Published by Asia Asset Management – 26th July 2017
Morningstar has acquired a 40% stake in Sustainalytics, a global provider of environment, social and governance (ESG) research and ratings, as it looks to ramp up its long-term sustainability strategy and bolster its ability to provide ESG products and services to the global investment community.
The provider of ratings of mutual funds did not disclose the price of the transaction.
The deal means Morningstar is buying into a 25-year-old company’s 170 analysts across 13 offices globally, with multidisciplinary expertise of more than 40 sectors.
The company says the acquisition builds on its successful partnership with Sustainalytics since 2015, when they developed the Morningstar Sustainability Rating series for global mutual funds and exchange-traded funds (ETFs).
This has become the largest set of data of its kind, covering more than 35,000 mutual funds and ETFs globally.
The ratings are used by investors to gauge how well companies held in their fund portfolios are managing ESG issues, or when they want to screen for investments.
“Enhancing this relationship enables us to leverage the expertise Sustainalytics has built over the last 25 years, and build on the momentum we started with the launch of Sustainability Rating,” Kunal Kapoor, chief executive officer of Morningstar, says in a July 25 statement announcing the deal.
“We have the largest ESG fund coverage universe today, and we look forward to continuing to meet the increasingly sophisticated ESG needs and requirements of our clients through integrated solutions and innovative research that highlights good stewardship, lower costs and transparency for investors,” he adds.
Sustainalytics’s strength lies in its level of penetration among institutional investors who rely on the company’s advisory services in ESG integration, compliance and screening, indexing, and portfolio analysis when they want to raise their level of integration with socially responsible investing.
According to the United Nations’ Principles for Responsible Investing (PRI) website, since the launch of its PRI signatory scheme in 2006, the total level of AUM tied to the more than 1,700 signatories has never seen a year of negative growth.
The scheme is a public pledge that asset managers and asset owners can sign on to commit themselves to socially responsible investing. The signatories represent some US$62 trillion in AUM as at April 30, 2017.
Within the Asia Pacific region, Sustainalytics’ offices are currently located in Sydney and Tokyo. It closed its Singapore office due to low market demand.
Catalina Secreteanu, associate director, institutional relations, Asia-Pacific and Asia at Sustainalytics in Sydney, says Asia is home to some of the fastest growing markets in responsible investing, and the company is “committed to supporting” this growth.
“We are seeing the greatest demand for ESG and corporate governance research and ratings that support the integration of ESG considerations into the investment processes of mainstream investors. We also see a rapid growth in the green bond market driven in part by country-level initiatives, such as the ones in Singapore and Japan,” Ms. Secreteanu says in an email reply to questions from Asia Asset Management.
The company’s clients in the region include Nippon Life Global Investors, Mitsubishi UFJ Financial Group, Nissan Asset Management, Sumitomo Mitsui Asset Management, Aberdeen Asset Management, Colonial First State Global Asset Management and Eastspring Investments.
Other notable collaborations include work with the Singapore Stock Exchange, with launched its SGX Sustainability Indices in partnership with Sustainalytics.
