Part 2.1: Classification of providers

EC research brief

The study should first try to define the main categories of sustainability-related products and services providers using a transparent categorisation method. Each category should present common characteristics and trends. The categorisation method should also take into account whether or not those providers already perform their activities under a specific EU status (such as MIFID investment firm or benchmark administrator).

The study should also examine different aspects related to the governance and organisational arrangements of the providers.  The assessment should include at least:

  • the governance arrangements,
  • the staff allocated to the preparation of sustainability-related products and services, its level of experience and seniority, and the average number of companies/assets covered - per analyst,
  • the management of conflicts of interest, and,
  • the use of a code of conduct

On what basis can sustainable investment data, ratings and research providers be best categorised?  What are the main categories of providers? Who are the major providers?

  • EC interest: "The study should first try to define the main categories of sustainability-related products and services providers using a transparent categorisation method.”
  • Your view: Contribute information, ideas & your opinions: via this structured survey (most efficient) | This email address is being protected from spambots. You need JavaScript enabled to view it. (still pretty good) or | by emailing your thoughts to This email address is being protected from spambots. You need JavaScript enabled to view it. or This email address is being protected from spambots. You need JavaScript enabled to view it..

Outstanding questions

To help us test and refine our categorization, we would like to ask research providers: Which other providers of sustainable investment data, ratings and research do you see as offering similar products to you?

What we (think we) already know => Context

Classification

We define and categorise sustainable investment research providers as follows:

  • Uber-category: Sustainable investment data, ratings and research provider
  • Definition: Any firm that directs sustainability-related information towards professional investors for the explicit purpose of guiding their investment decision-making or ownership activities

Within this, we define the following categories:

Category

Definition

Examples

ESG (ratings) agencies

Research firms that provide broad-coverage ESG ratings alongside other sustainable investment data and research products and services

FTSE Russell, MSCI ESG Research, ISS ESG, Sustainalytics, Vigeo Eiris

‘Sell-side’ brokers

The research divisions of investment banks that produce primarily investment research for clients which increasingly includes sustainable investment

Citi, Exane, Goldman Sachs, Morgan Stanley

Credit ratings agencies

Firms that primarily provide credit ratings for corporate, sovereign and other debt.

Fitch, Moody’s, S&P

Data providers

Firms that primarily provide specialist financial data for investors but also provide ESG data and research.

Bloomberg, Refinitiv, IHS Markit

For-impact and grant-funded research providers

Teams within NGOs and research firms funded by philanthropic grants that produce investor-relevant sustainability research with the primary aim of bringing about positive change in the sustainability actions of companies

Carbon Tracker, CDP, FAIRR, ZSL

Specialist research, engagement and data boutiques

Providers of specialized sustainable investment data, engagement services and/or investment research (but not ratings)

Asia Research and Engagement, Hermes EOS, Kigoda, RepRisk, Trucost

Excluded from scope

Although an essential part of the broader responsible investment landscape, we believe the mandate for this study does not extend to require the classification of corporate governance research providers and proxy advisors.

Also, as per the EC’s specification, we have considered benchmark administrators to be clients of the research process rather than research providers themselves.  However, we note that benchmark administrators that also sell, for example, ESG ratings to third parties (such as FTSE Russell do) will qualify as ESG Ratings Agencies under the classification above.

What are the governance arrangements of the major sustainable investment data, ratings and investment research providers?  Do the major providers apply a code of conduct?

  • EC interest: “The study should also examine … the governance and organizational arrangements of the providers … including … the governance arrangements … and the management of conflicts of interest”. "The study should also examine … the use of a code of conduct”
  • Your view: Contribute information, ideas & your opinions: via this structured survey (most efficient) | This email address is being protected from spambots. You need JavaScript enabled to view it. (still pretty good) or | by emailing your thoughts to This email address is being protected from spambots. You need JavaScript enabled to view it. or This email address is being protected from spambots. You need JavaScript enabled to view it..

Outstanding questions

We have questions for research providers about their:

  • Ownership
  • Management structures
  • Use of 'codes of conduct' and
  • Avoidance of conflicts of interest
  • We also have questions for assessed companies on their experience of this

What we (think we) already know => Context

We believe that four components of organizational structure and governance are fundamental to the production of independent and unconflicted research:

  • Ownership
  • Existence of clients (within the same ownership group) that might give rise to conflict
  • Organisational governance structures (to ensure organisational conflicts do not harm the quality of research)
  • Individual practice (to ensure personal conflicts do not harm the quality of research) - this is typically covered by a ‘code of conduct’.

We will review all aspects of these components to ascertain whether sustainable investment data, ratings and research is produced within a framework that ensures that it is independent and unconflicted.  Specifically, on:

  • Ownership: We will identify ownership for all major sustainable investment data, ratings and research providers - this will be particularly important if they are held within a group that has clients with potentially conflicting interests
  • Existence of clients that might cause conflict: We will identify where a research firm also provides services to issuers and determine the relative significance of revenues from investor and issuer clients.
  • Organisational structures: We will investigate what (if any) management structures exist within research businesses to ensure that research is independent and unconflicted. These will include (but not be limited to) research sign-off procedures, analyst training and review teams/committees.
  • Individual practices: We will compare the features of the codes of conduct of different research providers to assess whether independence of research is ensured

Finally, as the perception of independence is critical, we will explore whether companies and investors perceive research firms to be independent with suitable safeguards against conflicts of interest.

Preliminary findings

We believe that most providers of SIDRIR research are transparent about their shareholders, but we would like to verify this.

We believe that the major providers of SIDRIR research have public policies on:

  • principles of conduct
  • conflicts of interest
  • independence of research, including separation of sales and research teams where appropriate
  • interactions with rated companies
  • confidential data, including insider dealing
  • external communications
  • relationships with shareholders and related entities

How many staff do the major providers have?

  • EC interest: “The study should also examine … the [number of] staff allocated to the preparation of sustainability-related products and services, its level of experience and seniority, and the average number of companies/assets covered - per analyst”
  • Your view: Contribute information, ideas & your opinions: via this structured survey (most efficient) | This email address is being protected from spambots. You need JavaScript enabled to view it. (still pretty good) or | by emailing your thoughts to This email address is being protected from spambots. You need JavaScript enabled to view it. or This email address is being protected from spambots. You need JavaScript enabled to view it..

Outstanding questions

We have questions for research providers about the number of staff in their organisation and the various roles that they undertake.

What we (think we) already know => Context

From their membership of SRI-CONNECT, we know that the in sustainable investment data, ratings or research.  (If the numbers are not correct for your firm, please encourage your team to update their profiles on SRI-CONNECT)

Research provider

Total

Management

Research and analysis

Sales & marketing

Other

ESG AGENCIES

         

Ethifinance & Gaia Rating

16 listed here

1 listed here

6 listed here

5 listed here

4 listed here

FTSE Russell

16 listed here

0 listed here

7 listed here

4 listed here

5 listed here

ISS-ESG

125 listed here

6 listed here

74 listed here

16 listed here

15 listed here

MSCI ESG Research

147 listed here

5 listed here

72 listed here

48 listed here

14 listed here

Sustainalytics

255 listed here

9 listed here

155 listed here

54 listed here

22 listed here

Vigeo Eiris

106 listed here

4 listed here

66 listed here

16 listed here

7 listed here

SELL-SIDE BROKERS

         

HSBC Investment Research

7 listed here

0 listed here

7 listed here

0 listed here

0 listed here

Morgan Stanley Investment Research

4 listed here

0 listed here

3 listed here

0 listed here

0 listed here

Kepler Cheuvreux Investment Research

5 listed here

0 listed here

5 listed here

0 listed here

0 listed here

Exane BNP Paribas Investment Research

7 listed here

0 listed here

5 listed here

0 listed here

2 listed here

UBS (Investment Research)

2 listed here

0 listed here

2 listed here

0 listed here

0 listed here

CREDIT RATINGS AGENCIES

         

Beyond Ratings

3 listed here

0 listed here

0 listed here

2 listed here

1 listed here

Fitch Ratings

6 listed here

0 listed here

3 listed here

1 listed here

1 listed here

Moody’s Investor Services

26 listed here

1 listed here

6 listed here

4 listed here

11 listed here

Standard & Poors

9 listed here

0 listed here

4 listed here

1 listed here

3 listed here

DATA PROVIDERS

         

Bloomberg

17 listed here

0 listed here3

9 listed here

3 listed here

5 listed here

Refinitiv

1 listed here

1 listed here

0 listed here

0 listed here

0 listed here

‘FOR IMPACT’ AND GRANT-FUNDED RESEARCH PROVIDERS

 

 

 

 

 

Access to Medicines Foundation

4 listed here

0 listed here

0 listed here

0 listed here

4 listed here

Carbon Tracker

18 listed here

2 listed here

6 listed here

3 listed here

6 listed here

CDP

41 listed here

0 listed here

18 listed here

5 listed here

15 listed here

CERES

22 listed here

2 listed here

8 listed here

0 listed here

8 listed here

FAIRR

6 listed here

0 listed here

3 listed here

1 listed here

2 listed here

INDEPENDENT RESEARCH PROVIDERS

 

 

 

 

 

2 degrees investing initiative

8 listed here

0 listed here

7 listed here

0 listed here

0 listed here

RepRisk

22 listed here

1 listed here

2 listed here

11 listed here

2 listed here

Transition Pathway Initiative

1 listed here

1 listed here

0 listed here

0 listed here

0 listed here

Trucost

21 listed here

2 listed here

6 listed here

9 listed here

2 listed here