Published on 21 March 2018

SUSTAINABLE FINANCE

Oekom to join Institutional Shareholder Services (ISS) in unexpected acquistion

Oekom’s acquisition by Institutional Shareholder Services (ISS), the American proxy firm, has caused quite a shock in the small ESG (Environmental, Social and Governance) community. The German rating agency will now be able to manage increasingly fierce competition, but Europe will lose a rare champion in the process as all the major players in the extra-financial rating sector are North American (MSCI, Sustainalytics or traditional financial rating agencies offering this type of service).

 

 

Robert Hassler, co-founder and CEO of Oekom, pictured at Novethic’s annual conference in 2017
Novethic

"I am pleased that Oekom Research is joining ISS," said Robert Hassler, co-founder and CEO of the German rating agency which was founded in Munich in 1993. He added: "We share the same objective of providing institutional investors with world-class ESG ratings and data alongside cutting-edge responsible investment research and insights.”

The rise of sustainable finance has accelerated thanks to commitment from the European Commission and its recently published action plan. The plan creates new demand, but also increases competition between actors who do not necessarily “fit” into the same categories.

Competing with ESG heavyweights

Being able to compete alongside giants like MSCI who are multiplying their efforts and have the means to compete with smaller players around the world, is the main reason behind Oekom's decision to join ISS. The agency is in good standing and has an excellent reputation, allowing them to negotiate the overall integration of their 120-person team along with the guarantee that they can stay within the new structure for the next two years. The Paris-based team, led by Julia Haake, is expected to remain in the capital.

Oekom's investing clients, who collectively hold more than €1.5 trillion, were alerted before the announcement was made public. They welcomed the news since an increasing number of them would like to see an ESG rating as developed as financial ratings, given the sheer volume of their portfolios. They understand that this involves considerable resources.

The first major European acquisition for ISS

For ISS, this first-of-its-kind European acquisition is part of a global strategy for a possible IPO to come late 2018 or early 2019. In an interview with Responsible Investor, published in November 2017, ISS CEO Gary Retelny stated: "This will depend partly on the success of our acquisitions, whose 'viability' will be strongly influenced by intangible problems [such as the] ability to integrate acquired teams into a company that employs 1,200 people worldwide".

In the last three years ISS has acquired Ethix, the Swedish-based agency employing over 20 people, as well as South Pole, the Swiss climate scoring specialist, which has 10 people on its staff. The former head of Ethix, Ulrike Hasselgren, left ISS after two years, at the end of 2017, to join a Danish bank.

Anne-Catherine Husson-Traore,  @AC_HT, CEO of Novethic


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