Morningstar’s acquisition of Fund Votes signals potential ESG voting ratings

Stewardship considerations could become part of ratings giant’s offering

Proxy-tracking firm Fund Votes has been acquired for an undisclosed sum by Morningstar, the NASDAQ-listed investment research company, signalling its latest purchase in the ESG space, which could mean Morningstar’s fund ratings integrate ESG voting behaviour considerations in the future.
Fund Votes was founded in 2007 by ESG disclosure analyst and stewardship specialist Jackie Cook, who will now report to John Hale, Head of Sustainability Research at Morningstar.
Cook, who is based out of Vancouver, will join Hale’s global sustainability research unit as Director of Manager Research, a full-time position involving fund-level research within Morningstar Research Inc, a Canadian subsidiary of Morningstar.
“Fund Votes has never tracked performance or assets under management-oriented data that Morningstar offers, from strategy to performance to manager information. So being able to combine it with fund-level stewardship will be very powerful,” Cook told RI.
It is not yet clear whether the brand Fund Votes will be kept. The data and methodology can be leveraged in many ways across Morningstar’s platforms and can surface in a variety of products, according to Cook. 
Cook was, until July, an Associate Director of Proxy Research and Services at Canada’s Shareholder Association for Research and Education, known as SHARE.Cook was Senior Research Associate at The Corporate Library, later acquired by GovernanceMetrics International, which has itself been owned by MSCI since 2014. She is also a member of the Climate Disclosure Standards Board’s Technical Working Group.
She has produced ground-breaking research revealing the lack of support for ESG shareholder proposals from big mutual funds in the US and Canada, in areas such as climate stewardship, gender or political spending.
“I feel I have a bigger voice within this larger platform, given that Morningstar has signalled its commitment to ESG,” Cook said.
Morningstar announced in May that it has started scoring investment funds based on their carbon transition risk via a product called Portfolio Carbon Metrics, based on Sustainalytics data. 
In July last year, Morningstar took a 40% stake and a seat on the board at Sustainalytics after launching in March 2016 the Morningstar Sustainability Rating for mutual and exchange-traded funds.
Hale wrote in his personal blog at Medium about the acquisition of Fund Votes: “We want to shine a light on how funds fulfil their stewardship role as significant owners of nearly every public company. How funds vote their proxies is a big part of that, yet it’s hard for investors and non-investors alike to even find this information, much less make any sense of it. We want to change that. How funds vote their proxies matters.”