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July 07, 2005
Vigeo-Ethibel Merger Forms New European Socially Responsible Investment Research Firm
    by William Baue

The Vigeo Group becomes the largest corporate social responsibility rating agency in Europe, with global operations that the newly-created company plans to expand.

Socially responsible investment (SRI) research analysts are often faced with the challenge of assessing the effects of a corporate merger on the social and environmental performance of the resulting company. What is the effect on corporate social responsibility (CSR) analysis and rating when SRI research firms merge? This is the implicit question posed by the recent merger between France-based Vigeo and Belgium-based Ethibel to create the Vigeo Group.

Numbers provide one set of answers.

"The merger between Vigeo and Ethibel gives birth to Europe's largest corporate social responsibility rating agency," said Vigeo Group spokesperson Thomas Gerard. "The Vigeo Group staff encompasses 56 people, including 25 CSR analysts."

"Total sales in 2004 for Vigeo and Ethibel together represented €4.04 million, making the combined company the leader in Europe," Mr. Gerard told

Investors (including BNP Paribas Asset Management and HSBC Investments) represent Vigeo Group's primary clients, with combined 2004 sales to them amounting to €2.77 million (€1.62 from Vigeo, €1.15 from Ethibel). The Vigeo Group thus accounts for 18 percent of the estimated €15 million European SRI research market, according to Mr. Gerard.

"The market of investors is expecting more and more professionalism from the rating agencies," said Mr. Gerard. "The agencies should prove their capacity to develop innovative processes, to cover more stock values."

"This is the reason why we foresee the beginning of an international consolidation of this sector, the creation of Group Vigeo being one example," he added. "The Vigeo Group's objective is to consolidate its leading position in Europe but also to acquire an international dimension."

The Vigeo Group retains Ethibel's Pacific Project of two Japan-based analysts specifically dedicated to Asian markets, and Vigeo brings coverage of the Moroccan market to the table.

The Vigeo Group's primary product for investors is its "Equitics" rating, which assesses corporate social and environmental sustainability performance on 550 listed companies in Europe. The Equitics process reviews six domains (such as human rights, environment, and corporate governance) under 38 criteria, examining 298 specific indicators.

Companies also represent a market for the Vigeo Group. The Vigeo Group offers what it calls "Overnance" ratings to companies, in which analysts conduct six-months of research to identify strengths and opportunities as well as vulnerabilities and risks. Whereas Equitics ratings measure CSR performance at the corporate level, Overnance ratings rarely measure corporate-wide CSR performance.

"Overnance is a genuine CSR audit--companies solicit the ratings, therefore they select the area, territory, and dimension to be assessed," explained Mr. Gerard. "For example, one company may ask for a CSR audit on its metallurgy activities in Poland, specifically focusing on human resources and human rights dimensions."

Overnance ratings belong to the company, so they cannot be sold to investors. Moreover, investors typically require comprehensive CSR evaluations, so the narrow focalisation of Overnance ratings renders them moot for investment decision-making, he pointed out.

Since its 2002 inception, Vigeo (which is Latin for "vigilance" or "watchtower") has conducted 33 Overnance assignments, with sales growing from €234,000 in 2003 to over €1million in 2004.

In addition to the Equitics and Overnance ratings, the Vigeo Group provides investors and companies Ethibel's Sustainability Indexes (ESI) and Vigeo's Advanced Sustainable Performance Indexes (ASPI) for benchmarking corporate financial and sustainability performance. Ethibel also brings to the Vigeo Group its European Quality Label, which provides an imprimatur validating funds' claims of social responsibility.

One final distinguishing factor of the Vigeo Group is its ownership structure, with nongovernmental organizations (NGOs) and unions controlling a stake amounting to more than a fifth (21 percent) of the company. Investment firms own almost a half (49 percent) of the company, while businesses' capital investment stands at just under a third (30 percent).

"Vigeo's capital (€13 million) and Ethibel's existing profitability (from revenues of €1.3 million in 2004, up 12 percent from 2003) give the Vigeo Group long term sustainability and independence," concluded Mr. Gerard.


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