In 2017, Morningstar took a 40% stake in Sustainalytics, a global provider of environmental, social and governance (ESG) research and ratings. This week, Morningstar is going all in on socially responsible investing, with plans to acquire the remaining 60% in the ESG research shop.
The transaction includes a cash payment at closing of about $59.8 million, and Morningstar has agreed to additional cash payments in 2021 and 2022 based on a multiple of Sustainalytics’ 2020 and 2021 fiscal year revenues. The deal values Sustainalytics at nearly $185 million.
"Modern investors in public and private markets are demanding ESG data, research, ratings and solutions in order to make informed, meaningful investing decisions,” said Morningstar CEO Kunal Kapoor. “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."
The two companies have already heavily collaborated on several Morningstar offerings.
In March 2016, they first rolled out the Morningstar Sustainability Rating for global mutual and exchange traded funds. Since then they have launched other products including company-level ESG metrics for the holdings of 35,000 mutual funds and ETFs, a tool that allows Morningstar users to screen portfolios for various ethical issues, and carbon metrics.