Editing Morningstar, Inc. (section)

==== ''Sustainalytics'' ====
Sustainalytics provides ESG data, research, analysis and insights to institutional investors globally, covering equity and fixed income asset classes. Its flagship ESG Ratings also underpin Morningstar’s Sustainability Fund Ratings for mutual funds and ETFs, multiple investable indexes and numerous investment platforms. Sustainalytics also serves issuers and banking institutions through its corporate solutions unit and is notably the world’s largest provider of green bond Second Party Opinions.

The EU Action Plan is a broad sweeping regulation with multiple components that require asset managers to align with the UN’s Sustainable Development Goals (SDGs) and report on portfolio alignment. Investors need high quality ESG research, data and reporting tools to help them comply with the regulation’s components: EU Taxonomy Regulation, SFDR, and EU Benchmarks Regulation.

In 2021, Sustainalytics launched several new products under its EU Action Plan Solutions suite, addressing the need for clients to access research and comply with reporting under recently-enacted European regulations. To help investors fulfil sustainable finance disclosure requirements, Morningstar delivered a rich new dataset emphasizing principle adverse indicators (PAIs) that cover sustainability factors and risks. Morningstar also launched a new product providing an holistic view of an investment portfolio's alignment to the EU Taxonomy. For institutional investor clients, Morningstar also worked to incorporate impact metrics and country risk ratings into the Morningstar Sustainability Rating for funds. Corporate issuers were introduced to a new Sustainalytics solution designed to assess ESG risk in a company’s supply chain and to a new Issuer Gateway portal that enables more efficient communication and engagement between the issuers and Sustainalytics. Sustainalytics also expanded its Second-Party Opinions coverage to support companies looking to issue Sustainability-Linked Bonds, and increased the number of publicly-available company-level ESG Risk Ratings to over 14,000.

Sustainalytics operates on a subscription-based pricing model for its ESG research products, which supports recurring revenue. The corporate solutions unit deploys a model that combines one-time revenue with subscription-based recurring licensing revenue.

Major competitors for Sustainalytics include MSCI, FTSE Russell, Institutional Shareholder Services (ISS), S&P Global, Moody's, ecovadis, and Federated Hermes. While the traditional ESG research market continues to aggressively consolidate, Morningstar expects that the market will continue to evolve as new entrants emerge and investors acquire ESG data from new distributors (for example, directly from stock exchanges). Large asset managers like BlackRock, State Street, UBS, and JP Morgan are also investing heavily to build in-house ESG capabilities and sustainable investing products. New technologies, specifically those that employ artificial intelligence, are facilitating these trends by accelerating the sourcing and use of unstructured ESG data.