Dive Brief:
- JPMorgan Chase’s asset management arm will no longer employ external proxy advisory firms for proxy voting advice at U.S. companies and will instead use an in-house artificial intelligence-powered tool to help make voting decisions, ESG Dive confirmed Wednesday.
- J.P. Morgan Asset & Wealth Management announced the change in a client memo first reported Wednesday by the Wall Street Journal. The tool, “Proxy IQ,” will aggregate and analyze proprietary data from the over 3,000 annual meetings, according to a portion of the memo seen by ESG Dive.
- In switching to Proxy IQ, JPMorgan said it is “the first major investment firm to fully eliminate any reliance on external proxy advisors for [its] U.S. voting process,” the memo said.
Dive Insight:
JPMorgan will complete its transition from using external advisors to Proxy IQ during this year’s first quarter, a company spokesperson said. The change comes after the bank’s CEO, Jamie Dimon, called out “undue influence” such firms exert. Meanwhile, the Trump administration and Republican state officials have targeted proxy advisers — namely Institutional Shareholder Services and Glass Lewis — for their diversity, equity and inclusion and environmental, social and governance policies.
Proxy IQ will be available on the asset manager’s Spectrum investment platform, which had over $3 trillion in assets under management across more than 11,000 portfolios at the end of 2024.
“By harnessing advanced AI, we no longer need third-party data collection or voting recommendations in the U.S.,” the memo said. “This reinforces our unwavering commitment to vote solely in clients’ best interests, using our information advantage.”
In Dimon’s 2024 letter to shareholders, the CEO announced the bank’s asset management arm would increase the participation of portfolio managers and decrease the influence of third-party advisers in the voting process.
J.P. Morgan Asset Management planned to excise third-party voting recommendations from its internal voting systems by the end of 2024 and work with third-party advisers to have any research reports exclude voting recommendation.
ISS and Glass Lewis collectively make up over 90% of the proxy adviser market and accounted for 48% and 42%, respectively, of that market’s assets under advice in 2021, according to the Harvard Law School Forum on Corporate Governance. By 2024, the firms collectively accounted for around 97% of the market, Harvard Law’s corporate governance forum later found.
President Donald Trump signed a December executive order that accused ISS and Glass Lewis of using their combined market share “to advance and prioritize radical politically-motivated agendas.” The order directed the Securities and Exchange Commission, Department of Labor and Federal Trade Commission to review all SEC publications that implicate DEI or ESG, consider reviewing or rescinding the rule that currently governs the proxy voting process, and review ongoing state-level antitrust investigations into proxy advisers.
A Texas anti-ESG law targeting proxy advisory firms, including ISS and Glass Lewis, was temporarily halted last year, after a federal judge ruled the law to be a form of viewpoint discrimination. Texas Attorney General Ken Paxton initiated a probe into ISS and Glass Lewis following the injunction. The two firms have also been probed by the attorneys general of Florida and Mississippi over their DEI and ESG policies.
