Morningstar says it’s “highly committed” to Sustainalytics’ expansion

Nasdaq-listed investment and data provider responds to shareholder question

Morningstar, the Nasdaq-listed financial services firm, says it is “highly committed” to the expansion and long-term growth of Sustainalytics, the ESG research house in which it now has a 44% stake.

Morningstar first teamed up with Sustainalytics in 2015 to develop ESG scores for sustainability funds.

“How does Morningstar leverage its relationship with Sustainalytics?”

This was followed in 2017 with it taking a stake, then put at 40%, in the ESG firm. It also got a board seat, held by Steven Smit, its Head of Sustainability and CEO of Morningstar Benelux.

It is a period which has seen Morningstar acquire proxy-tracking firm Fund Votes and Sustainalytics buy India-based research house Solaron and engagement firm GES International.

As RI reported last month, Morningstar is officially seconding a bid by Sustainalytics CEO Michael Jantzi to become a board member of the Principles for Responsible Investment (PRI).

Morningstar, headed by CEO Kuna Kapoor (see 2017 RI interview here), is rare in that it encourages written questions from “shareholders, potential shareholders, and other interested parties”, which it answers via filings at the SEC.

One anonymous question recently was: “How does Morningstar leverage its relationship with Sustainalytics? How much data is shared between the organizations? Sustainalytics has a partnership with FTSE Russell to provide data for its indexes; how does that conflict or compete with your intent to grow Morningstar Indexes?”

Morningstar responded: “For firms trying to serve ESG investors, Morningstar and Sustainalytics work together to deliver an end-to-end service of company level research and data, software, tools, and components for every workflow, all designed to bring clarity and transparency to the investment decision.“Morningstar is a 44% equity owner in Sustainalytics and has a single representative on the board of directors. Morningstar is highly committed to Sustainalytics’ expansion, coverage, and long-term growth as an ESG research firm. We do not comment on the commercial relationships that Sustainalytics maintains with its other customers, but we are supportive of Sustainalytics’ efforts to expand its business activities and provide institutional quality data and research to a wide range of customers including asset managers, asset owners, advisors, and index firms.”

“Morningstar and Sustainalytics work together to deliver an end-to-end service of company level research and data, software, tools, and components for every workflow”

It went on to say that it is also a client of Sustainalytics: “We license the Sustainalytics data in order to enrich our software, data, research, ratings, and tools offerings. Additionally, we license Sustainalytics data to power portions of our Morningstar Global Sustainability Indexes business.
“We also salute Sustainalytics’ leadership in the area of corporate social responsibility and are using Sustainalytics’ research framework to shape our own efforts in this area.”

It comes as the updated methodology for Morningstar’s Sustainability Ratings has just become effective.

Meanwhile, last month Morningstar said its Chief Product Officer, Tricia Rothschild, was resigning effective December “to pursue other opportunities” after 26 years with the firm.