6/2/22, 3:43 PM A Letter from Joe Mansueto and Kunal Kapoor | Morningstar

A Letter from Joe Mansueto and Kunal Kapoor

June 2, 2022

To our Morningstar community,

Morningstar owes its success to the trust investors place in the data, research, and analytics we
provide. We engender that trust by placing our principles—independence, transparency, and long-
term thinking—front and center in what we do. We spend every day thinking not just about how
we can spur Morningstar’s growth and create value for stakeholders, but about how we can
reinforce our commitment to the principles that have led us on our successful mission.

Soon after we acquired ESG ratings and research firm Sustainalytics, we began receiving
questions about whether some of Sustainalytics’ research practices reflected bias against
companies operating in Israel, including charges that Morningstar and Sustainalytics supported
the Boycott, Divestment, Sanctions (BDS) movement. To address those questions, we conducted
an internal investigation and published our findings in March 2021.

We stated then—and reaffirm today—that neither Morningstar nor Sustainalytics supports the
anti-Israel BDS campaign. However, in retrospect, our initial review was overly dismissive of the
serious bias concerns raised by the organization JLens, the Illinois Investment Policy Board (IIPB),
and other entities. We consider bias unacceptable in any form and concluded that the concerns
warranted a thorough, independent review.

For that reason, we formed a working group led by independent directors Steve Kaplan and Gail
Landis of our Board of Directors to oversee an investigation. In October 2021, the working group,
which also included Managing Director Don Phillips and Chief Ratings Officer Jeffrey Ptak,
engaged the outside law firm White & Case LLP to conduct that investigation. White & Case
interviewed more than 40 employees and external parties while reviewing around 140,000
Sustainalytics documents, client-facing reports, and other materials.

White & Case has completed that investigation and documented its findings and
recommendations in a 117-page report that we are publishing in its entirety. It identifies limited

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areas of bias that are outliers over the span of our work but, nevertheless, do not live up to
Morningstar’s standards.

In summary, White & Case found:

■ There was no evidence Sustainalytics products recommended or encouraged divestment from

Israel.
■ There was no evidence of pervasive or systemic bias against Israel across Sustainalytics
products, including the Sustainalytics ESG Risk Rating.
■ One Sustainalytics product, Human Rights Radar, exhibited bias in its outcomes by
overrepresenting firms linked to the Israeli-Palestinian conflict. Human Rights Radar is a siloed
product with the purpose of providing information on issuers involved in regions of the world
where serious human rights violations allegedly occur. It also sometimes used inflammatory
language and failed to provide sourcing attribution clearly and consistently.
■ Though not widespread, the investigation found scattered instances of processes and
procedures that can be improved to address and mitigate potential for implicit or confirmation
bias.

Based on these findings, White & Case made various recommendations in the report, which we
have decided to adopt in full. Morningstar has discontinued the Human Rights Radar, and
additional steps we are taking include but are not limited to: (1) embracing greater transparency as
to Sustainalytics’ research sources and ratings methodology, (2) monitoring our internal processes
to ensure greater consistency and adherence to our methodology, (3) adopting a style guide to
ensure all research products are free from biased terminology, and (4) discontinuing further
bespoke research on behalf of clients.

Along with Sustainalytics President Bob Mann, we have shared these findings and
recommendations with community organizations and colleagues who expressed interest in this
topic. We have greatly appreciated their candid feedback and thoughtful perspective, and given
what we have learned, we want to thank JLens, the Illinois Investment Policy Board, and other
interested parties for focusing our attention on these issues. We hope this dialogue, coupled with
the actions we have taken to investigate this matter and adjust our policies, procedures, and
products, underscores our commitment to conducting research in a way that upholds our
principles.

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We acquired Sustainalytics because we thought the firm shared our values and commitment to
delivering objective and insightful investment research and analysis to investors. Our experience
since that time has only further reinforced our original conviction. Bob and his team work tirelessly
to conduct rigorous, incisive analysis while innovating to keep up with the market’s rapidly
evolving demands. It is far from an easy task, as Sustainalytics is often called on to assess
controversial or ethically ambiguous matters. But time and again we’ve been impressed by the
seriousness and good faith with which our Sustainalytics colleagues meet these challenges. It
makes us proud to work alongside them.

Despite our best efforts, if investors have reason to question whether our research and ratings
uphold the principles of independence, transparency, and long-term thinking we aspire to, then we
can’t fulfill our mission. That’s why we’re taking the actions we’re taking. By taking these steps,
we believe we can build on Sustainalytics’ abundant strengths and ensure its work resonates even
more with the investors we serve.

As always, we value contrarian views and welcome your feedback anytime you see an opportunity
to do better for investors.

Sincerely,

Resources
View the full report of independent investigative counsel here.

Joe Mansueto
Kunal Kapoor

Executive Chairman Chief Executive Officer

Transparency is our policy. Learn how it impacts everything we do.

Transparency is how we protect the integrity of our work and keep empowering investors to achieve their goals and
dreams. And we have unwavering standards for how we keep that integrity intact, from our research and data to our
policies on content and your personal data.

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