The Index positively tilts towards issuers ranked higher on ESG criteria and underweights lower ranking issuers. The Index applies JESG issuer scores to adjust the market value of index constituents from the baseline index. JESG issuer scores are a 0-100 percentile rank calculated based on normalized raw ESG scores from third-party research providers, including Sustainalytics and RepRisk. An issuer’s finalized JESG score incorporates a 3-month rolling average. Quasi-Sovereign issuers with no coverage from either third-party research provider default to their sovereign JESG score. The JESG scores are divided into five bands that are used to scale each issue’s baseline index market value, with the band rebalance occurring on a quarterly basis.
JESG Score Bands Scalar
Band 1: Score > 80 1.00
Band 2: 60 < Score <= 80 0.80
Band 3: 40 < Score <= 60 0.60
Band 4: 20 < Score <= 40 0.40
Band 5: Score <= 20 0.00
Issuers in Band 5 will be excluded from the index and will not be eligible for twelve months. If an instrument is categorized as a “green bond” by the Climate Bonds Initiative, the security will receive a one-band upgrade. Green bonds upgrades may happen intra quarter. Green bonds by issuers already in Band 1 will not receive any further upgrades.
Additionally, the Index incorporates positive screening techniques whereby ‘green’ bonds (bonds which are created to fund projects that have positive environmental and/ or climate benefits) of the same issuer are prioritised by the Index.
Further information on the index methodology can be found at: https://www.jpmorgan.com/insights/research/index-research/composition-docs