JP Morgan replaces proxy advisers with AI-based research tool

JP Morgan Asset & Wealth Management has cut ties with its external proxy advisers for its US stewardship efforts, replacing them with an AI-powered stewardship tool as proxy advisers face growing political backlash in the US.

The manager has replaced its external proxy advisers with an in-house, AI-powered software, Proxy IQ, which will aggregate and analyse data from company meetings, according to a briefing note seen by Net Zero Investor.

The new tool will draw on proprietary data from more than 3,000 annual company meetings, reinforcing the independent analysis carried out by JP Morgan’s portfolio managers, the firm said. This move eliminates the need to rely on third-party data collection.

JP Morgan, which has historically relied on major proxy advisers including Institutional Shareholder Services and Glass Lewis for its stewardship activities, has long been critical of the sector. The bank’s chief executive criticised the “undue influence” of proxy advisers in a letter to shareholders in 2024.

The announcement comes a month after the US administration issued an executive order aimed at curbing the influence of proxy advisers on ESG and DEI matters. Pointing out that Glass Lewis and Institutional Shareholder Services control around 90% of the proxy advisory market, the White House criticised what it described as “politically motivated advice” and said advisers prioritised ideological goals.

The order encourages the Securities and Exchange Commission, the US financial markets watchdog, to investigate proxy advisers for potential fraud in voting recommendations. It also suggests that reliance on proxy voting advice could amount to a breach of fiduciary duty.