The index construction starts with the flagship JPM GBI Government Aggregate Index which covers 40 countries. The first step is to narrow it down to issuers with better ESG profiles as defined by a JESG score of at least 50. Due to liquidity considerations, the index also excludes emerging market countries with a weight below 25 bps in the parent index. The index weights are inherited from the standard index and rescaled to promote higher-rated ESG sovereigns, while reducing exposures to countries with inferior ESG ratings. This J.P. Morgan methodology relies on ESG ratings provided by RepRisk and Sustainalytics. The two methodologies capture different angles of sovereign ESG assessment hence adding an internal diversification effect to the process.
