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Morningstar to acquire ESG data firm Sustainalytics

Morningstar has agreed to buy ESG ratings and research provider Sustainalytics in a transaction that estimates the value of the latter at €170m.

Global research provider Morningstar currently owns a 40% stake in Sustainalytics, a position it acquired in 2017, and will purchase the remaining approximate 60% upon closing of the transaction.

In an announcement released 21 April, Morningstar said the transaction consideration includes a cash payment at closing – expected to be early in the third quarter of 2020 – of approximately €55m (subject to certain potential adjustments) and additional cash payments in 2021 and 2022 based on a multiple of Sustainalytics’ 2020 and 2021 fiscal year revenues.

This, Morningstar said, puts an estimated the enterprise value of Sustainalytics at around €170m. Morningstar intends to fund the transaction with a mix of cash and debt.

On the fast track

Morningstar chief executive Kunal Kapoor commented on the deal: “Modern investors in public and private markets are demanding ESG data, research, ratings, and solutions in order to make informed, meaningful investing decisions.

“From climate change to supply-chain practices, the nature of the investment process is evolving and shining a spotlight on demand for stakeholder capitalism. 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.

“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. Morningstar helped democratise investing, and we will do even more to extend Sustainalytics’ mission of contributing to a more just and sustainable global economy.”

ESG data integration

Netherlands-domiciled Sustainalytics was established in 1992 to provide ESG solutions and research to investors, banks and companies. It now offers data on 40,000 companies worldwide and ratings on 20,000 companies and on 172 countries.

It employs more than 650 employees across 16 locations.

It has maintained a working relationship with Morningstar since 2016 when they teamed up to supply investors the industry first sustainability rating for funds, a global sustainability index range and sustainable portfolio analytics that includes carbon metrics and product involvement data.

Following Morningstar’s acquisition, the groups said they will continue to expand this part of the business, integrating ESG data and insights across Morningstar’s existing research and solutions.

Sustainalytics chief executive Michael Jantzi said: “Sustainalytics welcomes the opportunity to join the Morningstar family. 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.

“This new ownership structure will amplify our ability to bring meaningful ESG insights, products, and services to the global investment community and to companies around the world.”

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Part of the Mark Allen Group.