M&A Deals Reveal Growing Power of ESG Ratings, Research

By December 22, 2020No Comments

In a recent NeuGroup Virtual Interactive Session, Deutsche Bank weighed in on the changing face of the players doling out ESG ratings which are increasingly important to investors and issuers.

  • As the graphic below makes clear, credit rating agencies and other companies are racing to get in on the action through acquisitions.

Trisha Taneja, Deutsche Bank’s head of ESG advisory, identified MSCI and Morningstar as two popular ratings providers, adding that Moody’s and S&P are growing.

  • “The two current main ones are MSCI and Morningstar,” she said. “Those drive the most amount of capital total, not just fixed income, but across asset classes.
    • “MSCI’s data feeds into the ESG indexes which are licensed to a lot of asset capital.
    • “With Morningstar, Sustainalytics data feeds into their fund ratings, but also their standard research, so that also provides a lot of capital.”
  • Ms. Taneja said S&P and Moody’s are coming up fast because their “ESG ratings are more issuer-friendly, so there’s more engagement there.
  • “It’s more forward-looking because they’re based on interviews with management,” she added. “However, because they’re issuer-solicited, it is hard for investors to use it for portfolio construction.”
Justin Jones

Author Justin Jones

More posts by Justin Jones