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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." 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."

Perhaps alluding 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."


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