Two and a half decades ago, people would say its against your fiduciary duty as a portfolio manager or an investment professional to look at anything but the bottom line. Jantzi: First of all, thats a question that will never be settled. In some instances, it was values-based you shouldnt be doing business in South Africa because of the apartheid regime. Its taking ESG to the strategic level and saying this is helping us uncover risks that have the ability to blindside the business; its helping us stay ahead of the curve. Just as long as you understand that achieving a competitive financial return is on absolutely the other end of the spectrum. For me, it has been a pleasure working with the Sustainalytics team since 2015 to develop the Morningstar Sustainability Rating for Funds, the Carbon Risk Rating/Low-Carbon Designation for Funds, and Morningstars sustainability indexes. About Sustainalytics Sustainalyticsis a leadingindependentESGand corporate governance research, ratings and analytics firm that supports investors around the world with the development and implementation of responsible investment strategies. Hale: Youve been at this a long time. Thats a huge shift. With 16 offices globally,Sustainalyticshas more than650staff members, includingmore than200 analysts with varied multidisciplinary expertise across more than 40 industry groups. 1 0 obj
Hale: When you think back on the 1990s, some investors were starting to think about sustainability issues, but not that many companies were. Reporting by Ross Kerber; Editing by Leslie Adler, Citi expects revenue from India corporate business to grow 10% a year, Mexico's Banorte keeping open all options for growth, says CEO, Australian insurer IAG sees margin drop on rising costs from floods, UK's Beazley says chairman to exit in autumn 2022, Hedge funds assets shrink amid investors withdraws, losses, See here for a complete list of exchanges and delays. Michael Jantzi: Sustainable investing is about the discipline of integrating environmental, social, and governance themes or indicators into an investment decision-making process. If any of these risks and uncertainties materialize, our actual future results may vary significantly from what we expected. Reuters provides business, financial, national and international news to professionals via desktop terminals, the world's media organizations, industry events and directly to consumers. Coming together with Morningstar creates the scale to influence capital across the entire investment spectrum and make ESG a part of every investment consideration.. Especially in the retail high-net-worth market, theres no question that with younger demographics, with women becoming more focused on their financial futures, and so on, weve seen a shift here. read more. You can then ask, well, why have regulations been advanced in Europe? How does Michael Jantzi define it? x]YsF~frBBp$<=1=>ZY{ Rj (REDV"(lV}1Z{wZr,~{w5_}Y~*&XUOw+|f>_Z|y&Dxdho~}7nH(oHRa%v "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. Kunal Kapoor, Chief Executive Officer, Morningstar, said: Investor demand for stakeholder capitalism is driving a profound transformation in the global investing landscape. If we see a gap between the exposure to these issues and what we think is their ability to manage them, then yes, we think thats something investors need to know about. He has a deep understanding of its history and the roles companies and investors are playing in this burgeoning area of the investment universe. Forward-looking statements by their nature address matters that are, to different degrees, uncertain, and often contain words such as "may," "could," "expect," "intend," "plan," "seek," "anticipate," "believe," "estimate," "predict," "potential," "prospects," or "continue." What are your thoughts on this idea that sustainability is becoming a more mainstream investment theme? Sustainalytics offers data on 40,000 companies worldwide and ratings on 20,000 companies and on 172 countries.
It made a lot of sense to me that if we are going to influence corporate behavior, we could do it through capital markets and directing capital in particular ways. Hale: One final question: 20 years ago, I recall a fairly dubious attitude toward corporate ESG practices on the part of sustainable investors. In some sectors, real estate for example, theres global leadership in Asia. Jantzi: Broadly speaking, European companies are ahead of North American and Asian companies. Since 2016, Morningstar and Sustainalytics have teamed up to supply investors around the world with new analytics, including: the industry's first sustainability rating for funds, rooted in Sustainalytics' company-level ESG ratings; a global sustainability index family; and a large span of sustainable portfolio analytics that includes carbon metrics and controversial product involvement data. The industry leader for online information for tax, accounting and finance professionals. Is that a fair criticism? Morningstar announced today that it is acquiring ESG research firm Sustainalytics. Sovereign wealth pension funds have long-term horizons that fit well with sustainability issues. We not only look at the number of controversies occurring but also where they are happening within the organization, and how often they are happening, and how companies are managing those controversies. By the same token, whether youre small or large, if youre operating in a high-exposure industry, you want to know that management understands the risks that may be coming down the pike. The firm is widely known for its security-level ESG Risk Ratings which are integrated into institutional investment processes and underpin numerous indexes and sustainable investment products as well as serving an ever-increasing number of use cases across the emerging sustainable finance landscape. Jantzi: It occurred to me very early in my career. Theyre integrating the ESG indicators we look at into their strategic and operational decision-making.
For more than 25 years, Sustainalytics has been ahead of the curve, recognizing the need to provide ESG solutions to investors, banks, and companies worldwide. About Morningstar, Inc. <>/ExtGState<>/XObject<>/ProcSet[/PDF/Text/ImageB/ImageC/ImageI] >>/MediaBox[ 0 0 612 792] /Contents 4 0 R/Group<>/Tabs/S/StructParents 0>> Frequently Asked Questions Citigroup expects annual growth in its corporate banking business in India to accelerate to 10% in the next few years as it focuses on its institutional business after recently selling its consumer banking business, a top executive said. Its going beyond just being transparent and disclosing what its doing on the sustainability front. For example, in Asia, where we see capital markets lagging behind on sustainability issues, we see some very strong corporate sustainability reporting, especially out of Japan, that is helping put these issues on both the government and corporate agenda. And then its part educational process on our part to say to smaller companies you need to think about putting management structures in place, even though at this point your exposure may be several levels below what youre seeing for your larger-cap competitors. So, the challenge for the field of ESG research will be to cut through that noise that vast amount of information and data to provide real insights to our clients. 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," said Morningstar Chief Executive Officer Kunal Kapoor. ESG Tools, Services/ M&A/ Platforms & Markets, Mark Segal Hale: Ive heard the criticism that a lot of the ESG indicators that Sustainalytics uses in its company ESG ratings have more to do with companies documenting and disclosing various environmental, social, and governance policies and less to do with actual performance metrics. Independent investment research firm Morningstar reported today that it has completed its previously announced acquisition of ESG ratings and research company Sustainalytics. Follow Morningstar on Twitter @MorningstarInc. What is it that companies are doing today to make themselves sustainability leaders? This press release contains forward-looking statements as that term is used in the Private Securities Litigation Reform Act of 1995. The founder and CEO of Sustainalytics, Michael Jantzi, has seen firsthand the development of ESG investing over the past two decades. Thecompanyhas operations in 27 countries. Morningstar intends to fund the transaction with a mix of cash and debt. Were also seeing today corporate and capital markets working together to address some common challenges, like excessive short-term thinking in markets. At the time of the announcement, Morningstar already held a 40% stake in Sustainalytics, acquired in 2017. I think what theyll do is take the best practices in Europe and North America and Australia and other parts of the world, adapt it for their own situations, and move forward accordingly. There are a variety of reasons that practitioners are going to undertake that sustainable investment process or that integration, and theyre not mutually exclusive of one another. endobj Were a long way from where we need to be, but certainly were heading in the right direction and have been for the past two decades. You have strong sustainability reporters out of Japan. So, the debate is still out there. I think youve highlighted one of the key drivers of the mainstreaming. Morningstar stated that the addition of Sustainalytics will bring deep ESG expertise, market leadership, and an extensive suite of security-level and country-level ESG data, research, ratings, and products. But when you look at a map, you understand that there are a variety of ways that you can get to your destination, and there may be trade-offs along the way, and I think thats what sustainability is about. Hale: Lets talk more specifically about the big question of whether sustainability creates shareholder value. The fact is that American companies are global in nature. Thats changed wholeheartedly now. Now commonly called ESG, for environmental, social, and governance, a confluence of factors in the market and corporate world is making this investing theme a mainstream approach. Jantzi: Theres no question that the mainstreaming of responsible investment is real, and its probably something that you can date back to the mid-2000s with the formation of the U.N.-backed Principles for Responsible Investment. But what are those key ESG issues that companies face?
But I think that the gap between Europe and North American companies is narrowing. So, I think American companies, because they are global citizens, are impacted not just by what American government or American consumers are saying, but what their consumers are saying in other parts of the world. Morningstar currently owns an approximate 40% ownership stake in Sustainalytics, first acquired in 2017, and will purchase the remaining approximate 60% of Sustainalytics shares upon closing of the transaction. But I think that looking at policies, programs, and how certain environmental, social, governance risks are being managed is underappreciated. In addition to eliminating the Human Rights Radar product, Morningstar's Sustainalytics unit will take other steps recommended by law firm White & Case LLP, such as making its research more transparent and adding an ombudsperson. All quotes delayed a minimum of 15 minutes. Morningstar will base the scores on ESG company ratings from Sustainalytics. Its not just about checking a box. That simply is not true either. Morningstar provides data and research insights on a wide range of investment offerings, including managed investment products, publicly listed companies, private capital markets, debt securities and real-time global market data. I think the fact that we have focused on large caps is appropriate. Thats a challenge weve had for 25 years, and thats just going to be ratcheted up more as we move from being large-cap focused to include smaller companies, as we include additional asset classes and other parts of the world. "Sustainalytics welcomes the opportunity to join the Morningstar family. Reuters, the news and media division of Thomson Reuters, is the worlds largest multimedia news provider, reaching billions of people worldwide every day. But then there also is the qualitative side of looking at performance and controversies. With more than 650 people around the world, Sustainalytics offers data on 40,000 companies worldwide and ratings on 20,000 companies and on 172 countries. For us, looking at environmental management systems, looking at supply chain issues, looking at what level within the company those issues are managed, these are important indicators for us to understand not just whether the company understands these risks, but how seriously theyre taking them, and then it gives us an indication of how they will manage these risks if they hit the radar in a real way. You do this, that and this, and its very easy to follow. But the reality is, from a product innovation standpoint, from a lifecycle standpoint, from a supply chain standpoint, European companies are ahead of the curve. Hale: There appear to be a number of factors in place today that are increasing demands on asset managers to pay more attention to integrating ESG factors, namely shifting demographics to a younger generation of investment decision-makers who have a greater affinity for sustainable investing. Together, we will lead investors of all types through this transition, empowering them with ESG insights that allow for the personalization of portfolios across asset classes.. read more Sustainalytics is one of the main firms assigning ESG ratings to companies as investors pour billions of dollars in sustainable funds.
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The closing of the transaction is subject to customary closing conditions and is expected to occur early in the third quarter of 2020. Today, we see many more companies addressing sustainability. How did that all happen? Morningstar already had a 40% ownership stake, initiated in 2017. Jointhe ESG Today daily newsletter and get all the top ESG stories, like this one. There are other investors that hold a combination of those objectives. We do not undertake to update our forward-looking statements as a result of new information or future events. Weve seen that plan participants and pension funds, as well as individuals, are beginning to understand that the decisions they make on the investing side are important not just from a financial standpoint, but they can have a positive impact on the broader world as well. Asia will find its own way forward on what sustainability means. Sustainalytics ESG research and ratings underpin numerous indexes and sustainable investment products, including Morningstars Sustainability Rating for funds and Morningstar Indexes. Browse an unrivalled portfolio of real-time and historical market data and insights from worldwide sources and experts. That quantitative side is getting more sophisticated every year. How did this idea of sustainability first occur to you as something youd end up spending your career doing? Were going to start to see sustainable investing extending beyond traditional equity and fixed-income asset classes. In fact, in Canada, I was in the process of writing my exams, heading down to be licensed by the Interior Securities Commission, and where that would have led me, I dont know. Boards of directors and senior management teams are looking at sustainability in a much more sophisticated way now and in fact, in some parts of the world, are bringing investors into the discussion. Is sustainability being used to drive business innovation or product development? Is it being used to drive competitive differentiation, whether thats on the branding side or the human capital side. In 2016, I sat down with Sustainalytics founder/CEO Michael Jantzi to talk about where the field was as we embarked on our new partnership. Measuring performance is also a critical part of the equation. But more important is the opportunity side of the equation. Morningstar, Inc. is a leading provider of independent investment research in North America, Europe, Australia and Asia. Jantzi: The first thing to understand is theres no single definition. Our collaboration over the past several years has helped to extend the understanding and use of ESG insights and strategies to a multitude of investors, advisors, asset owners and managers across the globe," said Sustainalytics Chief Executive Officer Michael Jantzi. Im an old-fashioned guy. Why wouldnt we look at social and environmental issues if it could have a positive impact more broadly and also for shareholders? Jantzi: Yes, it is more optimistic, because more companies are paying more serious attention to ESG issues. So, its quite exciting how corporations have come up the learning curve, but its even more exciting to me to see how capital markets and companies are working together. 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