J.P. Morgan Asset Management unveiled another offering in the "ESG and Social" money fund space, launching new "Empower" share classes to support minority banks and institutions. A press release entitled, "JPMorgan Chase Announces Initiatives to Support Minority-Owned and Diverse-Led Financial Institutions," tells us, "JPMorgan Chase today announced initiatives to further support Minority Depository Institutions (MDIs) and diverse-led Community Development Financial Institutions (CDFIs), as part of the firm's recently announced $30 billion commitment to advancing racial equity. MDIs and CDFIs provide vital financial services in communities that are often underserved. In order to provide this necessary funding to underrepresented communities, many MDIs and CDFIs need additional capital themselves."
It explains, "These new initiatives are focused on strengthening minority-owned and diverse-led financial institutions by providing additional access to capital, connections to institutional investors, specialty support for Black-led commercial projects and mentorship and training opportunities."
Under the heading, "A New Money Market Share Class for Distribution by MDIs and Diverse-Led CDFIs," the release says, "JPMorgan Chase has launched Empowering Change, a unique program supported by Google and in partnership with MDIs and diverse-led CDFIs to provide economic opportunity to underserved communities. The program is designed to allow MDIs and CDFIs to offer new investment products to their customers, boost their technological capabilities and develop new revenues through fund distribution."
It continues, "Google is anchoring the program's launch with an intent to invest $500 million in the Empower money market share class that will be initially distributed by diverse-led MDIs The Harbor Bank of Maryland, Liberty Bank and Trust, M&F Bank and Unity National Bank. This initiative builds on Google's partnership with Opportunity Finance Network to support CDFIs, and multiple racial equity commitments made in 2020."
The Empowering Change program includes: "A new Empower money market share class for distribution by MDIs and diverse-led CDFIs, offered across J.P. Morgan Asset Management's suite of money market funds, allowing institutional clients to support MDIs and diverse-led CDFIs and create a positive social impact; An annual donation of 12.5% of revenue received from the management fees on Empower share class assets to support community development; Access to the depth and breadth of J.P. Morgan Asset Management's resources, including the Morgan Money digital investment platform, sales and marketing and client service support; [and] Training, education and marketing resources for partner firms led by JPMorgan Chase."
Paula Stibbe, Head of Global Liquidity, Client at J.P. Morgan Asset Management, comments, "The Empowering Change program will create new economic opportunities for minority-owned and diverse-led financial institutions, enabling qualified firms to offer our money market funds, as well as gain access to advisory support, management training and talent development.... This will empower these firms to deliver ongoing positive change in their communities. At the same time, corporate investors can make their money matter by investing in the Empower share class, designed specifically to support their socio-economic goals."
"Google is committed to helping create sustainable equity and economic opportunity for all," says Juan Rajlin, Vice President & Treasurer at Google. "We know that racial equality is directly linked to economic opportunity and are proud to partner on the Empowering Change program, which will help create new business opportunities for minority institutions."
A "Fact Sheet" accompanying the release asks, "Why is a new share class the right approach for Asset Management to support MDIs/CDFIs?" It explains, "The concept of establishing service agreements with financial intermediaries is not new. However, proactively pursuing partnerships with MDIs to expand their existing capabilities and gaining meaningful access to institutional clients is brand new to us and our industry. JPMorgan is set to be first to market with this type of initiative."
It states, "Many corporations have worked with JPMorgan Chase to get introductions to CDFIs and MDIs in order to support these organizations directly, however they're running into a few issues: MDIs have already taken on multiples of their deposit base in the wake of George Floyd's death and the subsequent civil unrest; ... The MDIs/CDFIs in consideration tend to be smaller in size than what most corporate investment policies allow; [and] Tier 1 equity is the most compelling to these MDIs, but that is typically a nonstarter for balance sheet cash."
Finally, JPM adds, "By investing in the Empower share class, institutional clients will be supporting MDIs and CDFIs who will receive payment related to the service of their investment, creating a positive social impact. The Institutional client will be investing in a vehicle they're already comfortable with, receive the same return on those investments, be an off-balance sheet solution, and offer a recurring revenue stream to MDIs and CDFIs to enhance their efforts in supporting the minority communities they serve."
Crane Data currently tracks 15 Social, ESG or Veteran MMFs with $33.2 billion (as of 1/31/21). Social or "Impact" MMFs (all Govt MMFs) total $18.5 billion and include: Federated Hermes Govt Ob Tax-M IS (GOTXX, $7,3B), Dreyfus Govt Sec Cash Instit (DIPXX, $4.4B), Goldman Sachs FS Fed Instr Inst (FIRXX, $3.6B) and Northern Instit Govt Select Williams Cap (WCGXX, $3.1B). Veteran-Affiliated MMF Share Classes total $5.5B and include: Goldman Sachs FS Govt Drexel Hamilton (VETXX, $2.2B), JPMorgan 100% US Trs MM Academy (JACXX, $1M), JPMorgan Prime MM Academy (JPAXX, $911M), JPMorgan US Govt MM Academy (JGAXX, $2.3B) and JPMorgan US Trs Plus MM Academy (JPCXX, $1M); ESG MMFs (All Prime) total $9.3B and include: BlackRock LEAF Direct (LEDXX, 1.3B), BlackRock Wealth LEAF Inv (PINXX, $2.4B), DWS ESG Liquidity Inst (ESGXX, $335M), Morgan Stanley Inst Liq ESG MMP I (MPUXX, $3.7B), State Street ESG Liq Res Prem (ELRXX, $1.1B) and UBS Select ESG Prime Inst Fund (SGIXX, $431M). (Several other funds are pending, including: HSBC ESG Prime, BlackRock's Mischler shares and Invesco's Cavu shares.)
For more on ESG and Social MMFs, see our February Money Fund Intelligence article, "Covid Changing Cash; Social, ESG MMFs Making Impact," and these Crane Data News pieces: "ESG and Social MMF Update: Mischler News, Green Deposits, Reg Debate" (12/4/20); "Academy Launches Treasury MMFs" (10/22/20); "Goldman Launches Social Class; Tiedemann Adds FICA; CS Green ABCP" (1/24/20); "Mischler Financial Joins "Impact" or Social Money Market Investing Wave" (12/5/19); and "Dreyfus Launches "Impact" or Diversity Government Money Market Fund" (11/21/19).
