RiskMetrics primed to buy KLD

Potential deal reaches final negotiations.

by Hugh Wheelan | October 13th, 2009

RiskMetrics Group, the New York-listed US risk management and corporate governance group is readying itself to make its second major acquisition this year in the ESG (environmental, social and governance) research space by buying Boston-based KLD Research & Analytics. Final discussions between the two companies are understood to be taking place and an announcement on a deal is expected shortly. Spokespersons for both RiskMetrics and KLD declined to comment. However, neither firm would deny that a deal was on the table. Responsible Investor.com has learnt that negotiations have reached a late stage and are likely to be formalised. A report by corporate governance newsletter, Global Proxy Watch, predicted that a deal could be announced within the next two weeks, if not sooner. KLD, which celebrated 20 years of business in 2008, is one of the oldest global research houses in the environmental, social and governance area. A RiskMetrics buyout of KLD would consolidate into the world’s largest ESG research house, coming hard on the heels of RiskMetrics’ acquisition in February this year of Innovest, the SRI research group. RiskMetrics, which was spun out of JP Morgan, the US banking group, in 1998 has been rapidly increasing its presence in the responsible
investment field in recent years and in 2007 acquired Institutional Shareholder Services (ISS), the US proxy voting agency. RiskMetrics would be buying KLD’s highly regarded research capacity. In October last year, KLD signed a partnership deal with FTSE, the London-based index provider to co-brand its suite of ESG indices, and split the revenues. Consolidation in the SRI research area has been frenetic in recent months. A combination of increasing costs as ESG information becomes more global and time-sensitive, alongside intense competition and a battle for fees, has pushed smaller organisations into mergers. In September Canada’s Jantzi Research and Sustainalytics, the Amsterdam-based consortium of European ESG research houses, merged. That deal came just ten months after Sustainalytics was created through the merger of the former entities of Dutch Sustainability Research (DSR), Scoris (Germany) and Analistas Internacionales en Sostenibilidad – AIS (Spain), which followed the disbanding in September, 2008 of SiRi Company, the former alliance of global ESG providers, which included Centre Info in Switzerland, KLD, Jantzi and PIRC in the UK.