Corporate governance giant ISS buys ESG research firm IW Financial to meet client demand

Latest acquisition will be integrated into ISS-Ethix

Proxy advisory firm Institutional Shareholder Services (ISS) has bought IW Financial, a US firm offering environmental, social, and governance (ESG) research, consulting, and portfolio management solutions, for an undisclosed sum.

Maryland-based ISS, owned since 2014 by private equity firm Vestar Capital Partners, said the deal would help it to meet growing demand from investment managers for ESG data and insights.

It’s the latest in a series of acquisitions that has seen ISS buy Sweden’s Ethix SRI Advisors (in September 2015) and BlackRock-backed governance start-up iiWisdom (in August last year).

IW Financial was established in 2001 and headquartered in Portland, Maine and ISS said its offerings help asset management firms and other institutional clients “identify risks, enhance productivity, and increase revenues” and that IW Financial’s solutions are based on patented technology that allows users to comparatively rate companies based on user-defined criteria.

“Institutions can incorporate ESG factors into their investment platforms, products, and portfolios and can quickly identify the investments that best meet ESG guidelines and client expectations,” ISS said in a statement. IW Financial will by integrated into ISS-Ethix, ISS’s ESG arm, to provide a “turnkey solution for responsible investing”.

IW Financial’s products include its IWF Workstation, which screens for industry involvement, ratescompanies, and provides access to narrative details on specific issues based on user-selected criteria. Its Investment Universes & Custom Indexes offering allows users to create customized ESG portfolios.

“A turnkey solution for responsible investing”

IW Financial’s CEO Sam Pierce will continue with the combined group and will lead development of an environmental and social ratings methodology, slated for release later this year as part of the ISS QualityScore screening and scoring solution.

It comes amid increasing activity in the ESG space in the US, with responsible investors welcoming a new interpretive bulletin from the US Department of Labor on shareholder rights late last month.

That followed on from the same department’s updated guidance in 2015 relating to economically targeted investments (ETIs) made by retirement plans covered by the Employee Retirement Income Security Act (ERISA) which removed a perceived obstacle to ESG investing.

It’s a trend that has seen ‘mainstream’ firms take notice, most recently with Eaton Vance’s acquisition of SRI firm Calvert. A recent survey by investment consultants Callan Associates found that the percentage of US institutional investors incorporating environmental, social, and governance (ESG) factors into their decisions has increased to nearly 40%.