One of the leading providers of investment research has broadened its push into ESG analysis with a new acquisition.
Morningstar has reached an agreement to acquire Sustainalytics. It currently owns a 40 per cent stake in the business, acquired in 2017, and will purchase the remaining 60 per cent upon closing the transaction.
“Modern investors in public and private markets are demanding ESG data, research, ratings, and solutions in order to make informed, meaningful investing decisions,” said Morningstar CEO Kunal Kapoor. “From climate change to supply-chain practices, the nature of the investment process is evolving and shining a spotlight on demand for stakeholder capitalism.”
“Whether assessing the durability of a company’s economic moat or the stability of its credit rating, this is the future of long-term investing.”
Morningstar and Sustainalytics have previously worked together on a sustainability rating for funds, a global sustainability index family, and a large span of sustainable portfolio analytics that includes carbon metrics and “controversial product involvement data”. Morningstar plans to use the acquisition to further integrate ESG data across its existing research solutions.
“By coming together, Morningstar and Sustainalytics will fast track our ability to put independent, sustainable investing analytics at every level – from a single security through to a portfolio view – in the hands of all investors,” Mr Kapoor said. Morningstar helped democratise investing, and we will do even more to extend Sustainalytics’ mission of contributing to a more just and sustainable global economy.”
Sustainalytics offers data on 40,000 companies worldwide and ratings on 20,000 companies and on 172 countries. Morningstar plans on integrating all 650 employees across the Dutch-domiciled company’s 16 locations into its organisation.
“Sustainalytics welcomes the opportunity to join the Morningstar family,” said Sustainalytics CEO Michael Jantzi. “Our collaboration over the past several years has [helped extend] the understanding and use of ESG insights and strategies to a multitude of investors, advisors, asset owners and managers across the globe.”
“This new ownership structure will amplify our ability to bring meaningful ESG insights, products, and services to the global investment community and to companies around the world.”
The transaction consideration includes a cash payment at closing of approximately €55 million, as well as additional cash payments in 2021 and 2002 based on a multiple of Sustainalytics’ 2020 and 2021 fiscal year revenues. Morningstar estimates the enterprise value of Sustainalytics as €170 million.