Facing heat over ESG ratings, Morningstar tapped this lawyer to put out the fire
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Reuters spoke with White & Case partner Tara Lee about her and her team's recent work with Morningstar to determine if their acquired ESG ratings and research firm, Sustainalytics, reflected bias against companies operating in Israel.
"How was [this assignment] different? It was harder, " Tara Lee told Reuters of the independent probe, culminating in a 117-page report that Morningstar made public earlier this month. "There was no real template."
White & Case's report found no evidence that Sustainalytics products "recommend or encourage divestment" from Israel, nor did the White & Case team find any "pervasive or systemic bias" in the products. However, they did conclude that one standalone product, the Human Rights Radar, had a latent, disproportionate focus on Israel.
As a result of the investigation, Morningstar pledged to adopt all of White & Case's recommendations "in full," according to a spokesperson. The Illinois Investment Policy Board voted last week not to blacklist Morningstar, pursuant to its commitment to implement the White & Case recommendations.
The report also underlines the broader issues with ESG ratings and provides first-to-market research about the ESG rating industry and regulatory landscape. It provides a roadmap for companies and boards of directors on what to consider, as this still unregulated industry begins to endure closer legal, regulatory and enforcement scrutiny, and how to proactively mitigate problem areas.
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