Morningstar is an American company that provides investment research as well as investment management services. It also competes with the big rating agencies like Moody’s in providing credit ratings. Lately, Morningstar has been focusing on ESG research with the purchase of Sustainalytics. The deal was announced back in April 2020. Sustainalytics specializes in providing ESG ratings and research. ESG is expected to be one of the biggest trends in the investment world for the next few years. It is driven by the increasing awareness about ESG among investors. Millennials, who are among the most influential demographics as investors, are also more inclined to have their investment reflect their own personal values. Therefore, anyone looking to invest in financial stocks can consider leveraging on the ESG theme.
How Does The Sustainalytics Acquisition Help Morningstar?
Sustainalytics already has data on 40,000 companies which means it can hit the ground running from day one. Secondly, Sustainalytics has ESG rating research on 20,000 companies in more than 170 countries. For Morningstar, that is an instant addition of significant ESG capability. ESG ratings are expected to be used by institutional investors, retail investors, private equity firms, family offices, and credit issuers. It allows Morningstar to enhance its product offering to a wide variety of audiences.
Morningstar has been working on integrating Sustainalytics with the company. During the 3Q2020 earnings announcement, company CEO Kunal Kapoor said, “We were thrilled to welcome the Sustainalytics team to our organization. We’ve made notable progress on our integration and together continue to see ample opportunities for meeting investor needs. As the current environment sheds light on global risks such as climate change, population health, and human capital concerns, investor interest in ESG factors is rising across our business.”
Morningstar’s stock has been on an uptrend of late. It closed at $222.63 on 28th December 2020, having gained 11% during the preceding month. The stock currently trades at a 0.57% dividend yield. On a 5-year basis, Morningstar’s stock has risen from $77 to $222.