By Dieter Holger
'It is the fastest-growing business,' says MSCI executive
Index and research giant MSCI Inc. has seen its stock outperform the market this year, buoyed by its rapidly expanding ESG -- or environmental, social and governance -- investing services.
"It is the fastest-growing business," said Remy Briand, head of ESG at MSCI, in an interview on Thursday.
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MSCI(MSCI)posted a 7.6% rise in net profit to $125.7 million during its second quarter, while operating revenues increased 6.2% from a year earlier to $385.6 million. It attributed the gains to a 25% spike in subscription revenue from ESG data and 11% from indexes, which include more than 1,000 ESG-themed products.
The company's growth comes as investors continue to flock to ESG. Briand said wealth managers like Merrill Lynch(BAC)and Morgan Stanley(MS)are increasingly speaking with their high-net-worth clients about impact investing. "People are starting to change their portfolio," he said.
Investors have also boosted MSCI's stock above the broad market. Shares in MSCI closed at an all-time high in mid-July at $245.73, according to Dow Jones Market Data. Its stock has fallen 6.2% from its record high but is still up 56% for the year, compared with the S&P 500's gains of 20%.
ESG earned MSCI just 5.5% of its operating revenues last quarter, according to the company's earnings, but Briand said that only accounts for research and doesn't factor the ESG data behind indexes that are licensed to clients, including for index funds. He added that the ESG business was also starting to move more into the risk and analytics side.
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Analytics are MSCI's second largest segment in terms of sales after the index business, accounting for around 32% of the company's total operating revenue last quarter.
"I think in a matter of a few years we will have the same level of interaction," Briand said.
MSCI's ESG team formed out of an acquisition around 10 years ago. On Monday, the company made its second acquisition in a decade when it agreed to buy Carbon Delta, a Zurich-based emissions analytics firm.
Carbon Delta's tech will create a new metric for MSCI's clients that calculates climate change's impact on the market value of listed companies, as part of a broader push to strengthen the company's ability to model the environmental impact of corporations.
"The next generation is to build those models on climate," Briand said.
He cautioned, however, that MSCI was more interested in organically growing its business and wasn't keen on acquisitions in the wildly overpopulated ESG data space.
Looking ahead, Briand said MSCI was exploring how to analyze the workforces of businesses -- including employee-turnover rates -- by drawing on data from online job postings and corporate disclosures. "There's a lot of digital information we can use on human capital," he said.
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Olivia Bugault contributed to this report.
-Dieter Holger; 415-439-6400; AskNewswires@dowjones.com
(END) Dow Jones Newswires
September 12, 2019 15:43 ET (19:43 GMT)
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