German benchmarking company Solactive has bought a British stewardship solutions provider, enabling it to offer proxy voting and stewardship services to asset managers and owners.
Solactive said it bought Minerva Analytics because growth in demand for ESG-related financial services had surged after it acquired a 33 per cent stake in the firm in 2019.
While both companies will continue to operate separately for the time being, Solactive expects also to capitalise on Minerva’s data capabilities to complement its own business. The companies have a combined client base of 500, each of which will be able to take advantage of the customized services that both Solactive and Minerva consider among their chief competitive advantages.
Solactive head of strategic initiatives Jennifer Steding said the acquisition would enable the combined companies to offer a more comprehensive set of ESG solutions.
“We want to be more than an ESG index provider, we want to provide services along the whole value chain, from data to index to services and stewardship,” Steding told ESG Insight from the company’s head office in Frankfurt.
“Stewardship has gained a lot in importance and Minerva has a long-standing track recording of expertise and innovation in the area,”
Solactive offers a range of standard ESG-themed indexes, including several series of benchmarks based on the UN’s Sustainable Development Goals and Paris-Aligned benchmarks, built on data provided by ISS ESG. However, it is at the core of its business to create customized benchmarks leveraging an open architecture that allows institutional clients to choose data from a variety of providers.
“Just as Solactive ensures that benchmarks and indices reflect client’s needs, Minerva’s approach to stewardship is to ensure a completely tailored approach.
The German company is benefiting from a surge in demand for ESG-linked indexes as more and more asset managers seek benchmarks against which to gauge their sustainable investment strategies or to track in index products like exchange traded fund or structured products
Last year, the number of ESG benchmarks surged more than 43 per cent to around 50,000 worldwide, according to the Index Industry Association (IIA). That followed 40 per cent growth the year before. The fastest-growing sector is fixed income, which saw ESG-linked index numbers surpass those of equities for the first time last year.
Appetite for ESG indexes hasn’t been diminished by recent pushback against sustainable investing in the US. The company has been monitoring sentiment among European asset managers and has detected no similar anti-ESG movement.
Closer Integration
Steding said that among Minerva’s attractions was that its climate change voting guidelines have been aligned with the Taskforce on Climate-related Financial Disclosure and Climate Action.
“Their sustainability governance research now has a solid 10-year track record,” she said. “Minerva has also worked to resolve the problems of pooled fund split voting and was actually the first service provider to market with a practical solution, fully integrated with securities lending too.”
Minerva’s ESG Nexus product, a comprehensive and objective meta framework of leading ESG and sustainability reporting frameworks, is already incorporated into some of Solactive’s indexes and Steding said the company expects to integrate more. The combined companies would further develop the data product.
Steding said that the two companies shared a common philosophy that there is no such thing as a “one-size-fits-all” solution for clients, especially in sustainability. For that reason, Solactive’s open architecture will be maintained independent of the acquisition, and Minerva’s data will be offered as an option within that.
One potential means of more closely integrating the companies’ capabilities is by linking customised voting policies to customised benchmarks.
“We could create a custom index with a custom voting policy on, say, gender equality. The client could follow a gender equality-centered voting policy for the money that is managed within the fund that follows this index,” Steding said, explaining that all services can be regarded as modules and can be onboarded separately.
Internal Synergies
With the Minerva acquisition complete, Steding said the two companies have identified synergies in their internal operations, with the initial focus to be on their technology stacks.
“For example, we can leverage Solactive Technologies GmbH’s capabilities in the area of natural language processing and artificial intelligence for some of Minerva’s internal data collection processes,” Steding said.
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