November 03, 2009
RiskMetrics Acquires KLD
by Robert Kropp
Deal is the second major acquisition of an ESG research provider by RiskMetrics in 2009.
The rapidly changing landscape of environmental, social, and governance (ESG) research providers
received another major update today, as RiskMetrics Group announced the acquisition of KLD Research & Analytics. The acquisition, which has
been widely anticipated for a month, follows RiskMetrics' purchase of Innovest Strategic Value
Advisors, like KLD a provider of ESG research, in February.
provider of risk management and corporate governance services to the global financial community,
RiskMetrics has, through its purchase of KLD, gained access to one of the most prominent names in
the ESG research arena. Founded in 1988, KLD published the first research designed to evaluate the
risks and opportunities associated with corporate social and environmental performance, according
to the press release announcing the acquisition.
Currently, more than 400 clients,
including 31 of the 50 largest institutional investment managers globally, use KLD's research to
inform their investment decisions based on ESG considerations. In addition to helping facilitate
the incorporation of ESG factors into the investment process, KLD's mission has been to provide
services to investors seeking to influence corporate accountability.
The merger of the two
companies will be closely watched by the socially responsible investment (SRI) community, for which
KLD has long been viewed as a prominent standard bearer for ESG investment research. The field has
been undergoing consolidation at a rapid pace. In addition to the acquisitions by RiskMetrics this
year, the merger in August of Jantzi
Research and Sustainalytics was
also a significant example of the consolidation.
In 2007, RiskMetrics acquired
Institutional Shareholder Services (ISS), a proxy advisory firm that was founded in 1985. Prior to
being acquired by RiskMetrics, ISS purchased the Investor Responsibility Research Center (IRRC),
like KLD a provider of ESG research and analysis.
When RiskMetrics acquired Innovest in
February, Innovest had a team of 50 researchers, which has since been pared down by RiskMetrics to
a fraction of that amount. In October, Matthew Kiernan, the founder of Innovest and co-head of the
Sustainability Solutions Group at RiskMetrics since the merger, left the combined company.
Ran Fuchs, the head of the sustainability business at RiskMetrics, told SocialFunds.com at the
time of the Jantzi—Sustainalytics merger, "It's very difficult for the small companies to grow
organically. As much as they want to, small companies cannot provide breadth of coverage, because
of scalability and maximum use of technology."
While it is not at all uncommon for
consolidations to include the workforce reductions experienced in the aftermath of the purchase of
Innovest by RiskMetrics, the SRI community will be looking for assurance that the consolidation of
KLD into the Riskmetrics fold furthers KLD's mission of providing investors with tools to influence
In addition to risk management and corporate governance
services, RiskMetrics provides proxy advisory services to institutional investors.