Sustainalytics

Sustainalytics
IndustryFinancial services
PredecessorJantzi Research, DSR, Siri Company, GES International
Founded1992
FounderMichael Jantzi
Headquarters
Amsterdam
,
Netherlands
Number of locations
17
ProductsESG Research & Ratings, Investment Stewardship
OwnerMorningstar, Inc.
Number of employees
1000+
WebsiteSustainalytics

Sustainalytics is a company that rates the sustainability of listed companies based on their environmental, social and corporate governance (ESG) performance.[1] The company was born of a merger between Toronto-based Jantzi Research, which was founded in 1992 by Sustainalytics' current CEO Michael Jantzi, and its European counterpart.[2] Following its acquisition of GES International on January 9, 2019, Sustainalytics had more than 600 employees with offices in 17 cities around the world and over 700 institutional investor clients.[3][4] On April 21, 2020, Morningstar, Inc. acquired the remaining ~60% of Sustainalytics' shares to become the sole owner.[5]

Morningstar acquisition

In 2016, Morningstar, Inc. released the first sustainability rating for mutual funds and exchange-traded funds based on Sustainalytics' company ESG research.[6] [7] In 2017, Morningstar, Inc. become a 40% shareholder in the company alongside senior management, Stichting Pensioenfonds Zorg en Welzijn (PGGM), ABN AMRO Group and Renewable Partners [8][9] On 21 April 2020, Morningstar Inc. completed the acquisition, purchasing the remaining 60% of the shares.[5]

Yahoo! Finance

In 2018, Yahoo! Finance started to include Sustainalytics' ESG score for over 2,000 companies. Retail investors will also be able to see if companies are involved in controversies or controversial products or practices, such as thermal coal and controversial weapons.[10]

Green lending and green bonds

In 2017, ING Group issued the first sustainability improvement loan where the interest rate of the loan is pegged to the sustainability rating of the lender, Koninklijke Philips N.V., as measured by Sustainalytics.[11] [12] Sustainalytics also provides "second opinions" for corporate governmental issuers that assesses the framework of the issuer's green, social or sustainability bond.[13] In 2017 and 2018, investors voted Sustainalyitcs as the "Most Impressive Second Opinion Provider" for this service in the GlobalCapital Sustainable and Responsible Capital Markets Awards 2017.[14][15]

Emissions scandals

Sustainalytics flagged governance concerns at Volkswagen months before the 2015 Volkswagen emissions scandal.[16] Sustainalytics had also flagged corporate governance concerns at Fiat Automobiles 18 months prior to the company being accused of breaking emissions laws in 104,000 diesel vehicles in January 2017 [17]

HBR's 100 best performing CEOs

In 2015, Harvard Business Review started to include Sustainalytics' ESG Rating as part of its assessment of the 100 best performing CEOs in the world.[18]

Indices

In 2000, Sustainalytics launched the Jantzi Social Index, the first socially-screened stock index composed of Canadian companies, and, in 2013, Sustainalytics partnered with the United Nation's Global Compact to launch the Global Compact 100 index, a real-time stock index that tracks Global Compact signatories awarded a high ESG rating by Sustainalytics.[19] [20] On 10 September 2018, the World Bank issued a sustainable development note linked to Sustainalytics' Global Sustainability Signatories Index, another index that tracks United Nations Global Compact signatories with high sustainability ratings.[21] The note will not pay a coupon, but rather return the principle in addition to the positive return of the index.[22]

Issues driving Morningstar / Sustainalytics ESG Risk Ratings[23]
Category Issue Contribution to
ESG Risk Rating
Environmental
43.3% 		Carbon - Own Operations 19.2%
Resource Use 10.3%
Emissions, Effluents and Waste 7.1%
Environmental and Social Impact
of Products and Services 		6.7%
Social
34.1% 		Human Rights 22.8%
Occupational Health and Safety 7.5%
Community Relations 3.8%
Governance
22.6% 		Corporate Governance 11.9%
Business Ethics 6.7%
Human Capital 4.0%

References

  1. ^ Hale, J. "How Sustainalytics Does Company ESG Research", Yahoo! Finance, 29 September 2016. Retrieved on 22 December 2017
  2. ^ Baldwin, William. "This Man Will Purify Your Portfolio", Forbes, 3 April 2017. Retrieved on 22 December 2017
  3. ^ Critchley, Barry. "Responsible investing will be replaced by 'investing with no prefixes'", Financial Post, 20 October 2017. Retrieved on 22 December 2017
  4. ^ Sloley, Chris. "ESG research giant Sustainalytics purchases engagement group". Citywire Selector. Citywire. Retrieved 12 February 2019.
  5. ^ a b "Morningstar acquires balance 60% stake in Sustainalytics (NASDAQ:MORN)". SeekingAlpha. 21 April 2020.
  6. ^ Morningstar, Inc. "Morningstar Introduces Industry’s First Sustainability Rating for 20,000 Funds Globally, Giving Investors New Way to Evaluate Investments Based on Environmental, Social, and Governance (ESG) Factors", 1 March 2016. Retrieved on 22 December 2017
  7. ^ Zulz, Emily. "Morningstar Releases Sustainability Rating for 20,000 Funds" Think Adviser, 1 March 2016, Retrieved on 22 December 2017
  8. ^ Sustainalytics "Morningstar and Sustainalytics Expand Their Sustainability Collaboration", 24 July 2017. Retrieved on 22 December 2017.
  9. ^ "About Us". Sustainalytics. 13 September 2018.
  10. ^ Norton, Leslie P. "Yahoo Adds Sustainability Company Data". Retrieved 2018-02-12.
  11. ^ ING Group. "ING and Philips collaborate on sustainable loan", 19 April 2017. Retrieved on 22 December 2017
  12. ^ Woudt, Job. "Lening Philips gekoppeld aan duurzaamheid", Het Financieele Dagblad, 19 April 2017. Retrieved on 22 December 2017
  13. ^ Mellow, Craig (8 February 2018). "Passing Fad or Future Habit? Green-bond issuances have been growing, even if there's no precise definition of what a "green bond" is". Global Finance Magazine. Retrieved 2018-02-12.
  14. ^ Hay, John (6 September 2017). "GlobalCapital Sustainable and Responsible Capital Markets Awards 2017: the Winners". www.globalcapital.com. Retrieved 2018-02-12.
  15. ^ "SRI Award Winners 2018 Revealed". Global Capital. 5 September 2018. Retrieved 13 September 2018.
  16. ^ Kerber, Kerry & Flaherty, Michael. "Investing with 'green' ratings? It's a gray area", Reuters, 26 June 2017. Retrieved on 22 December 2017
  17. ^ Mooney, Attracta. "When markets ignore vital warning signs", Financial Times, 8 May 2016. Retrieved on 22 December 2017
  18. ^ Loudenback, Tanza. "The 25 best-performing CEOs in the world, according to the Harvard Business Review", Business Insider, 13 October 2015. Retrieved on 22 December 2017
  19. ^ Murray, Sarah. "Sustainability measurement: index looks to connect investors {GATED CONTENT}", Financial Times, 2 June 2015. Retrieved on 22 December 2017
  20. ^ Power, Gavin. "Global Compact 100", United Nations Global Compact Retrieved on 22 December 2017
  21. ^ Martin, Katie (10 September 2018). "UBS launches World Bank sustainable debt product". Retrieved 13 September 2018.
  22. ^ "Global Sustainability Signatories Index 7.5% VC ER". www.sustainalytics.com. 10 September 2018. Retrieved 13 September 2018.
  23. ^ Morningstar, Inc. (2023) "Sustainalytics ESG Risk Rating Summary Report" for Holcim Ltd., page 3.
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