December 01, 2009
Thomson Reuters Acquires ASSET4, a Major Provider of ESG Investment Research
by Robert Kropp
The merger is the latest of many in the sector in 2009, and positions Thomson Reuters to compete
with major rival Bloomberg in providing ESG data to investors.
Consolidation in the environmental, social, and governance (ESG) investment research industry
certainly ranks as one of the year's most important stories for the growing number of
sustainability investors, who in the absence of regulatory mandates for transparent corporate
report on so-called extra-financial considerations rely on such researchers for their investment
analysis and decision-making.
Among the significant mergers taking place thus far
this year are the acquisitions by RiskMetrics
Group of Innovest Strategic Value Advisors and KLD Research & Analytics, as well as the merger of Jantzi Research with Sustainalytics.
Another merger of considerable
scale was announced this week, when Thomson
Reuters acquired ASSET4, a Swiss-based
investment research information provider that provides information on ESG aspects of corporate
performance. Through its more than 400,000 workstations, Thomson Reuters is one of the largest
providers of financial information in the world.
According to the press release announcing the deal, it
"represents a step forward in the integration of ESG data into mainstream financial analysis."
"The global credit crisis, climate change, new regulation and other issues have highlighted the
need for financial firms to assess the environmental, social responsibility, governance and
reputational risks attached to the firms in which they invest," the press release continued. "This
information allows investors to engage companies, improve investment performance, reduce risk and
lower research costs, while corporate executives can reduce risk, enhance corporate governance and
increase accountability, transparency and trust."
SocialFunds.com spoke with Peter
Ohnemus, CEO and President of ASSET4, about the merger.
"The goal of ASSET4 has always
been to make ESG data mainstream," Ohnemus said. "We're already familiar with Thomson Reuters'
financial data, which we have used for our ESG analysis, and there's synergy between our ESG news
scanning product and their products as well."
"We were looking for market distribution and
scale, and only two companies could provide that," Ohnemus continued.
In addition to
Thomson Reuters, Ohnemus was referring to Bloomberg, Thomson Reuters' key competitor in the
financial information industry. Earlier this year, Bloomberg launched an ESG data service for its
subscribers. Describing the product at a forum hosted by Ceres in April, Emil Efthimides, manager of the service at
Bloomberg, said, "Eleven percent of assets under management are socially responsible. Now the
other 89% will get a chance to see that 11%. Maybe they’ll dabble in it or even request that
information from companies. It will become a virtuous cycle."
Ohnemus said, "If you look
at the changes in the Securities and Exchange Commission (SEC) in the US, I think we're going to
see a lot of mainstream investors moving into the ESG space. A lot of conservative asset managers
are now saying, we have to move into this space."
"In most cases, ESG considerations can
give a holistic view of corporations, and can lead to outperformance for investors," Ohnemus
continued. "The incorporation of ESG considerations represents a natural evolution of investing."
Asked about the trend toward consolidation in the ESG investment research industry,
Ohnemus said, "The industry is growing up. Distribution and scale are becoming increasingly
important. With worldwide regulation, and initiatives such as the UN Global Compact, the Principles for Responsible Investment (PRI), and the Carbon Disclosure Project (CDP), the
requirements for corporate reporting will soon have standard frameworks."
to the role played by credit rating agencies in the economic crisis of 2008, Ohnemus observed,
"With an operator the size of Thomson Reuters moving into this space, it's going to move the
industry forward. I believe the rating agencies will feel positive pressure to take ESG impacts
into account in their benchmarking of companies."
Among the failures of credit rating
agencies contributing to the economic crisis was their delay in downgrading their ratings of
mortgage-backed securities until July 10, 2008, long after knowledge of problems relating to those
products was widespread.
"To an important degree, President Obama and his people,
especially those at the SEC, are driving the consolidation of the industry," Ohnemus said.
Products jointly developed by the merged companies will be coming onto the market in 2010,
according to Ohnemus.
The SRI community will certainly be watching closely as the effects
of the merger of Thomson Reuters and ASSET4 develop. In other acquisitions and mergers announced
this year, the numbers of ESG researchers have been sharply reduced. For instance, 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.
Asked about the effect of the merger on ASSET4's employees, Ohnemus
said, "All the key people will stay." And because Thomson Reuters already has a presence in Zug,
Switzerland, where ASSET4 is headquartered, "From an integration point of view, our employees will
have to move less than three miles."