"At JPMorgan Chase, starting with the senior leadership, there was never any effort to hide or explain away our mistakes."
By Aman Singh
"In the wake of the financial crisis, your industry continues to face high scrutiny and low trust. How is society better off because of what JPMorgan Chase does?"
That's how The Nature Conservancy CEO Mark Tercek starts off his interview with JPMorgan Chase CEO Jamie Dimon – featured prominently at the beginning of the financial behemoth's latest Corporate Responsibility Report. While the interview is meant to address the heightened focus on transparency improvements in risk management and operational sustainability, the key idea is to highlight one main issue: trust.
In fact Tercek's first question is telling of the intent and content of the interview that follows.
To drill deeper and learn more about JPMorgan Chase's sustainability activities in 2012 as well as how the institution prioritizes intangibles like customer trust, ethics and responsible leadership into its business strategy and operations, I turned to Peter Scher, EVP and Global Head of Corporate Responsibility.
Leveraging all of its Assets to Invest in Communities: A Bank's Citizenship Journey
"The most important thing we want to convey through the Report is that we're using more than just our money and resources to make a positive impact. [Our]scale and global reach puts us in a unique position to not just spend money, but use the core expertise of our company and employees to make a difference for our clients and communities," he started, adding, "We want to focus on using all of our resources to support our communities."
In 2012, JPMorgan Chase raised and provided $2 trillion in capital and credit for its clients worldwide. It also donated more than $190 million to nonprofits in 37 countries while its employees volunteered 468,000 hours in local communities.
"We've helped over 77,000 U.S. veterans find jobs working with other companies through the 100,000 Jobs Mission. We see investments in our community as long term investments, just like we would look at investments into our business," Scher explained alluding to CEO Dimon's quote in the report:
"If we can help our clients grow around the world, they will in turn generate the jobs, small business growth and other economic activity that builds strong, vibrant communities and generates more sustainable economic growth and prosperity for all."
But how does that contextualize into day-to-day operations at the bank?
"A couple of ways. Our clients and our business are key components of our communities, not just pieces of a balance sheet. For example, some of our clients are municipal governments, hospitals, and healthcare institutions. We help them provide vital services to people," he said.
"In 2012, we provided $85 billion to nearly 1,500 nonprofit and government entities in the U.S. and around the world. Despite the crisis in Europe, we didn't pull out of our investment commitments. We continued to provide billions of dollars in credit and financing to European clients – corporate and sovereign. That was a testament to our values as a company and underlined how we approach business. We are part of these communities for the long run."
At the height of the financial crisis in the U.S. three years ago when lending was lean, JPMorgan Chase announced increased lending to small businesses to boost the economy. It made good on that commitment and today is one of the largest lenders to small businesses in the country. "We also hired 1,000 small business bankers to help us find small businesses to invest in. This commitment has increased every year since then – from $7 billion in 2009 to $11 billion in 2010 and $17 billion in 2012," explained Scher.
Despite the increased lending and a resolute desire to beat a deepening crisis by focusing on core competencies and a community-based approach, 2012 was a tough year for the financial leader.
"We had significant trading losses which cost us money and embarrassment – more the latter since we made record profits in 2012. It also showed that we weren’t immune to making the mistakes other companies made. What we were proud of was that we didn’t try to hide any of it or explain it away," he said.
For example, the bank – after Dimon's very public apology – made its Control agenda a top priority leading to a re-prioritization of its major projects and initiatives, deploying massive new resources, and dedicating critical managerial time and focus to the effort. Specifically, the bank:
- Established a new firm-wide Oversight and Control Group separately staffed and reporting directly to the Chief Operating Officer with the authority to make decisions top down, in command and control fashion.
- Appointed a business control officer in every line of business to report jointly to the line of business CEO and the firm-wide Oversight and Control Group.
- Staffed every major enterprise-wide control initiative with program managers and oversight group managers, including COOs.
- Made it mandatory for the Operating committee to meet regularly with regulators to share information and hear any criticisms.
"I have worked in a lot of different public and private institutions during the course of my own career and have not found one that doesn’t make mistakes. The real test is how we address them. And at JPMorgan Chase, starting with the senior leadership, there was never any effort to hide or explain away our mistakes. In fact, there was a commitment that we were going to use them as an opportunity to become a stronger company," Scher added.
Building a Culture of Responsibility
Corporate responsibility can be challenging at any company. Particularly for one that belongs to a sector that remains as tarnished for its dealings of the past decade today as it were in 2008. What is JPMorgan Chase doing to shift the mindset and modus operandi of its industry?
"Well, we're starting at home, with our 260,000 employees in more than 60 countries – and we're letting our employees know how the firm contributes to their communities," he said.
Are JPMorgan Chase employees driving the demand for non-financial disclosure?
"Yes, there's demand from many of our stakeholders, including our employees, to know how we match up in our actions versus our commitments. We're also starting to see demand from our clients. The financial crisis really focused people's attention on what companies are doing and could do to help contribute in a positive way to the community," Scher emphasized.
"The fact is, if our communities are growing, that's good for us as a business. More growth means more banking services – and we want to be a part of their future. Besides, clients want to know that companies they work with are responsible and thinking of their impact on society."
Global Footprint, A Comprehensive CSR Strategy
With a substantial community investment commitment as well as programs to rehire military veterans, bolster investment ties among cities in the US and worldwide through its Global Cities Initiative, and impact investing goals – principal investments focused on emerging markets added up to $50 million in 2012, clean energy investments –over $6 billion in clean energy investments in 2012 deployed, the bank is leveraging its global footprint effectively to grow the global economy.
It’s also trying to help address some of the world’s most pressing challenges.
For example, urbanization.
"Half the world's population already lives in or around cities. That's going to increase to 70 percent in the next few years. That translates into a lot of challenges for what our infrastructure can support: energy, healthcare, water, job creation, etc. And for us as one of the largest lenders for these projects, that has significant ramifications."
"So we're trying to use our resources and expertise to help address these challenges. We're working on understanding how policymakers are dealing with these across the world and trying to bring in some creative thinking to help them shift as the economies transform. We're also thinking of how we can finance energy exploration and development in a more sustainable way."
"In the U.S., for example, a lot of these investments have focused on natural gas. We're identifying best practices and creating a risk assessment framework to help us influence our clients' policies and procedures and help them conduct their energy operations in a sustainable manner," he explained.
And how is the bank's Social Finance arm faring? It launched in 2007 to serve the new and growing market for impact investments – new business models that deliver market-based solutions for social impact.
According to Scher, JPMorgan grew its Social Finance principal investments to nearly $50 million in commitments for funds focused on helping improve the livelihoods and quality of life of people living in poverty around the world, with a particular focus in emerging markets. "In addition to making principal investments, we’re also working to help shape and grow the field of impact investing, by providing client advisory services and data-driven thought leadership," he added.
At the end of the day, with a Report that runs into 90 pages replete with data, interviews and the makings of a comprehensive CSR strategy, JPMorgan Chase seems to be pulling all the strings it has available to make a positive impact on its constituents – with some appreciable humility thrown in for good measure.