Sustainalytics has reportedly told staff it will fire up to 12% of its workforce next week.
According to multiple sources, the ESG data and analysis giant announced during a ‘town hall’ meeting yesterday that between 150 and 180 employees would be let go, although it did not say in which departments or geographies.
IPE understands that the teams working on sustainability bond assessments in the company’s Singapore and Hong Kong offices were axed in June.
Sustainalytics was officially founded in 2009 by Canadian sustainability veteran Michael Jantzi. In 2020, Morningstar – which already owned 40% of the firm – bought it outright.
Since then, it has hired aggressively, but insiders say financial and political headwinds have prompted it to rethink.
While much of the demand for sustainability data is coming from investors in Europe, most of the European providers have been acquired by big North American firms in recent years.
In 2019, Moody’s acquired a majority stake in Vigeo Eiris, S&P Global bought the ESG ratings arm of Dutch firm RobecoSam, and MSCI bought Swiss start-up CarbonDelta. S&P’s index arm bought British environmental data provider Trucost in 2016.
But the high-profile political and legal pushback against sustainability in the US over the past 18 months is rumoured to be have prompted a new, more conservative approach to ESG activities at the firms, as well as cutting down demand for services from US clients.
European and UK regulators are also clamping down on ESG ratings providers. Stricter rules are being introduced around the governance and transparency of the firms.
Earlier this year, Ron Bundy, president of Morningstar’s index business took Sustainalytics under his leadership following the departure of its own president, Bob Mann.
Mann was the latest in a string of management exits, which includes founder Jantzi last summer, and managing director Diederik Timmer in June, having been with the firm for nearly 15 years.
Speaking to the media at the time, Bundy insisted that the reshuffle was driven by a desire to expand the two firms’ ESG work rather than reduce it, saying they should “have one voice” when speaking with clients about ESG data and ESG indices.
The firm committed to a 90-day review, which appears to have resulted in the decision to axe more of its workforce.
Some employees are angry at not being told who will be affected by the decision. That announcement is understood to be slated for next week, during New York Climate Week, one of the busiest times for sustainability professionals.
Sarah Wirth, spokesperson for Morningstar, told IPE that there was a recent announcement about a closer alignment of Morningstar Indexes and Morningstar Sustainalytics.
“As a part of this alignment, we are in the process of making adjustments to strengthen the financial footing of the business. We remain committed to growing our ESG capabilities and will continue to invest in this area going forward,” she added.
“Unfortunately, headcount reductions in addition to other expense reductions are part of the mix. While it has been a very difficult decision, we plan to reduce our global headcount at Sustainalytics by 10-12% to ensure we can get the business on healthy financial footing to be able to move forward and grow,” Wirth conitnued.
“We are not able to share details on impacted employees. We took great care in making these decisions and in every case will work closely with those who are impacted, as well as those who remain, to ensure a smooth transition and support for our global teams,” she said.
Growth in other parts of the industry
While Sustainalytics moves to streamline its workforce, MSCI announced yesterday that it has launched a ‘sustainability institute’ to “spur collaboration across finance, academia, government, NGOs, think tanks and companies from different sectors, while helping to close the gaps between strategy-setting data, analysis, policy and action”.
It said the entity would give academics and policymakers free data and training, and aggregate academic research for the financial community. It will also convene pilot projects dedicated to finding new ways to measure different aspects of sustainable finance performance.
The institute will be run by MSCI’s former head of global ESG and climate research, Linda-Eling Lee. It will be advised by Hiro Mizuno, who recently joined MSCI as special advisor to the chief executive officer.
Mizuno became a big name in sustainable finance during his time as chief investment officer at Japanese public pension fund Government Pension Investment Fund (GPIF).