ROI meets ESG

Insider: Michael Jantzi

Michael Jantzi, chief executive officer, Sustainalytics: "If you believe that sustainability is an increasingly important part of your strategic planning and business development, you should be telling that story"

Who Michael Jantzi, CEO of Sustainalytics, a leading Amsterdam-headquartered, global ESG and corporate governance research, ratings and analysis firm. Jantzi founded Jantzi Research in Toronto in 1992 and merged it with Sustainalytics in 2009.

Involvement In August, Sustainalytics announced a deal with Morningstar, the investment research and fund management firm that will allow Morningstar to launch the first ESG scoring system for global mutual and exchange-traded funds, using ratings data from Sustainalytics. This follows a 2014 deal with Bloomberg that resulted in Sustainalytics’ research being added to the business news giant’s professional service platform.

Listed How did the Morningstar deal come about? And what does it say about growing mainstream awareness of ESG issues?

Michael Jantzi In very simple terms, it’s a reflection of increasing interest in ESG or responsible investment from the marketplace. This was a deal that was incubated in the fact that Morningstar was hearing from its market, clients, prospects and so on, that the time was right to do something like this and I think it’s fair to say—and Morningstar has been open about this—that demand was broadly based. It was institutional, it was retail and they were seeing it on both sides of the Atlantic.

Listed Was last year’s Bloomberg deal of similar significance?

Michael Jantzi It’s reflective of a very similar trend. If you look over the last decade or so, there’s no question that the number of institutions that are looking at how they can evaluate or integrate environmental, social and governance issues into the investment process has been growing steadily. Much of that growth has been on the institutional side of the market. You’re seeing large pension funds, sovereign wealth funds, large asset managers increasingly understand the idea that environmental, social and governance issues are not just things that they can ignore, that they do represent and can represent real business or investment risks.

Morningstar is a little bit different in that very large segments of the clientele it services are on the retail side. I think what the Morningstar announcement indicates is that that segment is now embracing responsible investment and looking at these issues much more seriously.

Listed Is your company changing its offerings to appeal to these firms, or is the market coming to you?

Michael Jantzi It’s a bit of both. As this industry has gone more mainstream, the demands that our clients have on us have ratcheted up. The interest in ESG is driven by the fact that our clients believe that it can add insight to their process, that these issues can be material, and it’s part of their fiduciary duty to integrate ES&G into that broader investment process. That might have started on the equity side, but what’s very clear is that the value of ESG integration holds true for fixed income, you’re seeing ESG integration expand into other asset classes, like infrastructure and real estate, as just some examples. So the demands are not only upping the game in the traditional asset classes, but across asset classes. And that’s been the focus of our challenge. The amount of information, the way we collect information and the way we distill and convert data into insights has changed immeasurably over time.

Listed Our investor relations columnist, Chaya Cooperberg, recently argued ESG awareness needs to be part of every issuer’s IR strategy. In your view, how do most issuers stack up on this?

Michael Jantzi I would say if you’re looking globally, the majority of companies now are paying more than just lip service to sustainability. You’re starting to see more effort being put into integrating these issues into business decision-making. And again the primary driver of that being, at the board level and senior management level, they believe it helps them make better, more-informed decisions. Now, I would argue that thinking is still lagging in regards to being strategic around the IR component of the business. In other words, often times we see companies are doing pretty good things from an investment side, which is obviously good from the business side, but their ability, capacity, willingness, whatever it is, to communicate that to the investor community, those dots just haven’t been connected in the way that they could be.

Listed Chaya’s column followed an investor tour in Europe. Is there still a difference between regions?

Michael Jantzi Yes. On a European road show you’re going to hear more of these questions coming from the audience. But I think that’s going to change. North America now from a capital markets perspective is the fastest growing market for ESG and responsible investment. The one thing I will point out, I often hear from companies who say no one’s asking us about this. And my response is, ‘Do you base your IR strategy solely on what questions you get from the audience? If you believe that sustainability is an increasingly important part of your strategic planning and business development, helping you identify risks or, maybe more interesting for the audience, how it’s differentiating you from the competition and informing and driving R&D, you should be telling that story.’

Interview by Listed Staff

Photography: Sustainalytics

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