Check-in at a Morningstar conference. (Photo: Jim Tweedie)
Morningstar has reached an agreement to acquire full ownership of Sustainalytics, a leading provider of independent research on environmental, social and governance (ESG) ratings.
It currently has a 40% ownership interest in Sustainalytics, which it acquired in 2017, and expects to close the deal to acquire the remaining 60% in the third quarter of this year.
Morningstar bases its sustainability ratings for mutual funds and ETFs on Sustainalytics' company-level ESG analysis, which includes data on 40,000 companies worldwide and ratings on 20,000 companies and on 172 countries.
Morningstar's current ESG ratings, based on Sustainalytics analysis, accounts for material ESG risks among industries as well as a company's ESG risk characteristics within its sector.
Its latest deal to acquire Sustainalytics' shares involves a cash payment at closing of approximately 55 million euros, equivalent to nearly $60 million, plus additional cash payments in 2021 and 2022 based on a multiple of Sustainalytics revenues for the prior two years.
Morningstar estimates that the enterprise value of Sustainalytics is worth 170 million euros, or about $184.4 million.
"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," said Morningstar CEO Kunal Kapoor in a statement.
He noted that ESG analysis "is the future of long-term investing," whether it's used to assess a company's competitive advantage in protecting its profits and market share — its so-called economic moat — or the stability of its credit rating.
"Modern investors in public and private markets are demanding ESG data, research, ratings and solutions in order to make informed, meaningful investing decisions," Kapoor said. From climate change to supply-chain practices, the nature of the investment process is evolving and shining a spotlight on demand for stakeholder capitalism."
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Bernice Napach
Bernice Napach is a senior writer at ThinkAdvisor covering financial markets and asset managers, robo-advisors, college planning and retirement issues. She has worked at Yahoo Finance, Bloomberg TV, CNBC, Reuters, Investor's Business Daily and The Bond Buyer and has written articles for The New York Times, TheStreet.com, The Star-Ledger, The Record, Variety and Worth magazine. Bernice has a Bachelor of Science in Social Welfare from SUNY at Stony Brook.
