual natureof the Social Sector Finance unit isdistinct from the microfinance activitiesof other banks. “While other banks’initiatives might be strictly philan-thropic or commercial, we’ve beenexplicit about the double-bottom-linenature of our initiative. We are firstand foremost screening opportunitiesfor social impact but also looking forcommercial or quasi-commercialreturns on our activities,” she says.Perhaps the greatest differentiator ofthe company’s microfinance work,however, is its capital investmentdirectly in the equity of microfinanceand social enterprise institutions.“From the start, our willingness toput forth our own capital has reallybolstered our credibility and reputationin the sector,” Leijonhufvud says. Afterestablishing a foothold in traditionalmicrofinance, the company will bewell positioned to extend to othercritical services like housing, healthand education, Leijonhufvud believes.

Chase’s home mortgage modificationprogram also illustrates the company’scommitment to both their customersand communities. Through the program,the company helps families struggling

to abandon socially and environmen-tally friendly initiatives. Displaying afirm commitment to sustainability sendsa message to clients that sustainabilityis still a priority during an economicdownturn. Angoorly explains:

“In this space, there are two groups ofpeople: those who are interestedbecause they are environmentalists,and those who are interested primarilybecause of the bottom line. At J.P.Morgan, our point is that one does notexclude the other. We have to connectwith bankers worried about their bot-tom line but also with chief environ-mental officers. It’s very importantthat we demonstrate things like ourown offset programs, wind, solar, workthat we’re doing globally on stoveprograms. We’re showing people thatwe have put an enormous amount atstake to make these things successfulbecause they matter to us for a vari-ety of reasons.”

Profitability

Profitability is often not a priorityaround issues of sustainability, butJ.P. Morgan expects its social andenvironmental impact to deliver bothsocial benefits and positive financialreturns—objectives they see as beingcomplementary, not mutually exclusive.

Convergence of social andenvironmental impacts bringabout social benefits and positivefinancial returnsThe company’s “double bottom line”objective is apparent in its SocialSector Finance unit: With more clientslooking to invest in socially responsibleways, J.P. Morgan can satisfy clientdemand, help alleviate poverty domes-tically and in developing countries,and tap an estimated $300 billion inunmet demand for financial services.

tax regime, cap and trade, or alloca-tions,” Fornell explains. “For example,will a utility be able to pass those coststhrough? Will a merchant generatorhave to bear the costs? What will theprice for power be in that market?”

Fornell and his colleagues see signifi-cant potential in wind but recognizethat solving the problem of limitednatural resources will require a widerange of prescriptions. The team isrealistic about the potential for arenewable energy industry to lift theUS economy out of its current finan-cial crisis: “Although you hear it saidpolitically, renewable energies are notgoing to immediately prop up thecountry,” Fornell says. “Yes, if Gamesabuilds a wind turbine facility inPennsylvania or Clipper builds a facilityin Iowa, you’re going to have jobs, butcompare that to an auto plant. Myguess is you could take all of themanufacturing around the wind busi-ness and it wouldn’t meet the outputof General Motors’ Poletown plant.”

J.P. Morgan is building credibility inrenewable energy by making sizableinvestments in renewable energy as away to build capital market support forfuture projects. As of December 2008,the company has invested (or committedto invest) $2.4 billion in renewableenergy transactions, and has raised$3.4 billion from outside parties. Whilethe company holds investments insolar plants, its principal investment isin wind farms. At the end of 2008, J.P.Morgan was a leading US institutionalequity investor in wind power.11

Building credibility in the sustainabilityspace is imperative to garnering clients,particularly at a time when manybusinesses, facing eroding profitabilityand an uncertain economy, are choosing



can speak very knowledgably aboutfinancing any new nuclear assets. Ourobjective is to help our clients andgovernment policy makers with thetransition of the economy from whereit is today to where it needs to be in20 years.”

According to Blythe Masters, publicpolicy will either make or break thereforms she views as necessary to thefuture of the commodities business:

“Sustainability is important to J.P.Morgan’s commodity business. I worrythat the recent collapse in oil andcommodity prices will lead to yetanother period of significant dis- andunder-investment in commodities andcommodity-related infrastructure,particularly energy. This will lead toyet another deferral of the necessarylong-term solutions to address theimbalance between supply and demand.Our commodities business is driven bythe implications and consequences offailure to tackle sustainability at apolicy level.”

Masters recognizes that the ObamaAdministration may make costly envi-ronmental reforms unpalatable tocash-strapped citizens. “Whether andhow this Administration implementscap and trade will partly be a functionof how much society is willing to bearthe cost. In the current economicenvironment, any cost is going to bevery hard to bear.” Regardless of thechallenges, forging relationships withthe Obama administration is a requi-site to being part of the continuingdebate ahead.

regulatory risks are such that theyought not to be built. It is a practical,objective sense of what the world islike, what it is going to be like, and whatis worth—and not worth—fighting over.”

Positioning for the future

J.P. Morgan is positioning itself tocontinue its role as an honest brokerand strategic advisor to its clients,partners, competitors and publicentities to help enable the global pur-suit of sustainability. Specifically thecompany is participating in the publicpolicy debate about regulatinggreenhouse gas emissions and naturalresource usage and by being a foundingmember in establishing the GreenExchange, in partnership with theChicago Mercantile Exchange, amongothers. The company is also preparingfor a low-carbon economy by investingin renewable and efficient energysources and working to reduce its owncarbon emissions.

Influencing public policyMuch of the value created by J.P.Morgan’s activities lies in positioningthe company for the future. For J.P.Morgan, having an active voice inpublic policy is critical to taking aleadership position in the evolvingenvironmental space. Leaders at thecompany hope to tap the firm’s vastexpertise to lend a voice to the debateover environmental policy “We have acolleague, John Eber in Chicago, whohas probably done more wind financingthan anyone in the world,” saysFuschetti. “John, in some ways, is anational resource, so we want to makesure he gets in front of the right peoplein Washington when they discussfixing problems associated withfinancing wind and other forms ofrenewable energy. Likewise, we haveexperts in nuclear power plants who

with mortgage payments to keeptheir homes. A vast roster of initiativescomprise the program, includinghomeowner assistance from hundredsof mortgage counselors; outreach toat-risk homeowners for prequalifiedmodifications such as interest rateadjustments; and financial supportintended to stabilize local communities.The firm is also lending $70 billion tomore than 400,000 US families at riskof foreclosure.12 By helping homeownersto meet their mortgage payments, thecompany builds community goodwilland reduces the mortgage default riskin its portfolio.

While J.P. Morgan recognizes theimportance of the societal half of itsdouble-bottom-line endeavors, thecompany firmly delineates the limitsof its philanthropic activities. “Weacknowledge that J.P. Morgan has itsown environmental policies and agenda,but we’re not here to preach to clientsthat they should have one positionversus another,” Masters explains. “Wecraft solutions that meet our clients’needs. So it’s very important not toconfuse the business with being envi-ronmentalists—though many of ushave very strong views on that topic.”Indeed, when the Carbon Principleswere being created, J.P. Morgan’sexecutives were mindful of this needto set limits. As Fornell explains:

“Environmental NGOs, such as theEnvironmental Defense Fund and theNational Resources Defense Council,kept wanting us to do more, but it hasto be in our shareholders’ interest todo that. We’re businesspeople. We arehere as people who are thoughtfulabout shareholder risk and want towork with clients on mitigating thatrisk. If fewer coal plants get built, it’sgoing to be because the political and



Preparing for the low-carbon economyJ.P. Morgan has established severalinternal sustainability goals and initia-tives. Fuschetti remarks, “Other thanconstruction materials, our big resourceuses are electricity, paper, and electronicequipment. Our emissions are mostlyindirect (i.e. generated by others) andare very small by comparison to indus-trial companies. That said, environmentalsustainability is a cornerstone here toour efforts.” The company has publiclycommitted to reducing its emissionsby 20 percent by 2012 (from a 2005baseline) and is also working to reduceits electricity consumption and use ofpaper and other materials.

Though wary of overextending thefirm’s public commitments, Fuschettiexpects the firm will institute moregoals to reduce resource use. “I’mhoping we can make a commitment toreduce paper consumption by a further20 percent, but we are still working onconsolidating paper use data from theBear Stearns and Washington Mutualacquisitions before doing so” he says.“We are also hopeful that we canreduce emissions and save money whilemaking our people more efficient byexpanding our teleconferencing capa-bilities so they need to travel less.There are huge efficiencies to begained here. The big challenge is howdo we make this happen in a culturewhere travel is viewed by many as anessential part of the job?”

The challenge of cutting consumptionis complicated both by the company’sorganic growth and by large acquisi-tions, such as the March 2008 takeoverof Bear Stearns and the September2008 buyout of Washington Mutual.“What can we do? We cannot reducein absolute terms electricity and asso-

income families, reporting annually onthe company’s aggregate greenhousegas emissions from power usage, andusing recycled paper in the company’sfax machines and computer printers.14

From one perspective, positioning itselfas a leader in carbon trading, environ-mental markets, sustainable solutions,and environmental risk management ismainly about client service for J.P.Morgan. As Fuschetti says, “Withoutclients, the firm itself is not sustainable.”Therefore, the firm makes a point ofoffering well-rounded expertise capableof providing risk-management andcapital raising services that appeal toa wide spectrum of clients. For somebusinesses, sustainability is an emissionsissue; for others it might be access tofresh water, for others it’s a reliablesource of raw-materials. “Our clientsalso need to be sustainable” Fuschettisays. “When people ask ‘What’s thebusiness case for J.P. Morgan’s involve-ment in sustainability?’ My answer is,‘Isn’t it obvious? It’s our clients.’ It hasnothing to do with us per se, our owndirect footprint is small. Our clientsare going to deal with these hugetransition issues, and if we don’t helpthem, someone else will.” Angoorlyechoes his sentiment:

“There’s a large information gap outthere, and we’ve dedicated enormousresources to having world-class peoplewith experience in origination, mar-keting, research—all across the boardunderstanding this business. Our clientsreally value that. And while makingmoney is the goal, there’s value inhelping clients understand why we lookat the world through the lens of sus-tainability. For instance, we offset ouremployee airline travel. If we’re alreadydoing something, we have morecredibility in recommending that othercompanies do it.”

Just as corporate responsibility isimperative to gaining credibility withinvestors, clients and stakeholders, it isalso critical when dealing with CapitolHill. To position itself as an engagedpolicy leader, J.P. Morgan thereforemakes substantial commitments tooperate in a sustainable and environ-mentally conscious way. The company,for example, has been engaged in devel-oping the Green Exchange—a globalenvironmental products exchange—with the Chicago Mercantile Exchange.A leading marketplace of its kind, theGreen Exchange offers environmentalfutures, options, contracts and swapsfor markets centered on efficient andeffective environmental responsibilityand solutions to climate change. TheExchange is a forum for trading globalcarbon-based contracts, such ascarbon credits under the UN CleanDevelopment Mechanism and carbonallowances under the European UnionEmissions Trading Scheme.13 Accordingto Masters, J.P. Morgan’s role in fund-ing the Exchange is a ‘strategicinvestment.’ “J.P. Morgan stands tobenefit by virtue of that investment inthe success of an exchange throughwhich, obviously, we would be con-tributing a significant amount ofvolume by definition if it’s successful.Perhaps more importantly, we get tocontribute our ideas on the design ofthe market infrastructure, which isincredibly important to us,” she says.

In addition to J.P. Morgan’s most visibleinitiatives—actively participating inthe creation of the Green Exchange,constructing “green” office buildingsin New York City, making major invest-ments in wind power and codevelopingthe Carbon Principles—the company iscommitted to many quieter initiatives:investing in “green” housing for low-



example, clients of the guys in ourchemical space, working in biofuels,have expressed that they’re glad wehave a big presence in chemicalsbecause if oil continues to slide, otherinvestment banks are going to firetheir renewable team—but they see usas here for the long run.”

Angoorly remarks: “We want to showclients that, if they improve whateverit is they’re doing, they can potentiallygenerate credits as a revenue stream.”Angoorly believes there are opportunitiesfor J.P. Morgan to pitch sustainability-related, profitable plans to clients.“Say, for example, our client is a rentalcar company that gives customers anopportunity to pay a few cents to offsettheir emissions. The rental car companyis passing all or part of the cost on tothe end consumer; plus, they caneffectively use the ‘environmental lever’as a key part of their brand differenti-ation strategy. The job across all of ourbusinesses is tailoring our solutions towhat the clients are trying to achieve.There are very different ways of lookingat the business, all of which can betapped into globally.”

Because the sustainability field is sodynamic, J.P. Morgan must constantlywork to keep employees up-to-date onthe latest developments. One way thecompany educates employees acrossbusiness lines is through its intranet.Angoorly says, “We have intranetmaterials explaining things like, whatdoes it mean to offset your carbonfootprint? What does it mean that weacquired ClimateCare? What can youdo as an individual? What are some ofthe principles that J.P. Morgan as awhole is doing around all of thesethings?” The company also hosts a seriesof teach-ins, which provide a morepersonal learning environment.

decided to embed sustainability initia-tives within existing business linesrather than create a new business group.“We’re not starting from scratch,”Fornell says. “We did not want to haveone core renewable/alternatives energygroup that is going to get fired in adownturn. Instead, we’re coordinatingacross industry groups where we’vegot something that is already up andrunning. Since alternative energy meansmore than electric power, it should haveinvolvement across the firm: People intechnology focus on solar opportunities;in chemicals, they focus on biofuels;in general industrial, they think aboutdemand response companies, meteringand smart buildings, etc.—all as a wayfor us to provide banking services tothose sectors.”

The firm also strives to educateemployees across its business linesabout sustainability’s science, challengesand opportunities. To earn buy-infrom employees outside the core sus-tainability-related businesses—GlobalCommodities, Social Sector Financeand so forth—the company makes apoint of communicating the businessopportunities associated with environ-mental and social responsiveness.

“I know bankers are always looking forsomething new to speak to their clientsabout,” Fuschetti says. “Sustainabilitygives bankers a great reason to calltheir clients and say, ‘Hey, what are youguys doing about the environment? Iknow you’ve got an issue. What areyou doing about water or emissions?”

Fornell agrees: “Investment bankersbristle at a command-and-controlstructure but respond well to the profitmotive, so they’re interested in oppor-tunities to make money in renewableand alternative energy. Spreading thealternative and renewable energy focusacross the business works because, for

ciated emissions or paper use whenwe’re adding large new operations toour firm”, notes Fuschetti. “What wecan do is continue to improve theenergy efficiency of our buildings byinstalling highly efficient lighting, HVAC,elevator and mechanical systems, andcontinue our conversion to electroniccommunication away from paper—that’s it. Fortunately, making theseimprovements is very cost-effectivewith rapid paybacks in many instances.We can accomplish an awful lot withjust improved illumination andmechanical systems.”

In a visible commitment to sustain-ability, J.P. Morgan is renovating itsmidtown New York headquarters toattain LEED-Platinum certification—the largest such conversion of anexisting building in the world.15

Consistency

To deliver performance consistent withits social and environmental objectives,J.P. Morgan is institutionalizing itscommitment to sustainability by edu-cating employees across business linesabout sustainability. The company isalso refining its long-term philanthropicstrategy to ensure goals are executedin a consistent, fruitful and enduring waythat provides benefits to the commu-nities in which the firm operates.

Institutionalizing its commitmentto sustainabilityGiven the obstacles many clientsface in investing in sustainability, J.P.Morgan believes that displaying aconsistent commitment to long-termsustainability objectives is essentialto building expertise and leadership.Institutionalizing the sustainabilitymind-set within the company’s cultureis critical. As a first step, J.P. Morgan



level, we’re looking for opportunitiesthat align well with our philanthropicpriorities and our clients’ interests. Wethink facilitating this philanthropicoverlap will ultimately encourage peopleto invest additional resources with us.”

Longevity

To ensure the longevity of the companyand its commitment to sustainability,J.P. Morgan is embedding sustainabilitythroughout the organization, andfostering strategic relationships withnew partners.

Embedding sustainability tostrengthen the company for thelong termJ.P. Morgan’s leadership believes thatsustainability has to be a company-wide initiative—not a dictum from thetop down. “I think things are smarterwhen they bubble up,” Fornell says.“Employees bristle when you havepeople at the top of the food chainsaying, ‘Thou shalt be sustainable.’When the institution is supportive ofinitiatives, people feel empowered.”

Fuschetti agrees. “With approximately225,000 employees spread out all overthe globe, we cannot mandate thekind of change we are hoping for. Weaim to empower our people to createa more environmentally sustainablecompany. If they own the project theywill make it work.”

The company is confident that embed-ding sustainability initiatives acrossbusiness lines and pursuing a moredurable philanthropic strategy willhelp with corporate citizenship. Indeed,many feel that nurturing a positive,responsible corporate culture is integralto the longevity of the company andits sustainability commitments. And

three days of its launch “This level ofemployee interest serves as a proxy foremployee satisfaction,” states Rigdon,adding that corporate responsibilityseems to be linked with retention.“Our younger employees, in particular,want a sense of social connectivity intheir work. We’re finding that firmswith more structured, high-qualityopportunities are better able to retaintop talent. So now, when we’re givinggrants, we ask our partners, ‘What arethe opportunities for employeeengagement?’”

Rigdon elaborates on the philanthropicmeasures designed to increase theyield and visibility of J.P. Morgan’scharitable commitments:

In the past, we did low-dollar, high-volume grants. But we realized thatby spreading $100 million or moreannually across more than 30 domesticmarkets and 30-plus countries, ourresources weren’t enough to addressthe symptoms of problems, much lesssolve them. As a result, we’re trying tobe more focused, working in commu-nities over a longer period of time inorder to demonstrate increased returnson our investments. We’re assumingthis approach will lead to some sus-tained employee involvement inhigh-need communities. We also thinkthat it will begin to change the kindof visibility we get in local markets.

Rigdon adds that partnering withinfluential community decision makers,such as public agencies, in areaswhere the company’s businesses oper-ate helps to foster comprehensivecommunity partnerships: “On theemployee level, we’re trying to provideopportunities we think will benefitretention. On the business level, we’retrying to work in a way that enhancesthe success of our philanthropic andcorporate goals. Finally, on the client

Another way the company has ensureda consistent commitment to sustainabil-ity objectives is to adjust the strategyof the JPMorgan Chase Foundation,the firm’s philanthropic foundation.Founded in 1961, the foundation garnersmore than $110 million in annualdonations and supports programs in33 countries and 550 cities in whichthe firm operates.16 In 2006, the foun-dation developed new goals: to increasethe philanthropic impact and visibilityof its grant portfolio and facilitategreater employee involvement in thecommunities where the firm operates.Mark Rigdon, VP, Director of GlobalPhilanthropic Strategy and Programsat JPMorgan Chase, explains the shiftin strategy:

“We had continuously heard fromemployees that having opportunitiesto participate in community activities,and providing firm-sponsored, struc-tured vehicles for contributing money,is important to them. So, in 2007 wereached out to employees and askedwhat they’d like to see, and we got alot of really great information back;people were pleased to be asked tocontribute ideas. This set the prece-dent that interactive communicationis a good thing.”

The Investment Bank launched an ini-tiative called "Team IB" to encourageand support employees involved in thecommunity. They have also launched anumber of programs that match theiremployees to short term volunteeropportunities in the microfinance sector.

The Foundation developed a Web plat-form that uses a questionnaire tomatch employees with current volunteeropportunities. Some 13,000 employeesregistered on the platform within



important to remember that we needto do this in ways that leave the worlda better place.”

Masters elaborates:

“Given that J.P. Morgan is very clientfocused and employs a significantnumber of people around the globe,we have a responsibility to the com-munity, to employees and to thegovernments of the countries withinwhich we work. A significant amountof our business is based on trust andconfidence, which we have to earnfrom both employees and customers.We’re a highly visible company, and ifwe don’t visibly give back, we simplywon’t have the credibility we need.J.P. Morgan has a culture derived frommany years of success, and employeeswant to be proud of the company theywork for. It’s hard to be proud of acompany that doesn’t take its corporatesocial responsibilities seriously. Howthe company does well and does goodis a self-fulfilling relationship.”

By establishing itself as a leader insustainability, J.P. Morgan plans to playa role in shaping what may be thenext era in global business—an era inwhich corporate responsibility andfinancial success go hand-in-hand. Asthe financial crisis that began in 2008continues, the long-term prospects ofmany Wall Street institutions remainuncertain. Investors and stakeholderscan be confident, however, that J.P.Morgan will greet the twenty-secondcentury as it has the last two: with onefoot planted firmly in tradition, the otherwalking steadily on the cutting edge.

Fostering partnershipsJ.P. Morgan’s adoption of the EquatorPrinciples and participation in creatingthe Carbon Principles are two otherexamples of its commitment to sus-tainability. The Equator Principlesprovide standards by which financialinstitutions can assess the social andenvironmental impact of their invest-ments and project-financing activities.17

In April 2005, J.P. Morgan became thethird US bank and thirtieth financialinstitution worldwide to adopt theEquator Principles, which the companyapplied to its commercial and invest-ment banks.1819

In 2008, the company took an activeleadership role in establishing theCarbon Principles, which are guidelinesto “strengthen environmental andeconomic risk management in thefinancing and construction of electricitygeneration.”20 Developed by J.P. Morgan,Citigroup and Morgan Stanley, in con-sultation with leading power companiesand environmental NGOs, the CarbonPrinciples are specific to understandingand managing the carbon-emissionrisks associated with power projects.

Conclusion

J.P. Morgan’s leaders believe that cor-porate responsibility is an essentialcomponent of the company’s success,and that social and environmentalbenefit and profitability can, indeed,be two sides of the same coin. Whileacting in the interest of clients remainsJ.P. Morgan’s top priority, leadershipcontinues to look for opportunities topioneer double-bottom-line initiativesthat will benefit all members of thecommunities in which J.P. Morgan hasa presence.

Angoorly puts it simply: “Obviously,building and running a successfulbusiness is our first priority, but it’s

just as Rigdon learned of employees’eagerness to participate in communitydevelopment opportunities, Leijonhufvudfound that investment bankingemployees were ecstatic about volun-teering in microfinance:

When we announced the Social SectorFinance initiative, I literally got 1,000e-mails in the first week from employ-ees who said, “I’ve been waiting forthe firm to do this. How can I getinvolved? Can I volunteer? Can I get ajob? Can I just come talk to you?” Itwas completely overwhelming andinspiring to see the thirst for an initia-tive like this. And I have a very small,four-person team, but I have tremen-dous pro bono support internally. A lotof what I’ve accomplished has beenthrough people who said, “I’m goingto do this on the side, even if I have towork weekends.”

Last year in New York, 75 J.P. Morganinvestment banking employees volun-teered to teach financial literacy coursesto customers of the microfinance orga-nization ACCION New York. Anotherprogram recently launched with theGrameen Foundation, called Bankerswithout Borders®, has attracted hugeinterest from employees. The firm isthe inaugural sponsor of the programwhich matches experienced profes-sionals who volunteer for short-termassignments in the microfinanceindustry. J.P. Morgan is also sponsoringa series of business-plan competitions,run by TechnoServe, that targetbusinesses serving the base of theeconomic pyramid in Latin America.These competitions involve employeesas mentors, business plan advisors, andjudges. “Engagement is so importantto the corporate cultural impact of theinitiative, which has become a biggerpart than I even realized when I firstset out to do this,” says Leijonhufvud.



Jim Grimsley is the AccentureSustainability Practice Lead for NorthAmerica. Based in Houston, Texas,Grimsley has significant experienceleading a number of successful reengi-neering and transformation projects.Prior to his current role, he was theglobal managing partner for upstreamin Accenture’s energy industry group.His consulting background encom-passes a broad range of leadershipexperiences, including major mergerintegration efforts in the energyindustry as well as several significantsupply chain projects.

About the authors

Eric Lowitt is a research fellow atthe Accenture Institute for HighPerformance, where his researchfocuses on the connection betweensustainability and high performance.Lowitt’s recent sustainability researchhas been published by the WorldBusiness Council for SustainableDevelopment and Forbes.com.


16. J.P. Morgan, “Corporate Responsibility,”

http://www.J.P. Morgan.com/pages/J.P.

Morgan/ap/about/cr (accessed November 7, 2008).

17. J.P. Morgan, “A: Environmental Risk Management

Policy,” http://www.J.P.Morganchase.com/cm/cs?

pagename=Chase/

Href&urlname=jpmc/community/env/policy/risk

(accessed November 7, 2008).

18. The Equator Principles, http://www.equator-

principles.com/index.shtml


19. J.P. Morgan, “A: Environmental Risk Management

Policy,” http://www.J.P.Morganchase.com/cm/cs?

pagename=Chase/Href&urlname=jpmc/

community/env/policy/risk


20. J.P. Morgan, “Leading Wall Street Banks Establish the

Carbon Principles,” press release, February 4, 2008.

10. Nick Hodge, “The Green Exchange: How Not to Miss

a Trillion-Dollar Opportunity,” Energy and Capital

Web site, http://www.energyandcapital.com/articles/

green-exchange-carbon+market/644,

March 17, 2008.

11. J.P. Morgan, “The Way Forward,” http://www.J.P.

Morgan.com/pages/jpmc/community/wayforward_

energy (accessed November 7, 2008).

12. J.P. Morgan, “Chase Further Strengthens Robust

Plans to Keep Families in Homes, Including

Systematic Review of Entire Mortgage Portfolio,”

press release, October 31, 2008.

13. NYMEX, “NYMEX and Other Major Market

Participants to Form the Green Exchange, the World’s

Most Comprehensive Environmental Market,” press

release, December 12, 2007.

14. J.P. Morgan, “Our Environmental Commitment:

Section A, B, F,” http://www.J.P.Morgan.com/pages/

jpmc/community/env/policy/intern (accessed

November 7, 2008).

15. LEED, or Leadership in Energy and Environmental

Design, is a designation awarded to buildings

meeting the highest environmental and energy-

efficient standards on a scale consisting of certified,

silver, gold and platinum (platinum having the

highest rating).

Notes1. J.P. Morgan, “J.P. Morgan Launches Social Sector

Finance Unit,” press release, November 7, 2007.

2. J.P. Morgan, “J.P. Morgan Volunteers Help ACCION

Clients Benefit from Microfinance,” press release,

June 27, 2008; J.P. Morgan, “Loans Help Fight Poverty

in China,” press release, May 3, 2008.

3. J.P. Morgan, “Growing Business to Curtail Carbon

Emissions,” press release, September 8, 2008.

4. Ibid.

5. Ibid.

6. Fred Pearce, “Dirty, Sexy Money: Carbon Is the New

Hot Commodity, but Can Trading It like a Currency

Really Save the Planet?” New Scientist, April 19, 2008.

7. J.P. Morgan, “Growing Business to Curtail Carbon

Emissions,” press release, September 8, 2008.

8. “PRESS DIGEST-British Business-March 27, 2008,”

Reuters News, http://uk.reuters.com/article/

governmentFilingsNews/idUKL2730323020070327


9. Ibid.

Copyright © 2009 AccentureAll rights reserved.

Accenture, its logo, andHigh Performance Deliveredare trademarks of Accenture.

About Accenture

Accenture is a global managementconsulting, technology services andoutsourcing company. Combiningunparalleled experience, comprehensivecapabilities across all industries andbusiness functions, and extensiveresearch on the world’s most successfulcompanies, Accenture collaborateswith clients to help them becomehigh-performance businesses andgovernments. With more than 186,000people serving clients in over 120countries, the company generated netrevenues of US$23.39 billion for thefiscal year ended August 31, 2008.Its home page is www.accenture.com.

About the Institute forHigh Performance

The Accenture Institute for HighPerformance develops and publishespractical insights into criticalmanagement issues and globaleconomic trends. Its worldwide teamof researchers connects with Accenture’sconsulting, technology and outsourcingleaders to demonstrate, through original,rigorous research and analysis, howorganizations become and remainhigh performers.

J.P. Morgan: Partner in the Global Pursuit of Sustainability

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