Ladies and gentlemen, please welcome Chip Merritt, Vice President of Investor Relations for S&P Global.
All right. Welcome to S&P Global Investor Day. I wanna thank those of you on the for attending here today, for those of you on the webcast, but particularly some of you folks traveled from quite a distance. We've got folks from California and Canada, Zurich, six folks from London, but the award goes to Marcus Guzzardi from Australia. Thanks for that. That's that's a true shareholder right there. I've done a number of investor days, and there's there's basically two principal complaints you get afterwards. The number one complaint after Investor Day is that the humble, hardworking IR guy doesn't get enough stage time. That we're not gonna fix that today. But the other complaint is not enough time for question and answers.
You're gonna get plenty of chances today to ask the speakers questions. As always, I need to re-read the obligatory statements. First, our non-GAAP adjusted information. In today's press release and throughout Investor Day, we're providing adjusted financial information. This information is provided to enable investors to make meaningful comparisons of the corporation's operating performance between periods and to view the corporation's business from the same perspective as management's. Click ahead here. Of course, we got the safe harbor. In addition, I need to provide certain cautionary remarks about the forward-looking statements. Except for historical information, the matters discussed today will contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including projections, estimates, and descriptions of future events.
Any such statements are based on current expectations and current economic conditions and are subject to risks and uncertainties that may cause actual results to differ materially from results anticipated in these forward-looking statements. In this regard, we direct listeners to the cautionary statements contained in our Form 10-Ks, 10-Qs, and other periodic filings filed with the U.S. Securities and Exchange Commission. Okay. With that, let's introduce what's going to occur today. We'll start off today with opening remarks from Doug Peterson, our president and CEO, and he'll talk about strategy. We'll go to Mike Chinn after that, talk about market intelligence. Martina Cheung will talk about ESG. Ewout and I were in Europe last week, and, I don't think there was a meeting we had where there wasn't an ESG question, so you Americans, it's coming.
Then Martin Fraenkel for Platts. At that time, we're gonna have a Q&A. That Q&A will be specifically just for Mike, Martina, and Martin, okay? You'll get Doug later. After the Q&A, we'll have a refreshment break, get a chance to go outside where you got your lunch, take a quick break. We'll come back in. We'll pick up with Alex Matturri from Index, John Berisford from Ratings. Then we've got technology panel. Mike's gonna come back up and host a little panel with Nick Cafferillo, our Chief Technology Officer, and Daniel Nadler, Kensho's Founder and CEO. We'll then have another Q&A. At that Q&A, it will simply be for Alex, John, and the panel members. Okay? Then we'll have our final speaker, Ewout Steenbergen.
We'll have the last Q&A, which will be Doug and Ewout and our four presidents. Okay? Plenty of chances for questions. I hope that most of you had a chance to see the showcase. If not, after the presentations, there will be a cocktail reception and an opportunity to go see the showcases that you didn't see. Ratings360, you've heard us talk a lot about that. Please go visit that booth. Factor Allocator, you probably know anything about it. Worth visiting. We talked about the market intelligence platform, right? That's something that Mike and his team are putting together. There's three examples of it for you out there from three different persona groups. Data feeds, very interesting, very interesting data as a unique way of using data feeds.
Platts has something about blockchain with Fujairah. We've talked about it on our conference calls. You can kind of see it as live as you can see something in technology. At Davos, at the World Economic Forum, we had a panel, a huge wall, and we've kind of made a version of that here for the big picture in energy. Lastly, we made that Kensho acquisition, and this is a chance to go out there and talk to folks who can answer things that I can't. Please take the time, ask them the tough questions that just go right over my head. With that, let's start the day with Doug Peterson.
Thank you, Chip, and good morning, everyone. Good afternoon. It's great to be here. I wanna welcome you to New York to our Investor Day. It's been a few years since we've had an Investor Day, and as you know, we've been interacting with you through our quarterly earnings calls and visits around the globe. Over those few years, we've been having really strong performance. Our company has delivered strong returns. We've delivered margin improvements. We've been able to raise our market cap. There's challenges around us. We still see around us various challenges. Our customer expectations have changed dramatically. There's a disruption around us from technology changing every kind of business model you can imagine, and the macroeconomic environment has changed.
This morning, I went to CNBC to talk for a few minutes, I thought I was gonna get bumped because of one of those macroeconomic and geopolitical issues which relates to North Korea. We've actually had 150 years of dealing with disruption and change. Our roots in this company go back to the original Mr. Poor, Henry Varnum Poor, that launched reports on railroads and canals. Over those last 150 years, we've developed products and services to deliver intelligence and products and data that our customers use to make decisions. They ask the question: what does S&P think? What does S&P Global think before they make decisions?
Today, we're gonna talk a little bit about the past, we're gonna talk a little bit about our performance, but we're also gonna give you a vision for the future and how we're going to position ourselves for growth to return more for our shareholders. Over the last three years, five years, seven years, we've transformed this company. If you remember four years ago when we had our last investor day, we had just completed a transformation of McGraw Hill and turned it into a data and analytics company focused on financial markets. When we took the strategy and took a step back, I thought about the company in different ways. We were global, and the types of products and services that we could provide that would have the most impact would be global. We were gonna build scale businesses.
We were going to have strong brands. Our data and our analytics and our benchmarks were going to be entirely focused on markets, financial markets and commodity markets. During that time, we divested of non-core businesses. We did acquisitions. One of the most important was acquiring SNL. As you've seen, SNL has been transformative for us. We put together the Market Intelligence division. SNL now forms a core part of our company when it comes to technology and data operations. Also during this time, we've invested in risk and control and compliance to have that foundation. We've invested to have a strong foundation. What were some of the results you saw? You saw the margins go from 30% to 47% over that six-year period. Our revenues increased last year to $6.1 billion.
Our total shareholder return on the prior three years, the CAGR was 26% from 2015 to 2017, versus 11% for the S&P 500. One of the things that unified all of us across that platform was the brand, the S&P Global brand. Something that brought the company together, gave us a single purpose, and allowed us to have all of our employees and all of our services to have this intense focus on essential intelligence. Our Ratings business, which provides opinions to global markets and local markets, Market Intelligence, serving investors, risk managers, investment bankers with models, with data, with analytics. S&P Dow Jones Indices, that is the benchmark. When people ask, "How did the market do?" People answer with either S&P 500 or Dow Jones.
Platts, S&P Global Platts, which is embedded across the energy complex. You might ask, who are we? Who is our company? Our 20,000 employees in 31 countries. We have over 200 billion data points across all of our different platforms. We serve 97 of the top 100 Global Fortune 100 companies. We serve 10 of the top 10 global banks. You think about these customers, over the last year, I've spent a lot of time with customers. It's one of the things that I enjoy in my job, getting out into the markets, meeting with different people who are making decisions, who are using our data and analytics. Last year, when I met with the treasurer of Boeing, we talked about their competitive dynamics and how they think about the markets.
We talked about their supply chain, and we talked about how they raise financing for a very complex global aviation industry. We talked about Capital IQ and how Capital IQ is integral to all of their decision-making on the industry dynamics. We talked about how they were using Ratings services with a new structured finance approach to raising aircraft financing for the emerging markets. Earlier this year, I was in San Francisco. I met with the CEO and the CFO of Salesforce. I learned a lot from them about their business model because we're spending a lot of time understanding technology. They also were taking a trip, their first time to tap the public markets for debt, and appreciative of having S&P Global Ratings along with them.
Earlier this year, I was in Japan meeting with GPIF, which is the largest pool of assets under management anywhere in the world. As Chip just said, the ESG and sustainability focus was the main part of our conversation, and they're using our index business to help them shape new indices and benchmarks for their performance. Finally, at the end of the year last year, I was in Mexico meeting with the CEO and CFO of Pemex. As you know, Pemex is looking at how the oil markets and gas markets are transforming from shale, as well as all of the production dynamics in the Gulf, in the southwestern part of the U.S. We talked about that and how they use the Platts benchmarks and the Platts data to make their investment decisions. As our customers are adapting to change, so are we.
It's necessary that despite having 150 years of performance, and especially the last five years, three years with very strong performance, we can't be complacent. We have to be cognizant that the world is changing around us. Now more than ever, we have to understand what is happening that's shaping the environment. AI and machine learning, the millennials. In fact, 64% of our employees are millennials, and they have different expectations on how they're gonna work. The regulatory landscape has been changing. Very importantly, customer insights are changing. Customer needs are changing. Last year, despite having had a very strong track record, we took a step back and said, "Let's revisit our strategy. Let's revisit our vision. We're not gonna change our purpose. We're not gonna change the foundation of what we are. We're not gonna let go of the things we're doing well.
Let's see how we're gonna approach the future. We took 60 of our top employees, along with our operating committee. We formed eight teams. Those teams went out and met with 155 companies. These teams focused on five client segments, including investment banking, commercial banking, governments, corporates. We had three teams. One of them looked at competition, one at disruption, one at technology. For almost three months, we spent time understanding all of those insights and what the implications were for us. What did we learn? We learned that customers' expectations are changing. When customers and users end up at the office, their experience is very different at their desktop than what it is on their cell phones and when they're arriving at office and the way that new products and services are integrated.
The delivery is different, the graphication, the visualization tools, the color, the interactivity. They also have a demand for transparency. Very importantly, around the globe, we hear that there's new data sets when it comes to ESG in particular, as well as supply chain data, private company information, that there's increasing demand for. With that, we developed a strategy called Powering the Markets of the Future based off of the customer feedback, these insights, views on competition and disruption, the future of the markets, based on our own employees' insights and how we did that as a team. You can imagine the kind of excitement that that's created across the company, that our own employees could go out and meet these hundreds of customers and develop our own strategy. As part of that, we've developed a framework.
This framework is what we're gonna use today throughout the presentations. This is we're gonna be using for the next few years to guide our investments, to guide how we're going to grow the company. This has a couple of different approaches. First, we're gonna use this to serve our customers better, to anticipate their needs and meet their needs. We're also gonna use it to serve our own people better, to serve our shareholders. This framework has three elements to it. It has an approach to evolving and growing our core businesses, finding adjacencies in places that we can invest for the future that cut across S&P Global or their new needs we can go out and fulfill. We have foundational capabilities, being global, customer-oriented, innovation, technology, operational excellence.
Our people, our commitment to our people, to ensure that we continue to invest in mentoring, in leadership training, managing our people better. One of the areas that we've looked at specifically recently is technology training in a program called EssentialTECH, something that we've rolled out across the company, starting with me, starting with the operating committee, so we ourselves can become much more savvy about technology, especially since we're gonna be investing so much there. Going back to what I mentioned earlier about listening to our customers, over the last five, six, seven years, especially starting in Europe and especially starting in Northern Europe, we've been hearing this need to start bringing more ESG information to the markets, environmental, social, and governance, data analytics, benchmarks, different ways that investors, risk managers, corporations, governments can make decisions incorporating this kind of information.
As part of that, we've undertaken an approach, and you're gonna hear more about it, on how we can take some of the products and services we already have, but understand what those needs are. As an example, today, there's over 9,000 companies reporting some type of ESG information. Through Trucost, we're actually gathering that in one of our products and services. 1,700 companies have already signed the United Nations Principles for Responsible Investment, including ourselves. You're gonna be hearing more about the design team and what they're doing. ESG is something that we've taken seriously ourselves, and we've invested in ESG as S&P Global. Our energy use is down by 27% over the last five years in our offices. We have a carbon offset program for our travel.
In the ESG space, last year, we donated 40,000 hours of our employees' time to community activities. Earlier this year, as you know, we invested $20 million in our foundation. We're an industry leader when it comes to employee resource groups that provide our diversity programs, a really unique way to connect our employees. As you also know, over the last five years, we've refreshed and diversified our board of directors, who really provide an excellent oversight and strong governance. Now, as you know, technology and innovation is gonna have to be part of our future, part of everyone's future. When we envisioned our strategy and we thought about the future, we didn't see one that technology wasn't gonna be integral to it.
In fact, we had a lot of arguments is, how much are machines going to be taking over decision-making? What is gonna be the relationship between human decision-making and machine decision-making? We felt like this was so important for us that we had to really raise our game in technology. So over the last few years, we have been investing in technology already through S&P Global Ventures, through relationships with venture capital firms in San Francisco, in Singapore and Tel Aviv, in direct investments that we've been making ourselves. We also knew that we had to commit to have platform, to the S&P Global platform, which we've been developing, and you'll hear more about this morning. We acquired Panjiva, which is providing data sciences. It has a advanced data supply and data science capabilities.
When you go back to the showcases, you can see some of the Panjiva data incorporated in some of our products. With Kensho, who you're also going to be hearing more from this afternoon, you're going to see that Kensho has brought an incredibly, what we call a extension of our brains, a way to extend our intelligence and make what was essential intelligence even more essential and more important. We have some early wins that you're going to hear about with our Crunchbase data of private companies, which was incorporated in hours and a few weeks of planning, as opposed to months and months. Technology is something that doesn't happen by accident. You need to take it on proactively to ensure that you can become successful.
One of the ways we've thought about it at the company is to think about how are we gonna manage the company as well. Last year, after understanding what the demands were in the markets, what our needs were to be more technologically savvy, we developed a program where we now have operational services across S&P Global, where we've unified our digital infrastructure, our engineering and technology and innovation services, as well as our data operation services. This gives us a platform to have scale, agility, apply agile approaches, and have best in class and speed in how we deliver.
Now, putting all this together, during today, you're gonna be hearing from our executives about our future, about this framework on how we're going to evolve our core businesses, pursue adjacent opportunities, develop our foundational capabilities, and how we're positioning S&P Global, starting with the strategy that's already been very successful, being global, having scale, strong brands, serving markets, and how we're going to use this approach to provide our future. We're gonna have the ability today to give you a vision for that future, a commitment to our employees, a commitment to the markets, how we're gonna deliver growth, how we're not being complacent about what we see happening around us, a commitment to our shareholders, and how we're going to continue to deliver.
With that, I want to hand it over to Mike Chinn and thank all of you and welcome you for being with us this afternoon. Thank you.
Good afternoon, everybody. I am delighted to be here with you to share the Market Intelligence story, to share our goals and our aspirations and our visions for the Market Intelligence business, and show you how our strategy connects to the broader S&P Global strategy that Doug just shared with you today. We are believe that in a world that is awash in data, where data is providing, every day, the fuel for decision-making in the twenty-first century, we believe that we are very well-positioned to take advantage of a multitude of opportunities that that environment creates to help our customers, drive better decision-making and faster decision-making, and to continue to deliver above-market revenue growth and ongoing creation of shareholder value. Doug showed you this framework, that we're all gonna use today, to talk to you about our businesses.
In particular, around the foundational capabilities, I'm gonna focus in on four of those. I'm gonna talk about how we continue to evolve the way that we engage with our customers, get orient ourselves so that we can most effectively understand their challenges and their problems and help them design solutions to solve those problems. We'll talk about how we have opportunities to continue to become a much more global business in every respect. Maybe most importantly, how we are going to continue to harness and invest in technology to drive innovative solutions and grow our business over the long term. We think that by doing all of those things, successfully harnessing all of those capabilities, that we can help our customers make better, faster, and smarter decisions with greater conviction than they ever have before.
When we think about the Market Intelligence business, we have assembled an amazing array of content and data assets, great brands that we've assembled over many years, that serve as the foundation for everything that we do. We focus on differentiated content, unique content that has an incredibly high degree of quality and relevance, all sorts of business and financial data that serves as the bedrock for our business. On top of that, we've developed excellent technological capabilities and skills. Software engineering that allows us to build workflow tools atop that content and help our clients get to the answer quicker.
The third key ingredient for us is that we have a proactive, knowledgeable, customer-facing commercial and go-to-market organization so that we can not only design products that help our customers, but sell those successfully and help our clients maximize the value that they get from those products. We do this with over 10,000 colleagues around the world in over 40 offices, including significant operation centers and delivery centers in areas all over the world, where there's a strong alignment of culture and of what we're trying to achieve really around the world. We have over 230,000 active users of our platforms today. We cover over 4 million companies across those databases. As we look at the last couple of years, we've delivered very strong top-line growth, organic growth.
What you'll notice here is that that growth is very consistent across all three product categories that we produce. Our desktop business may be the most familiar. A host of great brands where we deliver our content through Excel and mobile and web experiences. Our Risk Services business where we monetize the intellectual property that comes from the ratings agency and then supplement that with new solutions that look at the unrated universe and help our clients understand credit and model out credit risk. Our data management solutions where we directly feed all of that rich content into the internal systems of our customers. You can see that across the board, quite consistent growth, around 9% over the last couple of years.
At the same time that we've been growing, we have made really good headway on the margin front, since the acquisition of SNL and the integration of those two businesses. You can see that margins have grown almost 900 basis points. About half of that is due to delivering the SNL-related synergies in a greater quantity and faster than we thought at the time of closing of the deal. We've also done a lot of work to streamline processes, leadership structure, tools, and products. There also, of course, is inherent operating leverage in our business, in our heavily subscription-based business. Those three big areas together have enabled us to grow our margins impressively over the last couple of years.
As we look at the overall environment in which we operate, market growth, the financial data and analytics business is growing about 3%-4%. There's strong baseline growth. There is, of course, a growing demand for tools and software solutions that help our customers do things faster, do it more efficiently, cut costs, automate things, and just generally create greater productivity and greater insights. We have the wind at our back there too. We also think that regulation on balance is modestly constructive for our business. As regulations change, as the environment for the companies that we serve change, they often turn to us to help them comply with new regulations. MiFID II is small impact for us because we just don't have a lot of exposure to that ecosystem around broker research.
For us, that's not a significant, a significant impact for us. Around Market Intelligence specifically, we have great revenue visibility. Over 95% of our revenue comes from subscription-based products, and our renewal rates are around 95%. The combination of those two things provides us with a lot of ballast and a lot of consistency going forward. You look at the chart on the right, you'll see that we are still heavily indexed to North America with respect to our revenue. While the areas, in EMEA and APAC are growing faster, we know that we have opportunities, to add fuel to the fire and grow faster outside of the U.S.
Then lastly, we also have great diversity in our revenue streams, not only by product group, but also by the segments that we serve and the personas that we serve within those customer segments. So I wanna give you a sense for the breadth and the depth and the size of that diversity of segments. If you look here on the left side, you'll see that we do serve a lot of segments. I think this is to some degree unique and interesting around the Market Intelligence franchise in relation to some of our peers in the market. Investment banking and investment management continue to be and will always be important segments for us, and those comprise a little less than 50% of our revenue.
I'll point you to the last few blocks in that chart on the left, and you'll see that private equity, commercial banking and insurance, non-financial corporations, and then other companies, which include professional services firms of all stripes, consulting, accounting, and law firms, government and regulatory agencies, that's more than 50% of our revenue. What We think that is interesting for a couple of reasons. Doug referenced that 360-degree view of the market. We think that by engaging deeply with all of these segments, we actually can build products and then monetize them across, but also bring new insights that we may learn in one segment to another segment, and we think that is unique about our franchise. You'll also notice that all four of those segments are growing faster than Market Intelligence overall.
There is tremendous change going on in the, in the corporate world, and we have deep, deep relationships from which we can springboard. To just to give you a sense for what that looks like, we took one of our clients, a large commercial bank, and are showing you the depth and breadth of our relationship there. We have over 600 users at this commercial bank. Certain segments would be very familiar to you in finance, capital markets, credit risk, where we have very strong assets. You can also see that we have strong penetration in revenue-producing parts of these commercial banks. Retail lending, commercial lending, leverage and sponsored finance. Not only, not only are these deep relationships, but they're broad, they continue to grow.
You can also see that from a product perspective, this isn't just a one-trick pony with SNL content or Capital IQ content. We also have very strong product diversification within these accounts. We think this is an interesting part of our business, maybe not terribly well understood, but you can see that it is really fueling our growth and fueling the way that we help our customers. Now let's turn to another part of our business that we're very excited about. Data management solutions for us is our data feeds and API business. In some way, this is the purest part of what a content and data and analytics company does.
We takes advantage of our tremendous capabilities in sourcing and integrating and cleaning and synthesizing data of all stripes, and then feeding that directly into the systems of our end users. This is about 20% of our business today, and you can see on the left, that it also is growing faster than market intelligence overall. We think this just has tremendous potential. As our clients continue to get more and more sophisticated with technology, they are coming to us for content to fuel all of those processes, risk processes, revenue-producing processes, and a whole series of other use cases. We thought to illustrate this, we would show you one example of our experience with one quant hedge fund client over the last 18 months.
What you'll notice here is that we started off with a very modest contract, $12,000, where we were feeding them PDF files of our transcripts. As over time, we made that machine readable, we made it streaming in real time, and most importantly, we tagged those transcripts with everyone who spoke in those transcripts, with all the analysts who asked questions in those transcripts, with an understanding of ownership data of those companies. By increasing the amount of linking and integration and making that available so that our end quant fund customer could actually understand what did it mean when this analyst asked that question? What kind of estimates did they have on this company? You can see that we actually create not just linear value, but we create exponential value for the end customer.
By doing all of that heavy lifting up front for them, we save them tremendous time and let them focus on insight generation. Typical data scientist or machine learning expert may spend 80% of their time cleaning and integrating and synthesizing data. By doing this for them, we believe that we create exponential value. This isn't just a hedge fund opportunity for us. As the world continues to change and data is increasingly the fuel for decision-making, we see that commercial underwriting teams, insurance underwriting teams, and data lakes and data scientists among our customer base continue to demand this content for us. This is an area where we're investing not only in the infrastructure, but in our commercial capabilities.
Given that we've got this fairly broad product suite and a number of different products, how do we actually get out to the market and engage with our customers? We have spent a lot of time over the last couple of years retooling and reorganizing our entire commercial team with the goal of making things simple and easy for our customers to engage with us, to buy from us, to be trained by us, and ultimately for us to deliver more value for them. We also have structured ourselves so that we can create much deeper relationships. Not just transactional relationships around sales and invoices, but much deeper relationships where we can bring to bear the full capabilities of our firm and help them create new insights from the information that we provide. Fundamentally, we did two things.
We had to get organized and aligned, and we had to make things simple. For instance, we have about 800 people in our commercial organization. Every one of them focuses only on one of those segments that we serve because we believe we need to be as expert in our client businesses as they are, and the best way to do that is to focus in on one segment. We also created role clarity. We have new sales people, we have relationship managers, and we have product specialists or sales engineers. We've got the right incentives in place for all of those so that we can not only drive white space production or new logos, but we can build much deeper relationships with our existing customers.
We also knew that we needed to simplify and make it easy and reduce friction for our customers to interact with us. We reduced our product packages by 90%. We've also moved about 70% of our legacy per-seat contracts to enterprise agreements. The reason that we like enterprise agreements is it creates greater stickiness. It reduces the friction for any client, any end user to get value from our product. We think that it's just a much better arrangement all the way around and creates a much deeper relationship. This is what we spent a couple of years doing, and we're starting to see results. We've got some very strong leading indicators that tell us that this is starting to make an impact.
Our renewal rates have improved from the low 90s to 95%, which is indicative of deeper, more insightful, we're bringing more value to these relationships. We're also starting to see that new logo generation, where we are actually bringing new customers into the Market Intelligence fold have increased dramatically. Our relationship managers are delivering more referrals, which tells us they're actually getting in and understanding what problems we can help our customers solve. As a result, we're seeing very strong user growth of about 14% year-on-year. We think we'll monetize that over the long term through higher renewal rates, stickier relationships, better pricing, also more willing referrals. Also on a more qualitative basis, we've reduced the administrative burden by simplifying everything on our frontline salespeople by about 10%.
As a result, all of these things have helped fuel that strong organic growth that we looked at a few minutes ago. Now that we've gotten our commercial model a little more dialed in, it's really important that we equip all of our commercial folks with the right technology and the right products to get out to the market. The S&P Global Platform, Doug mentioned, this is the largest software engineering project underway at S&P. Fundamentally, what we're trying to do here is to bring together all of our legacy platforms into one consistent user experience that's simple and integrated. This will allow our clients to interact with us very consistently across every channel: Excel, web, mobile, feeds even.
This is a big project for us, and you can see here that this is a project that will be a multi-year journey, not only for us, but also for our end customers, because we have about 230,000 of them to move to this new platform. We took the first steps in doing this with the SNL platform over the last few months. We've heard a lot of feedback from a lot of our end customers who are very accustomed to the systems that we have. In response to that feedback, we've stepped up our release cycle so that we can be more responsive and address the feedback that's coming in. We've done four subsequent releases since last November, and we've moved about 100,000 users to the new platform. The Capital IQ platform is under development.
This will take two or three years. We want to be very deliberate, very thoughtful, and cognizant of the fact that we are changing deeply embedded work tools. We have the luxury of taking the long view on this. There are some other products that we need to move. At the same time, the Market Intelligence Platform has also become truly the S&P Global Platform. If you had a chance in the showcase to look at Ratings360, is launching in the next week or so, and it is built on the architecture and infrastructure of the new Market Intelligence Platform. RatingsDirect will move to that, our colleagues in Platts, and Martin will talk about this in a bit, also will be able to build upon this architecture.
We think this helps everyone at S&P Global get to market more efficiently and quicker than we would if we were all doing this independently on our own. We think this is a big win for S&P Global. Now looking forward a little bit, we think we have a multitude of opportunities to build off of this very robust and strong foundation. We've grouped them into three buckets, these opportunities. The first, we think there are some very logical and yet material extensions of our core data and analytics franchise. In our risk services business, and you'll hear from Martina in a little bit, there are opportunities for us to expand our ESG coverage, to expand our cyber risk coverage, to make sure that we're providing a holistic view of risk and credit risk to our customers.
We also are experimenting and doing research on behavioral and sentiment-based models, moving beyond just pure financial credit risk, but also taking in the totality of information that is available in the market today. We also are responsive in taking advantage of new regulations, IFRS 9, CECL, and other things that are changing the way that companies need to evaluate their credit risk, and we are really well-positioned to deliver solutions and have one of our showcases focused on that. Similarly, we think there are ways to continue and opportunities to continue to expand our core competencies around differentiated and unique content. Doug referenced Panjiva, which is a really innovative company doing interesting things around supply chain data and trade flow data. We think that supply chain presents a nice opportunity for us going forward.
We also have opportunities to round out where we are already very deep in certain sectors, opportunities to round out global coverage. We also are really interested in continuing to expand our sector-specific, sector-relevant model to sectors that we do not follow today. We've done some pretty extensive research to identify opportunities that we think are ripe for our style of coverage and our approach to the market. Second big group, and I mentioned this earlier, is that we know that we have bigger opportunities outside of North America than we've taken advantage of so far. Some of this is just building out our commercial teams. We've identified areas to supplement those teams in fast-growing emerging markets.
In Risk Services in particular, given the relative immaturity of certain markets around the world in emerging economies, we bring a particular product set and skill set to helping commercial banks and insurance companies evaluate all sorts of asset class risk with some of our scorecard solutions. We also have opportunities and the need to make our products more relevant in some of these markets. Some things are as straightforward as product localization, making sure that our products are easily used by the full scope of users in some of these countries. Private company data Doug mentioned is a big opportunity for us. We prioritize key markets where we think we have a real ability to build solutions off of private companies, and provide greater detail and context there.
The last part of that is in certain countries where financial data is either less available or less reliable, we've done some very interesting work to start to build alternative credit models that look at non-financial data, where traditional data is limited. The third bucket and last bucket of opportunities that I'll talk about today is embracing the tremendous opportunities that have been created by the proliferation of new sources of content outside of traditional data and new technologies, and we think about these in two ways. First is nontraditional or alternative data, as it's often called. We are already doing this in many areas. There's a great showcase around using transcripts and linking that together with other content. I referenced that a little bit ago.
We believe, as I said earlier, that linking this alternative data, geographic data, satellite data, logistics data, other things together with our traditional data creates exponential value. It also leverages some of our strong suits and some of our core competencies around sourcing, ingesting, and integrating content. We'll talk about this later. Again, as I mentioned earlier, this is not just a quant hedge fund opportunity for us. We see these opportunities across the multitude of segments that we serve. On the emerging technology side, we think we have a big opportunity to improve discover, discoverability and usability of our platforms by incorporating a much more natural language, Google-like search into our products to help our customers get to the answer faster and find what they're looking for more efficiently. Machine learning also accelerates for us time to market. We've talked about Crunchbase.
Something that would've taken us months has been distilled down to hours or days to get out to market quicker. This whole area is a great opportunity for us to marry together our core data capabilities with capabilities around emerging technologies. Just to close here, we think that over the last couple of years we've been the fastest growing organic, fastest organic grower in our space. We would hope to continue to do that given the huge spectrum of possibilities and opportunities that we have, and we'll continue to focus on three things. The first is leveraging our strong content heritage, building off of this robust foundation of unique assets and must-have content, to expand our core franchise. The second is we have big opportunities to streamline and enrich the customer experience.
The S&P Global Platform is one part of that, but there are a number of things that we need to do and opportunities we have there across all of our delivery platforms. As I just mentioned, we are very well positioned to harness the proliferation of data from all sorts of new sources, and use emerging technologies like Kensho and others to integrate that into our products and build new things that the market hasn't seen before. I'll close there. Thank you very much, and I'd like to introduce Martina Cheung.
Thanks, Mike. Good afternoon, everyone. It's my first time meeting many of you, and I'm really delighted to be here today so I can talk to you a little bit about our ESG initiative at S&P Global. I didn't want to make any assumptions around how deeply all of you were familiar with ESG, so I thought it would be good to maybe start from a fairly foundational level in terms of how we think about ESG at S&P Global. We view ESG as critical to long-term value creation, and that's not just for companies, it's for investors and a lot of other stakeholders in the market.
Some of the top factors driving this value creation, for example, under environmental, think about factors such as greenhouse gas reduction rather, resource consumption. Under the social category, you can think about factors such as labor standards, such as product quality and safety. Under the governance area, think about remuneration, board composition, and policies as well as shareholder rights. Of course, all of these things have the ability to impact both your top and bottom line. Rather than just thinking about it from the standpoint of reporting and disclosure requirements, we could look at, for example, your ability to manage operational risk. If you think about disruption possible in your supply chain as a result of ESG impacts.
You could think about also the ability to manage your costs, for instance, through more efficient energy consumption. We also look at the ability to really differentiate your brand and increase retention and loyalty with your employees through strong ESG programs. We're also seeing the use of a lot of what we think of as upside ESG strategies. For example, if you are a big tech company and you decide to power your data center through solar, you may be able to sell your excess power back to the grid at a profit, and that's a great example of an ESG upside strategy. When you think about all these things together, they can impact cash flow, profits, and ultimately long-term company value. Of course, we're not alone in thinking like this.
By any measure, this market has experienced exceptional growth in the last several years. Doug mentioned that there are over 9,000 companies reporting ESG today. That's up from about 20 companies in the early 1990s. When you think about the 1,700 signatories of the UNPRI, their asset under management has effectively grown by 11x between 2006 and 2017. Today, globally, there are around $23 trillion assets that are managed under responsible investing strategies, and that's an increase of about 25% since 2014. Very fast-growing market and lots of adoption in that market. When we see the adoption in a market that's fairly young and nascent, we also see the customer needs start to increase.
I wanna just make sure to emphasize to you, a lot of you might think about the ESG use cases being very much sort of driven by the investors, and certainly, that's been an area where there has been a lot of focus in the last several years. For us, ESG actually has broad application across the many use cases and users that we have across all of our divisions. Certainly investors would use ESG for exclusionary screening. Some of you may already do that. You'll see a lot of ESG investment themes, for example. We also serve lenders who are interested in ESG-linked lending and who may also need ESG factors to actually track loan covenants, for example. In addition to that, I mentioned operational risk.
A supply chain manager may have operational risk exposure if their counterparties in the supply chain have poor labor standards and have strikes and disruptions, for example. Last but not least, think about the CFO. Not only do they have oftentimes the burden of compliance or regulatory disclosures, but they're also responsible for actually being able to calculate the financial impact of these ESG factors for reporting purposes. When we talk to all of those customers and all of those users of ESG information, what they tell us is that they're experiencing quite a bit of pain in terms of how they do their analysis, and this comes down into several areas. The first will be around data. It's not just enough to have the ESG score.
Our users and our customers want the underlying data that goes under that score, and they wanna know that so they can run their own analysis and run their own scenarios. The second, and many of you will probably be familiar with this, is that there's a huge push for very deep asset-level data. You'll see that as it relates to the need to report at factory level and plant level for new disclosures such as SASB, TCFD, et cetera. In addition to that, we're seeing a lot of demand for scenario-based planning tools, but also for other types of analytic tools that will help take this, the big swath of ESG data that's out there and actually drive insights for users.
Lastly, but I think also very importantly, a lot of the folks in the last several years has been unlisted companies. What we're hearing from our customers is they would like to see these ESG factors, these ESG analyses applied not just to listed and public companies, but also private companies and other asset classes, so, for example, real estate. At S&P Global, many of you will probably be aware that we already play a very important role in the markets as it relates to ESG. Doug mentioned the 1st, which is that we have our own award-winning corporate responsibility program, but we also participate quite a bit in the industry dialogue around setting standards and frameworks for ESG.
Dr. Richard Mattison, who's the CEO of Trucost, participates in the EU Sustainable Finance Plan, and Michael Wilkins from our S&P Global Ratings group participates in the governance panel for the TCFD. We really help to drive the dialogue around ESG and to help make sure that there are rigorous and robust frameworks set up going forward. Of course, last but not least, the third way we participate is that each of our divisions has very deep assets in this area. To cut across, think about data. We have incredibly deep energy data, including carbon, biofuels, renewables, in both Platts as well as Market Intelligence. Market Intelligence also has really a market-leading governance dataset, which is very powerful.
When you think about analytics, I could give you some examples here that include the Platts Scenario Planning Service, as well as the Trucost Carbon Scorecard. That Carbon Scorecard has been applied to all of the standard S&P Dow Jones Indices. Finally, thinking about research and insights, Ratings just launched their Green Evaluation product last year, within Market Intelligence, we now have a dedicated ESG team that's reporting ESG news. We're getting quite a bit of adoption on those products. Just in terms of the ratings themselves, a recent look back against the ratings highlighted over 700 ratings assessments that were impacted by the E or environmental and climate concerns between 2015 and 2017.
If you look even outside of that into Platts and into MI, for example, or Market Intelligence, Platts already has 600 customers using their Two-Degree Scenario Planning Service. Market Intelligence has received hundreds of requests for deeper renewable data, as many of our customers are thinking about disclosures, operational risk, et cetera. I'm not gonna spend time speaking further about some of the products here 'cause I mentioned a lot of them. I did wanna also just add that last week, Trucost launched their SDG Evaluation Tool, which is a quantitative model that helps companies evaluate the performance, their own performance against SDGs in the context of their geographic coverage. Lots of new products coming out of our divisions also. You see, in each of our divisions, we have very strong assets.
We have very strong products, lot of expertise. We did see an opportunity to really accelerate and scale these products at an S&P Global level. In December, we launched the ESG design team. It is a cross-divisional, cross-functional group, and the goal of the team is to effectively identify and prioritize opportunities in ESG that cut across the divisions. This is made possible by the fact that we have this common data and technology backbone that Doug referenced earlier in the session, and that's really gonna help us here because data is very critical to building some of the better and more sophisticated ESG products that we'd like to do. Our initial areas of focus are gonna be on data, so we're very focused on ensuring that we have fully populated datasets for asset-level data, particularly in the energy space.
We're also looking at ensuring that we can create the first foundation for what we're terming the ESG Data Factory. Big part of that is actually bringing all of the data we currently have in-house onto the same platform, and we've made some investments there, particularly focusing on Trucost data and Platts data and bringing those datasets onto the S&P Global Platform. We're also looking to focus on better educating our clients in terms of the overarching set of capabilities and products that we have around ESG. That's gonna be quite a big focus going forward. And I would say that the team itself has an incredible amount of energy and enthusiasm for this.
We also see it as an incredible opportunity for us, one that, one that is necessary really for us to serve our customers in the best possible way. I will finish up there. Thank you, and I'm gonna hand over to Martin Fraenkel.
Thanks, Martina, good afternoon to everyone. It's my privilege to introduce the Platts business to you. The Platts business has shown strong growth for quite a number of years now, both through the ups and the downs of the commodity market cycle, it continues to grow. The business has been favored through these the ups and downs by some favorable market trends, particularly the liberalization of energy markets around the world, the increasing trade flows in all commodities.
As we, as we talk today about the business, and using the framework which Doug outlined at the beginning, I'm going to focus on how Platts continues to grow the core business by serving our global customers, and by striving to deliver them exceptional customer experience and with an increasing focus on operational excellence. I'm also going to discuss with you some of the ways in which we're applying technology to bring new and innovative solutions to the changing energy market environment. Platts has been serving commodity markets for over 100 years.
Platts price assessments are integral to the workflows of very many of our customers all around the world, and they're integral to multiple workflows in those customers and right through the supply chain, and that's part of the underlying strength of our business. We have a unique platform, the eWindow platform, which is an electronic platform, which shows real-time bids, offers, and transactions in markets at particular times during the day on the market on close in particular. That's a unique competitive advantage because once we bring customers onto the eWindow, once we bring markets onto the eWindow, it's something which none of our competitors have. The Platts business is the most global of the S&P Global businesses.
Our revenue streams are approximately evenly distributed across the three major geographical regions. We're slightly underweight in Asia is our fastest growing region. Asia currently is much favored by those trends towards liberalization of energy markets, particularly in countries like Japan and China, which are some of the biggest energy consumers in the world. As we look at those markets, it's worth mentioning that our business is our largest business is in oil. We think that that's a good place to be because we're in one of the most attractive segments, price reporting, in the largest commodity, oil, and we have a very strong position in that segment of price reporting.
Oil is a really important activity for us and will continue to be so. We have very strong positions and growing positions in other commodity markets as well. Those commodity markets are much smaller, they're always going to be a smaller part of our revenue mix, we have market-leading positions in areas such as petrochemicals, metals, and in natural gas in the U.S. As we look at those mature businesses on the left-hand side of this slide, you can see Dubai crude oil and a suite of products around natural gas in the U.S. These are some of our biggest markets in crude oil and natural gas. You can see that they're continuing to grow.
We use a number of measures to see how our markets are growing, things like the adoption of our prices, our price assessments in the physical purchase and sales contracts of our clients around the world. The most visible way to track the growth of our assessments is through futures contracts, which are public information and which is what are on this slide. Futures contracts become relevant to us when exchanges around the world choose to use Platts price assessments as the settlement mechanisms for those futures contracts. Generally, the futures exchanges will choose a Platts price assessment when we have traction in the physical markets, when market users are using our assessments, and when they think there's an opportunity, obviously, to launch a financial derivative against them.
What excites us at the moment is not only do we have a strong position in our existing markets, but we think we're winning the white space in new emerging commodity markets. On the right-hand side of this slide, we mention and we show the futures on three of those markets: iron ore, steel scrap, and most recently, the Black Sea wheat contract. It may be hard to see on this slide, but the, excuse me, the axes are differently labeled on these graphs, so I don't want you at all to think that the emerging benchmarks are at the stage of development of the established ones. They're not. These are all relatively early stage benchmarks at different stages of developments.
What you can see, I think, fairly clearly on these futures contracts is that there is traction in all of these benchmarks. The traction is reflective of the fact that they've already been adopted in physical markets around the world. Another point to note on this slide is that the exchanges which have listed these contracts are multiple. They are ICE, the Intercontinental Exchange, CME Group, SGX, which is the Singapore Exchange, LME, the London Metal Exchange, and also Tokyo, the Tokyo Commodity Market, which has the Dubai contract listed. You can see that we have multiple exchange relationships, and building those relationships is core to having a global business and growing these benchmarks.
The probably the assessment that we are most excited about at the moment is LNG, liquefied natural gas. Liquefied natural gas is a condensed, concentrated form of gas which can be shipped around the world, and the trade in LNG is connecting gas markets around the world, and we already hold a very strong position in North American gas and in other gas markets. The trade flows in LNG are changing, and I would encourage you, if you already haven't had a chance, to have a look at the product showcase outside. Doug mentioned or Chip mentioned the energy data wall, which shows you real-time trade flows in LNG, among other asset classes.
As these trade flows are changing, the pricing structure is changing from long-term contracts to spot contracts, and that gives opportunities for price assessment agencies such as ourselves. Platts launched its LNG assessment, the JKM marker, Japan-Korea marker, in 2009. We've been working at it ever since. Our assessment has been used as a settlement mechanism for futures contracts on CME, ICE, and TOCOM. You can see on the top graph on the right-hand side of this slide that those derivatives have taken off in the last two years.
This is indicative of the inflection point we believe that LNG trading around the world has reached, and we think that this is going to continue to grow for years to come and will change the structure of gas markets around the world. Our position in LNG has been recognized by third parties. Earlier on this year, Reuters published an article saying that in the battle to establish the benchmark for LNG pricing in Asia, which many price assessment agencies, exchanges and others have been competing for, Reuters said that Platts had won the battle. There's still a lot of work to be done, but we're very encouraged by this.
Why does this matter? Because if we establish a benchmark in the way that we have done in many occasions in the past, it establishes a strong and recurring revenue stream for the business. The benchmark becomes embedded in the client's processes in the ways that I describe. Then we can then have multiple applications which continue to grow the revenue stream thereafter. That's what really drives the resilience of the Platts business model. What you can see on the right-hand side of this slide is that as many of you know, commodity prices collapsed in 2014 and 2015 and going into 2016.
Several of our customer segments had really And this had a dramatic impact on the revenue streams of some of our customers, particularly in the oil and gas upstream sector, but also on the commodity businesses of banks and other financial market players, many of whom either exited commodity markets or severely curtailed their businesses. Throughout this downturn, Platts' business continued to grow. And that's the testimony to the resilience of this business model that I've described, particularly as these benchmarks become established. It's also explained by the diversity of our client base. As you can see, we have customers in consuming as well as producing sectors. And overall, it's supported by a revenue stream, which is over 90% based on subscription.
That 90% renews at a renewal rate of 94%. It's a strong business model. The remaining 9% is what we call the Global Trading Services revenues, GTS revenues, and these are linked through our licensing agreements with exchanges, to certain key contracts on those exchanges. Similar to exchange volumes, those revenues are much more volatile. As we move forward, we think that we can build on the solid base that we already have, to apply some of the technology and innovation across the organization, to move the business further forward. We can simplify our processes. We can, we can bring our technology platforms together.
That will allow us both to operate the business more efficiently, but also to provide new products to our customers, leveraging both across data across Platts, but also going outside of Platts into Market Intelligence, Ratings, in the way that Martina was discussing, for example, in ESG and in other areas. We think it will also give us opportunities to improve the customer experience for our clients. We're well advanced in integrating our analytics acquisitions, which have been made over several years, so that we have one voice to the customer, one interface for the customer, where we currently have multiple websites. We will use the S&P Global Platform for that interface for customers. It will provide an overall better experience.
We will also be able to simplify our product packaging to allow us to move more rapidly towards enterprise solutions, the advantages of which Mike discussed earlier. As we move forward with that innovation, we believe with that customer experience, we also believe we will be able to continue to innovate. I mentioned the eWindow. It's 10 years old now. We continue to add new applications and new markets onto the eWindow. Most recently a specialist petrochemical market just a couple of weeks ago in Singapore. We also are using new technologies such as blockchain to solve our customer experiences.
We announced a successful application of blockchain technology in the Port of Fujairah a couple of months ago to allow the port and the tank owners to put their inventory data on an aggregate basis through blockchain, which would allow Platts to publish that data. It's a key part of allowing the Port of Fujairah to bring more transparency to markets, and it allowed the inventory owners who have proprietary knowledge of the inventory in their individual tanks to do that in a secure way and with an audit trail. We believe this is one of the first, if not the first, successful application of blockchain technology in the Middle East, if not in global energy markets. It's resonated very highly with our customer base.
I'd encourage you again to look at the product showcase outside to get more details of this. We think that this is exactly the same process as we've used successfully over the years with eWindow to grow our ecosystem by using technology. As we move forward, our focus will be to continue to extend the core through innovation, responding to energy market and commodity markets evolution. We'll simplify our product strategy and our platform strategy, increasingly using the S&P Global platform. That will enable us to drive a commercial transformation, moving to enterprise pricing models. Thank you. Okay. I'm going to ask Martina and Mike to rejoin me for Q&A. Thank you.
Okay. We have some folks that will have microphones. If you'd like to ask a question, please raise your hand. We ask, in light of what Mike said earlier about the transcripts and the value we can get, okay? It's incredibly important you state your name and your firm's name very clearly. I'm gonna take a risk here. We'll start with Peter Appert. Peter, you understand, just 'cause you've got the microphone now, you can't keep it after the first question, okay?
We're sticking with the rule of no more than ten questions.
Exactly. We're gonna start with Peter.
Peter Appert from Piper Jaffray. Thanks. Two questions actually for Mike Chinn. You the margin improvement story has been really impressive over the last few years. Your margins are now approaching, you know, pretty much at the level of FactSet are close to it, certainly better than what Thomson Reuters is doing. Can you quantify us for us how much is left and what the runway can be from here? The second question, I guess, Mike, for you, maybe for Martin as well, you spent a lot of time discussing the S&P Global Platform. How do you help us think about how meaningful that is? Is it a cost-motivated program primarily? Is it something that moves the needle from a product standpoint as well? What drives it?
Quantification of any cost benefit you see from it. Thanks.
Thanks, Peter. The first question around margins. I mean, look, we certainly think there's more to do. We've made a lot of progress, as you noted, but we think there's more to do there. We'd like to be, you know, sort of best in class around both growth and margin. Clearly, there's a balance there over time. I think we've made good headway in things that were not easy, but were clear, and we have more to do. You know, our goals, and I think Ewout's gonna talk about this at the tail end, but we think, you know, sort of mid to upper thirties is where we can get to over time. At the same time, we know that we operate in a competitive space. Technology investments are really important.
We're gonna have to continue to make plenty of those. At some point, you know, there is a balance between continuing to invest for long-term revenue growth, which we think is really meaningful to a premium multiple and capturing a lot of that as margin. There's more to do. Maybe I'll start on the second question, Martin can jump in. Around the S&P Global Platform, I'd say there are a couple of primary motivations there. The first is we think it's just simply more efficient from an overall S&P Global technology spend to reuse and share architecture and technology wherever we can. Not only over time that certainly creates a cost advantage over time that's difficult to quantify, but we also think maybe more importantly that it helps everyone get to market quicker.
Building these complicated software distribution systems is a lot of work, and we think that by sharing what we've been able to do over the last couple of years on the market intelligence side with everyone else enables them to make the kind of changes that they wanna make to their businesses and just get there quicker. Time to market is really important in our world.
Yeah, I'd echo that. I mean, when you talk about the platform and within Platts, we were already looking at how can we bring our customer platforms into one place from the multiple platforms which we currently have from the analytics acquisitions. You start to look around in the marketplace, then the SNL acquisition happened, we're looking at the way forward, it really doesn't make sense to start building something new when you've got a best in class solution which is in your sister company. I think that, you know, just purely from a practical approach perspective, you wouldn't go at a different way.
When you start to sort of dig a bit deeper, you start to think about, well, what are the product opportunities which may come out of here? You know, the analysts in all of our divisions, they ask us really regularly about this in terms of, "Well, how far have you got on this? When are we gonna be able to use different data across the organization?" Because they can see the opportunities.
Okay, right down here. Alex?
Thank you. Alex Kramm from UBS. Oops, sorry. I actually wanna start with Martina. I know I have only one question, but making a big I guess first time really you guys are making a big discussion about ESG. Just curious about, you know, the longer-term, bigger picture plans. I think I liked your comments around this is not just about the investor side, but there's so much more. When we talk to investors, it's kinda like S&P, you know, I was in New York yesterday, I think it came up pretty low on the list in terms of having an ESG franchise. I think maybe number four, if I'm being generous. I mean, are you trying to be number one or two at some point?
Do you have to buy somebody to get there? Then maybe just lastly, Sorry. Hopefully everybody heard this, Do I have to repeat all this now? Can you actually disclose kinda like the, what you define as your ESG revenues all in across all the different segments?
Yeah. Let me cover the first part of it, which is, there is I mean, there is a fairly, buoyant market out there right now in the sense that there are a lot of different players, trying to respond. We view it, frankly as still being in the very early innings, in terms of ESG. You only have to look at the number of frameworks that are being developed by regulators, industry groups, et cetera, to understand just how early this is in terms of the forming of the market. There's a lot of runway here. We don't think it's a winner-takes-all situation. There's gotta be room for a couple of different perspectives, in the market.
It's incredibly important, you know, a broad base of perspectives. It's for that reason we'll have, even within S&P Global, we'll have perspectives from Ratings, we'll have perspectives from S&P Dow Jones Indices, from Market Intelligence, et cetera. Hopefully that gets to the first part of your question. I think in terms of the second part of your question, we have, as you can probably guess, we don't break ESG out today. In many cases, it's actually bundled into enterprise contracts, for example, so it's quite difficult to get a sense for, you know, what's specifically and directly ESG. Our best analysis gives a range of around $20 million.
That's direct ESG, but that's not counting quite a bit of indirect revenues as well that we couldn't necessarily separate. That's where we are right now.
Great. Thanks.
We'll go here. We'll go to the way back. Hamzah.
Hi, it's Hamzah Mazari from Macquarie. Maybe for Mike to start. You know, you have exposure to commercial, banking, insurance. You highlight those as sort of 52% of your mix. They're growing much faster. If you look at your competition, they're not really penetrated there. Maybe just talk about how defensible that is. You have a large private equity competitor that's gonna close a deal soon. Can they penetrate that market? Just help us understand sort of the competitive set and how you defend that diversity. Thanks.
In that 52%, I would say I'm not sure I would say that it's less competitive, but I think the competitors are different, as you point out. You know, I can't speak too much to their plans, but I would just say that over time, some of those larger competitors have been in those markets before and have chosen to get out. And then also some have, you know, started to inch their way in. I'd say we have a few advantages. One is we've been across a lot of the different legacy assets across Market Intelligence. Virtually all of those businesses that have now come together have been operating in banking and non-financial corporates and insurance for a very long time. This isn't a new thing for us. It's a long time focus.
I think we've built some really deep, as we tried to illustrate for you, some very deep, broad relationships that we think are quite sticky, where we, year after year in those markets, continue to find new use cases and new personas where we can bring our information and our analytics and help them solve new problems. That's what's really driving the growth. There's also just frankly, a lot of companies to sell to in those spaces. You know, we're very positive on that space. It's not that we're not investing in investment banking and investment management. We are, 'cause investment management is our biggest segment. We just think that we need to direct a lot of investment to those areas because you can see in the numbers that it's a very rich source of growth for us. Great.
Thanks.
Let's go right here in the Yep.
Hi. Conor Fitzgerald from Goldman Sachs. Mike, just a question for you. It feels like the marginal investment dollar from some of your customers is moving from the back office to the front office. Just wondering if that's something you're seeing from your customers, and what products are you focused on using to capture that investment dollar trend?
I think that's true that things are starting to sort of swing to the front office. I think everyone's focused on revenue growth and product differentiation and all those sorts of things. I think probably where we're seeing that the most are in some of these corporate areas, certainly in banking and insurance, in a lot of the underwriting and lending functions. I think that perhaps those groups have been a little later to embrace sort of these new workflows and new ways of doing things.
Any time we can get in the front office or where we can directly diagnose a problem that speaks to revenue generation, we love to be in those areas because it's just easier to talk about a product that's helping you drive top line than something that's sitting off in the back office and helping you drive efficiencies. I think in those markets, we're certainly seeing that. We're in a lot of insurance product design and development areas in the corporate space. You know, we love to be in strategy and corp dev too, because maybe not exactly front office, but certainly helping drive growth and drive strategic positioning.
I think your point is a good one, and I think we're seeing it, and we are as, increasingly focused on training our people to be able to have those conversations.
Okay. Let's go way over there. Tim?
Hi, Tim McHugh with William Blair. Just asking on the data feeds growth that you talked about. The growth looks great, but I would have to think of that as a more competitive type of area just 'cause there's others who can offer somewhat similar data feeds. How is competition? How do you differentiate and how price sensitive are the clients when you're trying to grow that product right now?
I would say that the data feed business is similarly competitive to the desktop because a lot of the same players are in that space. In terms of differentiation, we always come back to uniqueness of content. Proprietary, of course, is great. Linked together effectively, we think we're really good at that. Quality is everything. As people are back testing models, I mean, high quality and low quality sorts itself out pretty quickly, and we think we win on quality. It's from a pricing perspective, I'd say that the ticket prices tend to be higher. There is appetite to pay for data.
The sales cycles tend to be longer because we're engaging with lots of different people to get one of those opportunities across the finish line, including technology and data folks on the client side. It's very sticky once we're in. The renewal rates are really high. We, you know, we love the business. We think we can do more there, both from a product development perspective and a commercial perspective. Alternative data really is a whole different set of opportunities for us.
We'll take one last question before the refresh break. Down here in the front. Yeah. Thanks.
Thank you. It's Manav Patnaik with Barclays. I just had a broader build versus buy question for each of you. You know, Mike, you talked a lot about alternate data and technology and building that out. Is that technology helping you get unstructured data and structuring it, or do you need to buy the structured data? You know, for Martin, for you as well, you know, you're putting all these brands together, I guess now. How much more white space is there that you think you can acquire? I think, Martina, you sort of answered it, but just I know you guys acquired Trucost, but is there more that you need to do, or is this now an organic build-out?
On the alternative data question and the way forward there, I think there are a number of different ways to address that. You know, we bought Panjiva, which had a great business on its own, but also is definitionally alternative data in a way. We thought that made sense for us. There's also partnerships are very typical in this space, whether those are revenue shares or just buying the rights to distribute content on a proprietary basis. I think we'll do what we think makes sense, but there are a number of different ways to do that and a number of different models for bringing that alternative data to our platform, and we'll pursue all of them.
I think as far as the Platts business is concerned, I mean, we've got very strong organic market positions in most of our markets. We think organic growth is gonna be important. We continue to pursue tuck-in acquisitions to build out the product set. There are opportunities, and they come and we review them regularly. When they make sense, then we'll proceed.
I would just say, there's so much that we can do organically. I mean, one of the reasons why we might not have factors as highly in conversations in Europe is that we haven't to date done a good enough job of connecting the dots between the divisions. That's really the goal of the design team is to do that. There's quite a bit of low-hanging fruit. I mentioned bringing Trucost onto the S&P Global Platform, S&P Global Platts data onto the S&P Global Platform. Even connecting what we do on S&P Global Platts and S&P Global Market Intelligence around energy with the asset level data we have is very powerful. Of course, we're talking to third parties where we have to fill data gaps. Those are immediate areas of focus.
I took an audible there and stole five minutes from your refreshment break, we can do five minutes of Q&A. Please be back here at 2:40. Move. Thank you. Can you hear me? Yes. Great. Please take your seats. Let's get started. I think you guys did pretty well with the bottleneck in the men's restroom. Let's continue with the program. Now up next is Alex Matturri talking about our index business. Alex.
Good afternoon. This afternoon, I'd like to give you a little bit of insight into how S&P Dow Jones Indices is going to be powering the markets of the future. Our core business continues to be the same, which is to continue to develop indices for use in investment products and as a measurement of investment performance. We're very focused from a global perspective, both in terms of the markets that we serve and the underlying assets that we use to build our indices, and take a laser focus on our customers, and just as importantly, our customers' customers, because at the end of the day, those are the people that are actually driving the investment dollars going into these investment products. We believe in the continuous innovation, which for us means continuing to develop indices that become relevant for market participants.
How do we do this? S&P Dow Jones Indices is one of the largest providers of indices globally. We have almost $14 trillion benchmarked to our indices and our products run the gamut of asset classes and geographies. In terms of the indices that we develop, that we offer out, we cover U.S. and global equities, frontier markets, commodities, fixed income, volatility, real estate and other economic indicators. And we offer these from a global perspective in terms of the underlying regions that they cover. In addition, we have a full suite of indices that are specialized versions of these standard indices. These include things like ESG that you heard Martina talk about earlier, factors or sectors, different ways of slicing and dicing the market in new ways.
In addition, we provide research and analytics that help support the use of our indices for investors, and we continue to offer custom index capabilities where we actually calculate indices for typically banks or asset managers, where it's their own intellectual property, and they need an independent index calculation agent. Over the past four years, our compounded annual growth rate has been 10%, and this revenue mix for us continues to be about 80% coming from market forces. These are the assets under management tied to the products that we earn for licensing our intellectual property. These could be structured products, index funds, ETFs, trading volumes tied to exchange traded derivatives based on our indices, with the remaining 20% coming from our custom index business, plus the sale of our real time or end-of-day data.
From a revenue mix, we always show up as very U.S.-centric, but I urge caution when you look at that. That's really a function of where our customers are headquarters. Our largest customers are the ETF providers, the banks, and most of them get billed out of the U.S., so our revenue shows up as U.S. regardless of where the underlying customers are, the people using the products, and also what the underlying where the products may be listed. What's been driving the growth of our of our business? The biggest trend has been this continued shift from actively managed strategies to passive strategies.
If you look at the chart in the middle, over the past 10 years, there's been almost an equal amount of money that's been flowing out of actively managed mutual funds into ETFs and index funds. Today, the definition of an index product or a passive product is much broader than the traditional view of just a cap-weighted index and is quite broad. What's been driving this sort of growth? It's been a desire for investors to look for lower cost products. They want cheaper products. They want more transparent products. There's been this fiduciary obligation of advisors nowadays to seek lower cost products, and there's been this growing importance of the distribution channels for investment-based products that have been driving a lot of this. We see these trends going to continue into the futures.
If you look in the right-hand side, one area of particular growth has been smart beta. These are ways of slicing indices into fundamental factors, into different ways of driving performance. This is an area that we see again, continued very strong growth. In our own efforts in this area now have reached over $250 billion indexed to this. Let's dig a little bit deeper into the growth of our business. Here in the U.S., which we think is one of the more indexed markets in the world, our estimates are that there's only about 20% of U.S. equity capital markets that's indexed. There's still plenty of room for this growth to continue into the future.
When we look at this on a global basis, we're starting from much smaller levels both in Europe and in Asia. Again, the growth rates are gonna be much faster as these markets are now starting to go through the evolution that's happened in the U.S. over the past few years. We think there's plenty of room to continue growing over the near term. Now, an important aspect of our success is how we operate across the full index value chain. Our direct customers are the people that we license our index intellectual property to. These are the product issuers, the ETF providers, the mutual funds, exchanges. These are the people that use our IP, use our indices to develop products that they sell into the marketplace.
Just as important to us are the indirect customers or the customers of our customers, and it starts really with the distribution channels. These are like the financial advisors, the consultants that are now becoming the important gatekeepers to making investment decisions for a lot of investors. These are the wire houses, firms like, you know, Morgan Stanley or Merrill Lynch. That are now getting more and more involved in making these decision on behalf of investors. There's the actual end investors themselves, the actual asset owners. These could be pension funds, these could be the sovereign wealth funds that you find throughout the world. Doug mentioned GPIF, one of our large clients based in Japan, the largest single asset pool in the world.
In addition to individual investors, they're all part of the value chain that we seek to serve. Our commercial strategy targets each of these segments differently. We target the direct customers through our licensing efforts with our product teams, with our research teams to make sure that they have the support necessary as they launch their products. Our business model is very much aligned with the success of our customers. We get paid typically basis points or some sort of variable fee tied to the success of the assets that are accumulated or the volumes that come from trading of indices that are the products that are tied to our indices. We do a lot to help their efforts to grow and capture assets. Just as importantly is the amount of time that we spend.
We have separate teams that we call our channel strategy, that go after the financial advisors, that call on consultants. Here the goal is really to get involved in the benchmark selection process, make sure they understand the indices, influence that decision because by influencing the decision about what index you're going to use, that's gonna indirectly influence the actual products that these customers will end up using. Then, of course, there's the end investors. More and more we're seeing sophisticated pension funds that are using index-based strategies to meet their asset allocation needs, and working with them to come up with customized solutions for them is very, very important. Now, this approach has several benefits. First of all, it keeps us very close to the customers.
We understand what's going on in the marketplace, we understand what their needs are, and we can factor that into our index development process. Just as importantly, a lot of our efforts help our direct customers. We help them in terms of actually raising assets, going out and talking about indices. We go on road shows with the banks that issue structured products. Again, because our interests are aligned, if they're successful, our revenues are also successful. This loop becomes very, very important. Now, there's been much discussion about fee compression in ETFs, fees are not the only drivers of success in this important market segment. It's important when we look at ETFs, to think about all the factors that really drive success, and it really comes down to the total cost of ownership, not just the expense ratio itself.
What's the bid-ask spread on that ETF? How liquid is it? Who has the first-mover advantage? Is that ETF being used as a hedge for structured products? There's a lot of factors that drive success, and fees are not just the only component of that. If you look to the right, there's three large S&P 500 ETFs here in the U.S. The Vanguard product, the iShares product, and then the State Street product, the SPDR product. The State Street product, of course, was the first to market. That's the product that actually has the highest expense ratio, and yet that's still the most popular product to be used. It's still the largest product, largest ETF product in the world. A lot of that is due to a function of it's got such a tight bid-ask spread.
The liquidity of this is so good that people could move money in and out of this product all the time. People are willing to pay higher fees to access that sort of liquidity. This phenomena is not just with the S&P 500. We see this with many other indices, that the lowest cost product is not necessarily the product that captures the assets. You have to look at it in its totality. It's not just a function of just our own indices. We see this even with some of our competitors. An important part of our success has always been our exchange strategy. We have 14 exchange partners throughout the world. We've emphasized the faster-growing markets, the markets that are earlier in their development cycle.
It's a symbiotic relationship that we develop with these exchanges. With the exchange itself, what do they get out of these sort of partnerships? Well certainly they get the commercial reach that we could offer them that they can't get on their own. We can commercialize their indices in ways that they hadn't thought of, ways that we can protect their intellectual property to make sure that they're actually earning money on the use of their indices, where many of them used to give this all away. Just as importantly, we bring their index development to global standards. This is becoming more and more important as we've become now regulated in Europe and in other markets.
It brings that to that level that these indices can be used in Europe because if they're not available to meet those global standards, they can't be a part of products there, for example. Of course, we can continue to develop new index concepts that they're just not used to thinking about. From our side, we gain a benefit of being in the markets with a strong local player. We get access to the local brand, which is important as we develop products for these local marketplaces. Much better to go into Japan, for example, using the TOPIX brand than just using an S&P brand. Everything we develop with the Tokyo Stock Exchange becomes S&P/TOPIX.
That local brand gives you a much better chance of having success, of having recognition into a lot of these, lot of these markets. We also gain a strong partner that opens doors for us. They know all the pension communities in a lot of markets. In Latin America, for example, a lot of these pension funds are buying U.S.-based products. They don't have enough local products. By having exchange partners, we get to know who the pension funds are, and we can get in and see them and talk to them about if you're gonna buy a U.S.-based product, we want it to be a product with an S&P index inside. We gain that benefit of a very strong local partner. They help us with regulators, as regulators are now starting to look at our business.
It's a very important part of our global strategy, is to build it around these core partners in exchanges. Exchange partnerships are a key component of our build-from-the-core strategy. Some of you have heard me talk about this. I wanna show you how this all comes together. In our core strategy, we have our base indices. This could be the S&P 500, it could be the TOPIX in Japan, it could be the Bovespa Index in Brazil, they all have a core index that's well-known. From that, we start building out our product suite. We could start with sectors, we could apply ESG, we can make it factors. Many different ideas all built off of this co-combined brand, S&P plus the local brand on this core index.
The third layer is how we then figure out what's the right way to distribute this index. Is it appropriate for an ETF? Should it be a structured product? Should it go into a fund? Who's the right partner to be the person that we license this index to? These are all factors that'll help increase success. As an example, we took our S&P Global BMI, which is a broad market index. We applied a 2-factor model that included combining intrinsic value with low volatility, two well-established factors in academic research, to create what's called the S&P GIVI Index. This was licensed in Japan to a lot of the index funds, including used by GPIF, and today has $28 billion in assets tied directly to that index to this product.
What made this successful was just as much having the Tokyo Stock Exchange be a partner of ours that allowed us to distribute this with them behind it. What does the future look like for S&P Dow Jones Indices? We will continue to build on our core franchise of developing indices. We'll continue to innovate these indices to meet investor needs throughout the world, and we'll continue to expand globally through our partnership of product issuers and exchanges. Thank you very much. Next up is John Berisford.
All right. Good afternoon, everyone. I've got 25 minutes. I'm gonna try to do three things. I'm going to reintroduce you or introduce you to the ratings business, depending upon how familiar you are with it. The second thing I'm gonna do is give you a little bit of the market backdrop for issuance and the context on why we're optimistic about issuance. Then third, and the lion's share of my time, I'd like to spend on the initiatives that we have either in flight, underway, or imagined, to create sustainable ways of growing and creating value for this business. You've seen this framework before. It works really well for ratings.
On the growth side, we've got opportunities to involve and grow our core business, and that is by extending our methodologies, our coverage, the globality of our coverage, and adding new issuers to our pipeline. On pursuing growth via adjacencies, this is about We have some of the richest IP and data in the franchise. Initiatives like Project Simplify are allowing us to discover and make accessible that data, and we see opportunities to create products off of that data. The one thing I would remind you is you may not see those. They may not be ratings products. The opportunity might be in some other part of the portfolio, but we have a lot of that data, and we see growth opportunities via adjacencies leveraging that data.
On globality, you saw the news this morning. We see an opportunity to extend our coverage by extending globally. Our priorities are in Asia Pac. ASEAN countries are very attractive to us. You obviously know we're very committed to China at this point in time. On customer orientation, three years ago, we hired Chris Jones to lead our Chief Commercial Officer organization. We are maniacally focused on engaging with clients, and for us, that's issuers and investors. We had over 22,000 face meetings with issuer clients last year, which explains why we added net new clients in 2017. What that allows us to do, that dialogue with clients, it allows us to think about innovating.
Often, dialogue with clients, they have a thesis that we actually have data or content somewhere in the pipeline of producing a rating that they would find valuable in a way that we're not yet giving it to them, and they're often right, and that is informing the way we think we can innovate. Operational excellence for us is really important. We're a 150-year-old company, and I would fair to say it's fair to say that most of that time was spent building a very bespoke operating environment, largely built around the habits of how we actually handle credits asset class by asset class, industry by industry.
For those of you that I've spoken to before, you know we committed to really foundational work on workflow and data architecture that we're beginning to cycle to the end of, and that's allowing us to ask more sophisticated questions about how we use technology. This is today and will be for a long time a people-intensive business. That's why when we talk about technology, we talk about augmented intelligence. We don't see a scenario where our analysts aren't sitting in the middle of our credit analysis, but there are ways to change the nature of their work and move them up the value chain, and away from the spreadsheet jockeying that analysts can do in a very bespoke environment, by leveraging technology to do that. This is the business overview.
Four things I would say up front. The real attributes of this business that I love are the power of its brand. This brand is known for integrity, independence, and transparency. The second thing is the globality of our coverage and the depth of our coverage. That takes a long time to build, and it's not easy to do, but our coverage is, in fact, global. The third thing is, and you would know this, we're a deeply regulated business. We have over 28 regulators around the globe. What's happened over the course of time is that regulatory scheme has matured, and so has our ability to ingest and absorb those regulations.
We think the regulation has been good for this industry and our business because it's yet another set of high standards on how we produce quality, the highest quality ratings and forward-looking opinions. At the end of the day, we like to believe that we compete on quality. A couple of other facts about this business. We have 1,500 analysts globally, and that analyst community is actually growing. We have 125 countries where we produce ratings. We have over 1 million credit ratings outstanding, and we've been in the market for 150 years. You would know our clients to be largely issuers, investors and intermediaries, and we take all of that client group very seriously.
They give us really rich feedback about how to make our business better. You'll see on the upper right, we have some financial momentum. We've had a good couple of years with a 7% growth CAGR. Several years ago, we saw an opportunity to sustainably and thoughtfully extend our margins, and we've done that without compromising any of the capabilities that we have to create quality in our offerings. In terms of the concentration of this business, you could see we're largely North American and Europe. We have good coverage in South America. I don't know that I would call that a big growth driver over the next couple of years, but APAC should be. APAC has been growing very nicely. It's 10% of our business today.
We are entering China. I'll talk about that in detail in a minute. We're bullish on ASEAN countries, and we think over the course of time, they'll open up the way that China has at some point in time. Market trends creating tailwinds for this business. Total corporate debt outstanding continues to grow over time, which is a real attractive, obviously, market condition for us. I'll give you some of the details about that. Securitization market is returning after a period of softness. There were a couple of years where that got really soft. It was largely a function, in our view, of the new regulations like risk retention, and the market needed some time to absorb those. We think they've absorbed them, and we saw really good growth last year and into Q1.
You heard Martina talk about ESG and cyber. Our view is that those are not passing whims, that they look like sticky themes. We think ratings is well positioned to incorporate them into our ratings and also leverage some of the IP and content we create to satisfy use cases on our portfolio or beyond it. Geographic expansion in China, I'll take you through that in more detail in one minute. If you look at, we've shown this chart. This is one of Chip's favorite charts that he's ever seen in his life. The correlation between GDP growth and debt issuance. By the way, he's a very simple guy, so he only has like two charts.
The correlation between debt issuance and GDP growth is actually quite strong and been true and stood the test of time. What we're seeing around the globe is synchronized GDP growth. We just earlier this year took our GDP growth for Europe up pretty substantially. We like that as one of the backdrops for why we're bullish on issuance. Capital markets are still under-penetrated in key regions. You can see the penetration in the United States and Europe is very strong, which kind of drives you to the refinancing walls that we see on the right-hand side of the page in the corporate refinancing chart. China and ASEAN are actually quite under-penetrated, and that represents a real good, solid growth opportunity for us, and we're committed to seeing it.
You can see LATAM and India are quite under-penetrated. Significant corporate refinancing needs in the U.S. that give us great confidence that issuance will be pretty positive or good enough. Now, on issuance, I would say, you know, the what you've seen over the last couple of years is this is a management team and a business that's capable of maximizing good markets. In Q1, we had a soft market, and I think we proved we can navigate the troughs pretty well as well. So we're conscious of being able to be agile enough to adjust to market conditions. This is the picture on structured markets. You can see pretty strong growth in 2017 over 2016.
You saw good growth in Q1. We think that is a function of real confidence in the markets. They've absorbed the regulations and I think gotten comfortable with those regulations. Over on the right, leveraged loans have more than doubled in the last eight years. In the U.S., there are over 1,000 issuers, which is really good growth and gives us a good indication that those markets are very healthy. We have multiple opportunities to extend into new markets, this is the way we think about it on the left-hand side. This is an opportunity for us to expand coverage beyond our cross-border credit ratings.
Being in the domestic market allows us to participate in the build-out of the credit culture, and gives us relevance, more relevance than someone not participating in the domestic markets to be even more relevant for the cross-border stuff. Supporting capital market development, as I mentioned, building that credit culture. What we've seen is large developed bond markets and emerging markets really need foreign direct investment, and the governments of those countries and the regulators see us as a real attractive way to bring transparency to that market and therefore attract investment into that market. We have two paths, three paths really. We can buy a domestic rating agency, we can do a JV, to the extent that we can't fully own a subsidiary, or we could go greenfield.
The markets that are attractive to us working from the bottom up, Philippines and Vietnam are on our watch list. Malaysia and Indonesia and Thailand, we have JV arrangements with domestic rating agencies. We can't fully own a subsidiary, but at some point in time, that may happen, and if it does, we're really well-positioned, and those bond markets are quite large. Then in South Korea, we just entered into a commercial arrangement with a domestic rating agency. We'll see how Korea develops, but we view it as attractive for the moment. Let's talk about China. We're gonna enter China with a greenfield.
A year ago China opened up the market to the large rating agencies and we pursued parallel paths. We were looking at a domestic rating agency and we were looking at what it would take to build a greenfield in China. Our assumption was that given the opening up of the markets the domestic rating agencies valuations would come down. While we believe that they didn't. One of the things that caused us to choose to go greenfield is valuations remain very high. At the end of the day we like the idea. To be frank the shareholder structure would have been a little complicated. A greenfield allows us to enter the market on our pace and be in more control of the analytics.
In the end, that's what we've decided to do, and we're quite convicted about it. We're gonna build a leading rating agency in China, a 100% S&P owned. The idea methodologically or analytically is to take the domestic scale and over the course of time, build it into a China scale, but ultimately, over the long term, would map to our global scale. We have to be sensitive to not being disruptive to the interbank market or the bank markets in China. We think there's a way to, you know, to do that and be quite relevant. Our dialogue with the PBOC has been really productive. They're, they've been very clear about what their needs are.
They've been very inquisitive about the global regulatory landscape for CRAs, and our dialogue gives us optimism that we can find the right path forward in China. You guys have probably seen Ratings360. Ratings360 is a digital platform that delivers our ratings and a whole bunch of other content to issuers. Think about this product as compared with some of the stuff that Martina and Mike own as a product for issuers. We have other use cases that we might extend it to, but at the end of the day, think about it as issuer. You can see it's a simple way for issuers to see their ratings. They can begin to compare peer sets and suppliers.
It's beginning to include, you know, forms of alternative data like investor sentiment, and that's a consistent theme across our portfolio. We're getting comfortable with how we use that kind of data, our economic research, and it gives them a way to engage with their analyst. We are quite confident that this is a very differentiated offering in this space, and we're proud that we built it and it's an example of really good synergies and collaboration across the portfolio because while we built the content and the prototype, Mike and his team built the production version, and we think that makes good sense. Otherwise, I would have, over the course of time, had to make some investments that would have been redundant with his.
We see other forms of innovation. Green Evaluations, think about Green Evaluations as an issue-level assessment. This is a bond. This is, you know, the credit rating. We've done somewhere around 30 evaluations since we launched our methodologies a year ago, and the pipeline is building. This pipeline is actually quite rich. This is what we know today, but this is building quite nicely for us. Then we look at things like transparency score, governance, and a mitigation score. We also think beyond credit ratings, our analytical capabilities allow us to think about other forms of assessment, and ESG is one of those forms of assessment.
Think about that as an entity level assessment, where Green Evaluations is more focused on the bond. Another synergy opportunity is that we're leveraging Trucost data, and we're introduced to Trucost by the index business, and they have been a wonderful partner. And importantly, we've spun up two teams in S&P Ratings. One is an analytical innovation team. Don't think about that as commercial, but think about it as getting the market feedback that we get from issuers and advisors and thinking about how do we extend our footprint through methodologies or coverage.
The second is we have a green finance team led by one of our ESG experts in Europe, and this is a cross-practice, cross-sector team that is looking for the right set of methodologies, data, and scoring for us to be relevant in an ESG assessment. On cybersecurity, we entered into a partnership with Cyence. Cyence is a cyber threat data and analytics company. You've seen a lot of that data in Ratings360, but this offers visibility into a new risk, and we're quite convinced that our issuer clients are going to find that data coupled with our own models and data to be very useful as they think about risk broadly.
This is a ratings presentation, so it, the core of what we do is analytical excellence. We get feedback all the time, informally and formally, here's what issuers and investors tell us. Our strengths are our brand. Our brand stands for integrity, transparency, and quality. Our reach is extensive and global, so we show up with a point of view, quality ratings and forward-looking credit opinions. Our coverage continues to get stronger and the quality of our analysts are a distinguishing feature, and we intend to maintain that differentiation. They also tell us that we have opportunities to improve. One of the areas is market engagement. By market engagement, what we mean is analytical engagement with investors.
Those gaps are important for us to close. Under Yann Le Pallec's leadership in our analytical practices, we are doing a lot of training, and we have a lot of initiatives to get our analytical teams more engaged with investors, and close those gaps. We made progress last year in that area. I expect us to make more progress over the course of the next year. The last thing is, three years ago, when we took an honest assessment of our technology and data capabilities, we had a lot of technical debt. By that I mean, you know, software systems that weren't running to their performance standards and a lot of complexity. We're addressing that through our analytical organization as well.
The priorities here are analytical engagement with investors, augmented intelligence, which is about and I'll talk more about this in a second, but this isn't about replacing our analysts. We don't see that in the future, but we do see leveraging technology to augment what they do. Not everything they consider is important to the outcome of rating, and some of those things lend themselves quite well to technological solutions. Analytical talent and leadership, one of the things that I assure you we do in this business is we sweat leadership appointments. We fundamentally believe that leadership appointments matter and drive a lot of value. And we are focused on continuity and expertise and sector knowledge in our analytical organizations. On the flip side, we've been aggressively retooling our IT and data capabilities.
You can imagine, as we deal with that technical debt and retire some of those dated systems, we have to find new sources of talent with different skills. The two areas I would point out are data science and software engineering, which were not in our wheelhouse. Finally, we're simplifying our organization. Over the course of time, I think, in response to a variety of factors in the market, we got a little clunky and complicated in our organization structure. We saw an opportunity to simplify, especially the way we thought about our methodologies, the development of those methodologies and the validation of those methodologies. Broadly, we saw an opportunity to simplify the organization. You saw us take a Q4 charge, and we actioned those matters in Q1.
We're beginning to see some cost benefit from that as well. The real purpose of this was to define absolute role clarity and accountability, because only with that can we execute well. When that's diffused or distributed, you're guessing about the level of execution you're gonna get. We're confident those actions will help us do that. Just a couple of minutes on technology and data. Three years ago, we committed to a pretty transformative tech and data agenda. You can see the process and capabilities on the left-hand side, but what we've really done is deal with workflow. Project Simplify was the project by which we wanted to standardize our workflow. We have three practices to go. We're in the tail end of that.
Importantly, our number one goal was 100% standardization of our analytical workflow, and we are achieving that to date and would expect to achieve that at the end. The other thing that we're working on is our data architecture. We have an initiative called our Integrated Data Facility. And we're doing some of this work with Mike's team on data factory. But the rest, content and publishing, sales and distribution, other than Ratings360, remain in front of us. The outcomes we're looking for are digitized analytical workflow, which we've accomplished. Just to give you another highlight of Simplify, much of the data that you see in Ratings360 was discovered and enabled by implementing standardized workflow in our analytical practices, right?
I mean, at the end of the day, that's hard to do, when the data is inconsistent or inaccessible or undiscoverable. That little project on, or massive project, if you're one of our analysts, is actually enabling other streams of value. The best example of that is data that's actually showing up in Simplify. Augmented intelligence, the Ratings360 platform. On data factory, I've mentioned to some of you that we committed to moving our data factory in chunks over the course of time to Market Intelligence. One of the things we found attractive about SNL and combining it with Capital IQ was they run data factories to scale. If you think about what I want in terms of data ingestion, I want the highest quality on the lowest landed cost, and MI can do that.
We're through phase I of that and are optimistic about the next chapter of that. Three use cases for augmented intelligence, and these are early days, so don't ask me questions about how much value I'm gonna get out of that in Q2, but we're bullish on the potential here. On ratings production, this is, you know, the factors that our analysts consider on the way to producing a rating. What we're trying to understand is which of those are really highly correlated to rating outcomes and what of those are not as highly correlated to rating outcomes.
To the extent that we can use more sophisticated technology to create algorithmic or technological ways to do that, what that allows us to do is move our analysts forward in the value chain to do more value-added stuff and out of the work that you can imagine they do when they're operating in a very bespoke environment without standardized workflow. Surveillance optimization, we have a million and one credits outstanding, and we surveil those, right, all the time. One of the things we're really excited about talking to Kensho about, and we've had sessions about this to date, is what we can't do today is see signals and patterns in that big tranche of data. What we do is surveil them periodically, annually against some schedule.
We also know that that surveillance doesn't always produce a rating, a change in a rating. We love the notion of being able to see those signals and patterns, both to extend the quality of our offering and get the ratings right all the time, but also to be able to engage in credits that we think the conditions have changed on. That also allows us to think about how we use our analysts' time and move them more forward in the value chain, and they are very exciting propositions. Data and IP distribution, this is about unlocking more of the data. You would be surprised how much data we create, how much data and content we create on the way to producing a rating that we don't do anything with, right?
Our clients have been very helpful in telling us, "I'll bet you have this. I'd like to see that. I'd like to see it in this format." We'll sort out over time who gets credit for that and what P&L it shows up in, but we're very confident we can be a driver of growth, either on our own portfolio or across the portfolio. Let me wrap up here. Our priorities, if they're not clear by now, are to strengthen our analytical excellence, and we think, both in traditional ways and leveraging technology is a useful way to do that. Executing our tech and data strategy, which is moving from being more foundational to more transformational.
We're quite excited about the growth opportunities in Asia Pac and, excited to get started in China. Thank you very much. I'm gonna turn this thing over to Mike Chinn, who's gonna host the technology panel, and I'll talk to you guys later. Thanks.
All right. For our next session here today, we are going to spend 20 minutes drilling into this topic of technology that has come up over and over again today and get some insights from these gentlemen who've joined me on the stage around some of those issues. Let me do quick introductions. On my far left here is Nick Cafferillo. Nick is Chief Technology Officer of S&P Global. He in his background has worked for a number of financial information businesses over time. He's always had product roles, so he understands the direct impact of clients, and the amazing things that we can do when we bring technology to solving client problems. Welcome, Nick. Then I have Daniel Nadler right here on my left. Daniel is founder and CEO of Kensho.
He is an academic by training, but one with tremendous commercial sensibilities. Daniel started Kensho a few years ago and has stockpiled just an amazing group of talented data science, artificial intelligence, machine learning experts. We're thrilled to welcome Kensho to the S&P fold just in the last couple of months. Let's get into a few things. Nick, Doug referenced the new operating model in his opening remarks that has sought to bring together technology, software engineering, and data operations across the franchise. Maybe you can kick us off by telling us what that means for S&P and what does that mean for our clients.
Sure. Yeah, great. You know, I think everybody's heard from the different presenters that technology and data really sit at the core of who we are, and there's a lot to get done. I think what excites me about the new operating model is we're bringing technology and data operations forward. We're bringing it to our clients. We're making it a part of our commercial organization, our business organizations. We're getting out in front of clients. We're listening to our clients' problems, and we're taking all that information in to what we're doing internally. We play an interesting role in the market because not only can we learn from our clients and make our products better, but what we're finding is many of our clients are struggling with the same challenges that we have.
They wanna understand how to use the cloud more effectively. They wanna understand machine learning and artificial intelligence and when maybe they can apply that. They're turning to us as a trusted partner for a lot of that information. It's really a great opportunity to showcase the things that we can do and to learn.
From those things. I would say the second benefit or thing that I get excited about in terms of this new operating model is it gives us a chance to look across the organization and to really apply best practices. Most of our technologies historically are very heads down. They're dealing with a fire that's in front of them. They have a hard time looking up and looking long-term. This new operating model really puts a premium on that. We need to be thinking about the long-term for our clients and the client value that they drive. We need to be thinking about the long-term for our organization. What does it mean to leverage continuous development? What does it mean to leverage the cloud?
How can we build communities of excellence around artificial intelligence and machine learning, and use these emerging technologies to power our business and ultimately help our clients? I think this operating model really helps position us in a way to be successful for the future.
How do you balance I think one of the risks is that all of this sort of technology and data becomes centralized.
It sort of turns into this.
Yeah
sort of bureaucratic process rather than something that accelerates the business. How do you balance in this model, sharing best practices and doing those kinds of things for the benefit of everyone, but keeping technology out close to the business?
Yeah. Two of my favorite words, centralization and bureaucracy, bureaucratic process. I guess that's three words. you know, what we do is we have an operating model where the technology teams are still embedded in the businesses. We don't take them out of the businesses because, again, we want them to be close to the clients. We want them to be close to the P&Ls. We want them to have joint responsibility for those P&Ls. Those technology teams report not only into me, but they report into the presidents so that they stay focused on the business. At the same point, they have goals and objectives set across the organization to drive that long-term growth.
To some extent, they're focused on the short to medium term within the business, getting things done, executing, driving the machine, but also looking long-term to say, "Okay, how can I leverage some of these tools, these best practices, really to put us in a better position for the long term?" It's that short-term focus, having those goals, having those objectives align with the business, and then that long-term focus with goals and objectives for S&P Global.
I think we've found that there are a lot of shared challenges within the divisions, and if we can raise these things up and reuse code.
Absolutely
reuse applications.
Yeah
We can just do things a lot more efficiently. We talked about that earlier.
Absolutely.
Great. Daniel, coming from Kensho, I guess tell us why S&P? Why was this a good home for you and your talented colleagues?
Sure. One of the things that you hear a lot, maybe some of you've heard this phrase, is that data is the new oil. Whenever I say that, the Platts guys get very excited. If you think about Kensho and what Kensho is and what motivates our talent, Kensho was a company, when it was independent, that had built some of the best oil refinement and extraction technology in the world, but controlled almost none of the world's oil.
We saw S&P as this company that was in this very special moment, analogous, for those of you who know your oil history, to where Texas was at the turn of the twentieth century, sitting on top of some of the most vast oil reserves in the world, but with almost none of it having been tapped and refined by data science. For us, that was just a very attractive moment and a very attractive partnership. The other thing to keep in mind is that this wasn't a blind date. If you look at what makes a lot of acquisitions not so successful, especially among my colleagues in California, it's a big company finds very sexy company, acquires it, knows really nothing about it, the company knows really nothing about the acquirer.
Day one they get together and it's like, "So what do you do? Wait, what do you do? Why'd we acquire you? Why'd we join you?" Right. It was the opposite in this case where we had worked together for about 18 months prior to the acquisition. S&P was our largest both investor and our largest customer by the time of the acquisition. We had spent the previous 18 months before the acquisition working on one of the hardest and most attractive problems to us, which is natural language search engine capability across the S&P Global Platform. This wasn't a blind date. It was something that once day one occurred, it was really just a continuation of day 400 to day 500.
That's something that was attractive to me and my team and made it very successful.
In the context of the operating model that Nick just talked about, what's Kensho's role in that going forward, and how do you engage with the divisions to help them solve problems?
Well, our role is making you guys look good. You know, we're at a moment historically where every Fortune 500 company talks about technology obsessively. If you look really closely, a lot of these companies are paying lip service to it because practically, at most it means let's make our teleconferencing equipment work. It doesn't really mean anything innovative. I think to look at how do you have a Fortune 500 company, a 150-year-old plus company, truly innovate? The gold standard historically is Xerox PARC. Xerox PARC, many of you probably know this, is where the graphical user interface was developed. Basically, all the technology that made the personal computer possible today came out of Xerox PARC. Xerox PARC never would've succeeded if all the technology people at Xerox were improving photocopiers, right?
What they had to do is they had to segment away a subset of them and say to them, "Look, we have a lot of people tweaking the photocopier, but we want you guys to really just figure out 25-year horizon technology, and we don't even know what it is, and we don't really even we can't even give you the mandate to say, "Develop this or develop that," because it's really something that you need to see over the horizon and do. What made Xerox PARC work was cultural independence, a little bit of operational independence, and that's the model that we're pursuing here.
Great. You guys are gonna engage to help us make much bigger leaps in technology than, frankly, we would have been able to do on our own, which makes good sense. Let's get into that. Let's start talking about some specifics here about, you mentioned, Daniel, some work that had been done over 18 months leading up to the deal. I think when we think about artificial intelligence, we think about injecting these technologies, one of the first places people go is, how do we use this to drive productivity gains? How do we use this to replace manual human labor, human capital with technology? Let's talk about a few of those things first.
Sure.
Nick, maybe you can talk about where we've seen opportunities to use Kensho technology to drive efficiency in the business.
Yeah. As you mentioned earlier, and we've talked a little bit about, we have a large data operations team. We cover millions of companies around the world. We have thousands of analysts out there doing that work. They can't do it without technology. You know, if we had to do everything manually, there would be no way to meet our timeliness goals, drive the kind of quality that's expected in the industry, and continue to drive growth. You know, we're constantly looking at ways to automate what we do, to use bots for what we do. You know, we already have hundreds of bots in production. You know, we kid with our analysts that it's bring your bot to work day, so that you have your bot sitting alongside of you as you're doing your job.
We're looking at individual problems where technology can solve that problem. We always test ourselves. We really feel embarrassed if we can't automate something, if we can't use these newer technologies. One example that we were struggling with for a while, where we really were having a hard time was something that occurs right at the beginning of the data collection process. That is, when we bring new content into the system, the first thing we have to do is we have to take the entities for that content, and we have to look them up in our system and try to figure out, do those entities exist? If they do, we have to link it together.
As we've talked about quite a bit today, linking content really unlocks a lot of the value, a lot of those insights. As we link those entities, it would seem pretty simple in a public company world. Everybody has an identifier, works great. As you start to look at assets, as you start to look at private companies, as an example, it gets pretty murky. This was a challenge where we continued to look at ways to try to automate that process, and it's very, very hard. When you're talking about adding 100,000 companies, it's a few months. When you're talking about adding 55 to 100 million companies, it becomes a problem that's really impossible to solve. Along comes Kensho.
Daniel and I were talking about some different things, and I think we were actually talking about OmniSearch at the time. We said, "Hey, this algorithm, this is really cool. Could we apply it to this entity linking problem?" We said, "Well, not sure. Let's try it." We were able to apply it. Somebody mentioned earlier Crunchbase. We were able to automate the entity linking process for Crunchbase. We took it from a process that should have taken 9-12 months down to a few days, and it made the impossible possible. We're now taking that same technology, and we're using it to cycle through private companies from the various registries around the world. Over the coming months and years, we look to add another almost 100 million companies.
Yeah.
Which for some of the other products we've talked about, and you talk about, you know, extending credit, lower into small to medium-sized enterprises, that type of thing is critically important. Having those private companies is a must, and we couldn't have done it without Kensho.
That makes technology really concrete and practical because.
Right
for many people it's very abstract. Time to market matters.
Absolutely
for customers. We're not in a static world in terms of data. The amount of data is doubling every month, right? For a company to even come up with a way to ingest all the data that's simply being added, never mind the data that it no longer has never included in the first place, would be trying to race as fast as you can on a treadmill unless you use technology. I think that's really illustrative because people have the big misconception with respect to technology that everything comes down to cost, especially in the area of machine learning and AI. To me, that's as mistaken as the notion that, well, the advantage of drones is that you save money on pilots. Well, that sort of misses the point, right? Drones can fly into mine shafts, right?
No amount of pilots can, no pilot can do that, no matter what they cost. What Nick discussed is an example of something that you would never even undertake it in the first place. If you wanted to ingest every single private company in the world in real-time, and then add the new ones as they're being added because companies are popping up every day, it's not a matter of, well, does it take 5,000 or 10,000 or 15,000 humans? You're talking about something with five trillion possible combinations and matches per geographical region. That's an example of something where technology simply unlocks the possibility of bringing to market a new type of data that would never have been brought to market in the first place.
So-
Yeah
Yeah, those are great examples. That's maybe on efficiency and time to market. Let's talk about a few things that you guys are working on around customer experience itself.
Yep.
You mentioned natural language search. Talk to us about how that, what we think is possible there, what we're working on, and how the sort of technology, teams and arms work together on something like that.
I think it, you know, it starts with the S&P Global Platform that's been mentioned a few times. It's a great tool for integrating a lot of content and solving many business problems. One of the challenges when you have a vast tool like that with so much content is, how do I find things? One of the questions we get asked quite a bit when we're out meeting with clients, you know, they'll ask us, "Do you have X?" You know, and yes, we have it, but they can't find it. Natural language processing and a search capability like OmniSearch can unlock that.
Being able to go into the product now and ask very simply, you know, "Show me all of the hotel properties that Hilton owns," they pop up, and I have them, and I have data associated with them, is much easier than trying to learn which menus to click on and where do I go. This was again, you know, I think what's nice about the partnership that we have is we think of things through a business problem type of a lens. When you sit down and you think of all of the problems you can solve with search, it's pretty exciting, 'cause nothing like this really exists in the market today.
No, this is an area where we were first to market, we as S&P.
Right
To put it bluntly, all financial information companies, including some of the competitors that were mentioned here today, have a millennials problem. Millennials are not just something that media-
You look like you understand something about that.
I know something about this millennials issue. I can speak personally that millennials, on behalf of my demographic, I'll speak personally, probably won't tolerate for very long such a discrepancy between the way they experience technology in their personal lives and the way they experience technology at work, right? Two-thirds of financial professionals today are millennials. You know, as a refresher, these are people who grew up not knowing what it was like to not have the internet, not knowing what it was like to not even have Google, right? They go home and their lives are so easy at home.
They use natural spoken language questions to access information, and then they have to go to work and try to remember the function key and the short key and the shortcut to, to get at that information, if it even gets them at that information. Most of it is still buried. There's such an opportunity now because there's this discrepancy between their personal lives and their and their and their work life. The first company that can close that gap, I think, will actually capture the millennials market. There was, you know, one of our competitors, you could argue in the '80s, had captured an entire generation of financial professionals.
I think there's an equally sized opportunity right now for S&P Global to capture the entire generation of financial professionals that the millennials represent if we can give them natural language search, if we can give them natural language ways of asking questions and calling up information. That's something that's super strategic and existential for us as a company collectively that we're gonna be working on together and are working on together.
I suppose if you can marry together sort of an evolved user interface that takes advantage of the way that most people.
Yeah
work in their consumer lives, and then you can actually inject it with much broader and deeper content that actually lets you ask and answer more questions, then we'd really be onto something.
Yeah.
Cool. All right.
That's it.
We just have a few minutes left.
Yep.
Maybe just talk about other things that are on the roadmap that we've dug into or not, a couple things that you might be excited about. Daniel, why don't you start?
Sure. As John mentioned, one of the things we're really excited about is the ratings space. Obviously, that's something that we have to look at with all deliberate speed because it is so complex, and it is regulated. As John mentioned, there's the entire surveillance exercise as something that is very costly, very human-centric, and very much about pattern recognition, and that's something where you're never gonna quite have a algorithm replace a human, but it could be a lot like a heads-up display in a fighter pilot cockpit, where you're giving a small elite group of analysts the ability to identify when a change in a set of economic or other variables has occurred that in the past would've led them to reevaluate a ratings decision.
The other thing that we're really excited about in the ratings space is alternative credit metrics, using alternative data, things that are perhaps leading to the traditional economic data that typically goes into a ratings decision, and making sure that S&P Global is first to market to include those types of variables. Both of those things are things we're actively working on right now. These are not speculative. Those are very exciting for us.
We've got an example of that I think out in the showcases.
Yeah.
Maybe Nick.
Yeah
we've got one minute left.
One minute. Yeah. I think, you know, what excites me the most, and Daniel and I have talked about this, it's the next frontier of data. We keep using the term alternative data, and there are different forms of alternative data, but one in particular that I think would be very interesting to the financial markets is the Internet of Things data, IoT data. If you could understand better with the use of devices, the shelf life of devices, take all that sensor data that sits in devices and bring it back, synthesize it, clean it, and link it back to more conventional data about the companies, you could gain some really informative insights into potential performance, potential credit risk, et cetera. It's a, that's a very big space.
It's very fragmented today, and it's actually really well suited for what we do in a data company, taking very complex data sets that are fragmented, not very clean, bringing them in, linking them, cleaning them, and putting them in a relevant format.
Beyond the linking, then using machine learning and AI technologies to actually figure out.
Pull the insights out of it.
what the insights are and all that content.
Absolutely. Absolutely.
Fantastic. All right. We're out of time. Nick, Daniel, thanks for joining us.
Thank you.
Great. Thanks.
All right.
Right there in the middle. Microphones? Can we get. Wait. Oh. You okay?
Yeah.
Well, please. This way. Oh, yeah. Okay. Thanks.
Hi.
Thank you. Sorry.
Jeffrey Goldstein, Morgan Stanley. This question's for John. There you are. Maybe we're gonna get to this in the financial section, just on margins, I know the number that's been out there for a while is low fifties in your business. I'm just curious, long term, you've been talking about a lot of initiatives here. You just went through Project Simplify, it seems like you have some longer runways. Just how should we think about the long-term margins on that side?
Our strat plan, our initiatives inside of our strat plan are designed to drive some margin expansion. You're not going to see the kind of margin expansion that you saw over the last couple of years, but these initiatives are in fact designed to do that. When we think about uses of technology, ultimately, we don't know quite how to harvest the value of that yet because it's early days, but it could be either in the form of productivity or it could be creating capacity to chase more growth. Give us a little bit of time to sort that out, what to do with the capacity we create, but we're going to create capacity. And in the short term, I think we've got room to run on margins.
Let us develop how to use the excess capacity over the next couple of years and we'll be able, over time, to give you better answers to that. But we can extend margins.
Shlomo.
Hi. Thank you. Shlomo Rosenbaum from Stifel. This is also a question for John. How do you think about the risks of expanding into China? This time last year, Moody's got slapped with a fine for a report that actually would be considered a normal report here in the U.S. about a lot of the companies that were over there. Just balancing, you know, the need to be open with the investors together with the sensitivity that they have in China with not necessarily wanting to be so open.
Yeah.
How are you gonna deal with that?
I think, it's gonna have to be a slow build over time. Here's what I'm encouraged by. We have rich, intimate dialogue with the PBOC and NAFMII, who's been appointed as the, rating agency regulator, and we're gonna continue that dialogue. The second is, I think, there are three secrets to getting into China in my view, having the right talent, having the right analytical path forward, and having the right technological enablement. We're gonna have to make sure that we have the right migration plan analytically. I said in my presentation, we have to be sensitive to not being overly disruptive to the Chinese market because it is, it's built the way it's built. We think their, their objectives of attracting foreign investment into the, into the market are real.
We think we can play that role. The other thing I think Greenfield gives us is if we're wrong about any of that, we can be agile, right? I mean, you know, the investments are a lot less than buying a domestic rating agency. You know, I think it allows us to kind of pivot. If we get uncomfortable with the risk, we'll address that.
Right here.
Thanks. Yeah, John Heagerty from Atlantic Equities. Also for John. Sorry. Two questions.
You guys, you guys can ask one each.
On China as well. Just very interested firstly on how you're gonna square the circle between the China rating scale and the global rating scale. That's something which has been problematic, I think, for a while. Also just on the ambitions, you know, sort of medium term, long term size of that market, 'cause it's always been a huge untapped potential, but will it ever have a real sort of meaningful impact on revenues?
Yeah. Let me start with the latter half of that. China, our cross-border China business is actually quite big today. It's a sizable contributor, a meaningful contributor, to both the top line and the bottom line. We think that the growth potential for China, both cross-border and domestically, is actually quite large. It almost has to be, given the overall size of the bond market, you know, as the third largest bond market in the world. I think the trick is getting the analytics right. Right? I mean, how do we account for the domestic scale and over the course of time converge? I don't know that we got the perfect answer because we don't have perfect data yet.
We've got to, I think, get our arms around what the existing ratings look like, get more private public company data, and sort that out. We're our analytical teams are confident that we can do that, and that we can do it, well. I think the final equation is winding that up with the right talent, and making sure that not just domestically in China, but in Greater China, that we have the right resources, and that they're senior enough and can handle that volume is the secret. Look, we spent the last year looking at this from every angle and we're quite confident we can navigate it.
Okay, let's go far over there. Vincent.
Hi. Vincent Hung from Autonomous. Just a question for John. Once you've finished implementing Project Simplify and Augmented Intelligence, et cetera-
Yeah
Are you expecting a big uplift in productivity in terms of the number of credits that can be rated per analyst, or should this be reflected in the quality of the actual analysis?
I would think about it as we are quite confident that this suite of technology and data initiatives create capacity. The question is, you know, does that get converted into productivity, or is there a way to use that capacity to chase other forms of growth? I think it's too early to say, you know, whether that capacity gets converted into actual productivity or whether it gets used in other ways. We're confident that these initiatives create capacity.
John will be back in the final Q&A. Let's have a question not for John. Right here.
Ask Daniel Nadler if he owns a tie. Somebody ask that question. This is like
This is, I think a question for Mike. This is just around the data kind of acquisition strategy. I mean, it sounds like from what a lot of you guys are talking about, there's opportunities in alternative or alternative credit data, and it seemed like with the presentation before, there's opportunities at least in the private company space or serving corporates. I'm just curious, is there any change of what you have to do to get that kind of data, or would you have to acquire that data, or are you kind of you already have that already?
Certainly there's a data acquisition component to all the things that we've been talking about. I think where we wanna go and much of this stuff is available. Some of it, depending on the provider, it might be a licensing arrangement. There's still lots of data available from governments around private companies that we're just not ingesting today. All of it needs to be acquired. There are different methods and different arrangements for doing that. I think what we're enthusiastic about is that the single biggest governor historically on being able to put new content into the product was often it was manual, so i.e., expensive over time.
The level of effort was such that getting to market, I mean, these would be multi-year projects to put something significant into the market. That'll probably still be the case for certain nuanced data that still requires a lot of human inter-intervention, but for a lot of these larger datasets that are on our priority list, we think it just accelerates our ability to do more of them simultaneously and get them to market quicker. That's where the opportunity lies.
Okay. Let's go very front row here.
Actually, Colin Ducharme from Sterling Capital. I have a question for Nick and Daniel.
Nice.
Curious, over like a three to five-year timeframe, as you integrate Kensho's expertise into the broader S&P franchise, specifically, how are you going to measure success? If you put yourself in our seats as investors and analysts, what would you recommend we look to that Kensho is indeed achieving traction across the franchise? Thanks.
That's very kind of you, actually. I'm gonna give it to John.
I'm not answering it because then Ewout will just give me a target.
That's right. Look, I cited Xerox PARC as kind of just one historical template, but I think one of the things that illustrates is new product innovation, new products to market as a metric for success. Because the role of an institution like Kensho within S&P Global is not to make incremental or marginal improvements to the photocopier. There are people doing that, and they should be doing that, and I'm not trying to diminish that in any way, but our role is to ensure that there are completely new and unprecedented ways of interfacing with S&P Global that are now possible because we're in the organization. We cited one example, which is natural language search.
A very concrete thing that you should hold us to is, you know, in the quarters ahead, does it become easier to discover what you're looking for in the S&P Global Platform that's getting created? If it's still very difficult and you're pulling your hair and you can't really get at, then we're not succeeding. Conversely, if you can actually not only find what you're looking for but have the recurring experience of, "Wait, S&P has that dataset? I didn't even know I had that dataset." Right? Think about what that does for renewal rates. Think about what that does for stickiness with the Platform. That's how that's part of the way that I think about it.
Yeah, no, exactly. I think it's going to be through new product, you know, additions, to the product suite, driving new solutions out in the marketplace, It'll be up to the businesses to then commercialize that and drive that with customers. I think you should hold us to coming up with new solutions and really changing the trajectory.
Okay. Down here in front. Manav. Oh, sorry, Bill.
Thank you. Manav Patnaik with Barclays again. Alex, a question for you. maybe it was just a factor of time, but, you know, do you think You guys already run a pretty lean and efficient operation there, but do you think, you know, Kensho and these technologies that everyone's talking about has some added value for the Indices franchise and how so? Then just for Daniel and Nick, I know you talked about IoT, but broadly, if you're thinking about, you know, the bigger picture, like, is this, you know, aspiration to get more data, is that more taking your Kensho technology and structuring the unstructured data, or do you have to go out and acquire a bunch of datasets?
First of all, Kensho actually had already started developing indices that they were actually licensing out, that's something that we'll be taking over. You know, traditionally, when we looked at doing something like a sector or thematic, the way you looked at it was much more based on something like GICS, right? Very rigid. Their technology, you can get at pure answers, so new ways of looking at sub-segments of the market that are more accurately representing what investors want. I think that's the interesting opportunity. Just a matter of time as we start to work that through from the transition side.
Right.
I was gonna say from a data perspective, I think it's gonna be a little bit of a combination. Where we've been really successful, it's not buy or build, it's a little bit of both. Where we acquire some of the datasets, we marry those with maybe some conventional datasets we already have. We have really great acquisition capabilities internally to take on new data items. You sort of marry all of those capabilities together to arrive not just at a new dataset, but ultimately to arrive at an insight that somebody can act on. Because our users want answers.
Some of the if you were on the showcase and you saw the commercial real estate example, it's a combination of data from S&P, data that we acquired from other sources, and then some insights that we could provide using these techniques. It's not one size fits all, it's gonna be really a combination.
Yeah, as Nick and Mike said, the challenge often is not acquiring it. Many of these datasets are free and in the public domain. Here's a very concrete example. Let's say you wanted to analyze what the effect of a Category three hurricane was on oil markets or on various sectors of the energy space, and you wanna know, well, when were all the Category three hurricane landfalls in the U.S.? That's on the NOAA, which is a federal agency's website, but it's embedded in the JavaScript.
What you have at banks are junior analysts going there, manually writing it down or copied into Excel, trying to create a clean date list of when all the Category three hurricanes were, so that they can then do an analysis in R or Stata that they give to the quants to run that against energy price movements. That's an example of something that's free, but it's to, as was implicit in your question, it's unstructured, it's lightly structured. The ability to bring structure to that type of data and then to have the analyst just say in natural language, "Whenever there's a Category three hurricane landfall in the United States, tell me what happens to oil prices in the next three days," that's the future, right?
That's what we're going for, and that's less about the cost of this data to acquire and much more about bringing structure to unstructured data.
Great. Bill, over here.
Bill Warmington, then from Wells Fargo. A question for Alex. You described some of the success you've had expanding internationally by partnering with some of the local exchanges. Has this been taking share or could it take share from MSCI, or are we talking about two different capital pools?
It's actually two different strategies. Our strategy is to be the local index in the local market, where their strategy is to be a global provider. If you go to Canada, if you go to India, if you go to Australia, if you're a local investor in those markets, you're using our indices. Those same investors may use somebody else's indices for their international or outside of their home country. It's, I would say, opposite of their strategy.
Okay, final question, it has to be for either Daniel or Nick, because you're not gonna see them again. Who's got a question for Daniel or Nick?
Wow.
Right here.
Conor Fitzgerald from Goldman Sachs. Just a big picture question on whether you think it's possible to create a sustainable competitive advantage with artificial intelligence, or do you think this is something that over time the market commoditizes?
I think precisely because over time the market commoditizes artificial intelligence, the sustainable competitive advantage is when you marry it with data that's very hard to acquire. As I mentioned, that was the rationale for the acquisition because, yes, we were first to market with AI in the financial space, but you're right, all things tend toward this type of commoditization. You take that first-to-market technology, and you marry it with a 150-year-old company that has all this long range history and long range data, and I think that creates a very, very robust moat, and that's what we did.
Great. Let's turn now to our final speaker. Thank you all. Probably the best presentation, Ewout Steenbergen.
Good afternoon, ladies and gentlemen. Earlier, you heard from Doug about our new strategic framework. You heard from our business leaders about our plans to continue to develop and grow our businesses. You heard from our technology leaders about our aspirations with respect to innovation and the implementation of new technologies in our business models. You heard from Martina about some of the cross-enterprise strategies, particularly with respect to ESG. In my section, I would like to bring that all together and particularly focus on the question: how are we going to create shareholders value in the future? I will focus on our operational leverage, our financial leverage, our capital management approach. I will give you some insight in case of a stress situation, the resilience of our business model.
I want to give you some insight in our valuation models and what those tell you, our financial projections, and then ultimately, how that translates in aspirational new financial targets for the company. Let's first look at the last five years back. Of course, a very remarkable transformation of the portfolio, and you have seen all the different divestitures and acquisitions. You're very much aware of those. I particularly would like to point out some of the acquisitions, the formation of the joint venture between S&P and Dow Jones Indices. Of course, SNL already mentioned, and more recently, Kensho.
If we look at the performance over this period, the operating profit margin has seen an increase of 33% to 47%. The total shareholder return has done very well on a relative basis, clearly outperforming the overall market, the S&P 500, but also clearly outperforming the peer group. Recently, we were recognized by the Drucker Institute, and this is a new ranking. A new ranking that is following the core principles of Peter Drucker. Those core principles are around customer satisfaction, employee engagement, innovation, about the financial strength, and also our social responsibility. If you look at the overall ranking, and it's almost 700 companies, S&P Global is ranked number 16. With respect to financial strength, we are actually ranked number 2, only behind Apple, and you see some of the key metrics on the left-hand side here.
We're clearly anchored in a position of strength, if it is about our motivated employees, our clear strategy, our operating model around operational excellence. I would like also to point out particularly our capital light business model. This is very important because we can grow a lot S&P Global in the future, and that doesn't require a lot of capital going forward. If you think about the future and think about those strengths, that is really helping us to make very specific investments, and I think particularly investment in technology are important. Given the theme of today, I wanted to show you more insight in the overall spend in technology for the company. What you see is, over the last two years, technology spend has come down slightly to $740 million, just under 25% of our overall expense base.
More importantly, you see a very important shift in the composition of the spend. Two years ago, we spent far more on what is called run the business, which means more the day-to-day maintenance, running of the networks and the applications. We have made a very large shift through working more in an agile way, taking complexity out of our environment, and now we're spending much more on transformational technologies, also called change the business. Investments in the new platform, as Mike already explained, other commercial strategies, and of course Kensho is also a part of that. If you think about creating shareholder value, we are thinking about four main components. The first is what we would call operational leverage, the third financial leverage, and the last one is what we would call our capital management approach.
Over the next few minutes, I will go in more detail in each of these areas. Let's think about the revenue momentum we have as a company. You heard a lot of the plans of the business leaders. I would put them in many different categories. We have our commercial productivity, we have new logos, new markets, new products, but we also have in Ratings our issuance growth. We have in Platts the growth of the trading volumes. We have in our indices business growth of exchange traded derivative volumes. Overall, together, I would say it is not one single lever here that will drive our revenue growth in the future. A combination of all of these will ultimately drive our revenue growth as a company, and you see here in the mid-to-high single digit range.
The next category with respect to our shareholder value creation is the EBITDA enhancements. Today, we are announcing a new cost reduction program of $100 million to $115 million, that is on top of already run rate saving programs that we have introduced in the second half of last year at a level of $65 million. The $65 million you have seen in some of the restructuring charges we have taken in the 3rd and the 4th quarter of 2017. The $100 million to $115 million new efficiency program, we have found these after many months of looking very deeply at our organization, at processes and at other opportunities and a lot of benchmarking work we have done. The main categories here are as follows.
In our support functions, we see a lot of opportunity for standardization, for centralization to centers of excellence, to the implementation of automation. Think about our invoice processing. There's a lot of opportunity for automation there to do the accounts payable in a more efficient way. With respect to our real estate, we have a large and expensive real estate footprint around the world, and there's certainly also there are excess real estate. We're planning to reduce that over time and that will also lead to expense reductions. The last is in the area of our digital infrastructure organization. We have a new approach with respect to sourcing.
We are looking at moving more to the cloud, data center integration, all of those combined will lead to that $100 million-$115 million expense reduction over the next three years. We have a very high level of commitment and conviction around that. The third component of shareholder value creation is our financial leverage. You see here the borrowing costs. We will continue to manage that at attractive levels. Our effective tax rate is coming down a lot this year. We will continue with finding tax planning strategies to continue to manage that. Our overall outstanding shares are coming down and therefore the EPS is going up. This year, approximately 23%-25%, that is consistent with the guidance in dollar terms we have provided to you.
Today, we are affirming that particular EPS guidance for 2018. The last area is our capital management approach. Capital management, in our view, starts with free cash flow generation. We're generating a lot of free cash flow, and in fact, that has gone up in a very healthy way over the last few years. At years ago, $1.3 billion, to this year approximately $2.3 billion, with a very nice increase between 2017 and 2018. What do we do with that free cash flow? We're actively returning that to our shareholders. On average, over the last five years at the level of 71%, and that is adjusted for the proceeds of some of the divestitures we have done over those years.
You see here also how we have distributed that in sense of share buybacks and dividends. We have a clear framework with respect to our capital philosophy and targets going forward, and we have explained that to you last year. Let me tell you again about some of the key components. On the one hand, a continued commitment to return capital to shareholders. At least 75% of our free cash flow generation will return to shareholders. We'll do that through disciplined buybacks, but we'll also do that through our dividends and dividend growth. We have been growing our dividends over the last 45 years, so we're one of the so-called Dividend Aristocrats in the market, and we clearly are planning to continue to do that as well. On the other hand, we have a prudent and flexible balance sheet.
We like our balance sheet with a lot of room to maneuver. We think that can be attractive at the right point in time. We certainly will continue with a balance sheet on that basis. We have that high level of conviction around our capital distribution and capital management framework because of the resilience of our business model. We do a lot of stress testing of our financials for moderate to severe short-term stresses, the impact of that is overall relatively modest, certainly taking into account some of our variable expenses that we can adjust as well. Why is that the case? If you look at the sources of our revenues, in fact, there is a very large component that is subscription-based, non-transaction based, asset link based. That is the dark blue part of here, the bar graphs you see here on the slide.
If you look at ratings transaction, in our view, there is also a very solid component in ratings transaction. That is the shaded part in the ratings bar. The reason is, there will always be a lot of refinancing that needs to happen in the market. Over the next five years, $10.2 trillion of corporate debt is set to mature. $10.2 trillion. That is not going away. That needs to be refinanced. In fact, therefore, there is a very solid part in the ratings transaction revenue. If you add it all up, 71% of our revenue is subscription, non-transaction based, 25% is ratings transaction, and 4% we would call that in a category of non-ratings, non-subscription.
To give you some other examples of our resilience of our business models, you see Ratings corporate revenue up over the last 10 years, despite very different cycles in terms of the economy over the last 10 years, and John already explained mostly directly correlated with GDP. We've seen the stickiness of our Market Intelligence business going up. The renewal rates are every year getting better. We've seen Platts doing well in difficult commodity markets over the last few years. If you look at the revenue of S&P Dow Jones Indices, also up each and every year. Although we have seen cycles with respect to assets under management growth. If you look at the yellow line, the exchange-traded derivative volumes, there is a kind of nice natural offset. There is a bit of a natural hedge in that business as well.
Those are some of the examples around the resilience of our overall business model. With respect to our valuation models, we are developing those models with some outside help to try to understand the correlation between the levers that we can pull as a company and what creates most shareholder value in the future. The conclusion of those models is very interesting because it's showing that revenue growth is by far the most important element. In fact, what it is telling is 1% point improvement of our top line growth creates five times more value than 1% point of margin expansion on our businesses. That's because our margins in our business are already so high. Growing those businesses as fast as we can is clearly the most important.
That's why we have a very clear commitment to grow at least in line with market or better as a company going forward. We also have that efficiency opportunity. I think about what we can do as a part of the efficiency opportunity can reinvest in the company to accelerate future growth, and a part of that can flow to the bottom line. In other words, we can grow our top line and still have an expense line that is growing 1%-2% less than our top line, and therefore seeing some margin expansion at the same time. Therefore, our medium-term outlook is that we can grow organically our revenues in mid- to high-single digits, and at the same time, be able to have a margin expansion in all of our businesses.
Our new aspirational medium term, which is three-four years, medium-term aspirational margin targets for the company are as follows: for Ratings, and that was the question that was asked earlier, we're setting high 50s. For Market Intelligence, mid-to-high 30s. For Platts, low 50s. For Indices, mid-to-high 60s. For the overall company margin of low 50s. I do want to point out that the path to those aspirational margin targets won't be linear. There will be fluctuation over time, but we're clearly very committed to get to those aspirational margin targets over the next few years. In conclusion, Doug explained to you our new strategic framework, our six foundational capabilities, how we're going to develop that further in the future, how we're going to evolve and grow our core businesses, and how we are going to expand into adjacencies.
You heard from our business leaders, our technology leaders around our AI-driven innovation, our plans with respect to new products, new markets. You heard about cross-enterprise opportunities. I explained to you some of our operational and financial leverage. That all translates in our medium term new financial targets with respect to mid to high single-digit revenue growth, low double-digit EPS growth, a continued commitment to return at least 75% of our free cash flow to our shareholders in the future. Thank you so much for your attention. We're getting some of these chairs back on stage. I would like to invite Doug and the business presidents for the last Q&A session. Thank you.
I think we've got a chance here to help the sell side. I keep reading that they're going to be under pressure in a post-MiFID II environment. Let's let them sweat for a minute, and I'm only going to take the first three questions from someone who's an investor on the buy side. First three questions, no sell side. After that, we'll open it back up. Okay? You got to step up your game here. You can't be quiet. Right here.
Hi, Colin Ducharme with Sterling Capital. I'm sorry, John, I'll go back to China here just for one moment. Just wanted to generally understand the longer term prospect for that market, and specifically just probe it along three dimensions. I'm curious, based on your observation, how, you know, issuance pricing compares versus developed markets today. Secondarily, I'm just curious in terms of the analytical kind of legwork that goes into creating those ratings, how much of that information today is digitized and able to be automated? Can you achieve the automation that you currently have in the developed markets? Then finally, if you could just touch on the level of disintermediation there and the trends as you see them going forward. Thanks.
Yeah. The first thing to remind you of is that our cross-border business is quite big and very profitable, right? You know, in the domestic markets, you should expect we should see revenue growth, but we're not expecting profit growth for a while, right? It's a slow build as we think about how to approach the market analytically. Some of the data is I mean, actually, the MI team probably could talk about a little bit of the data. Data is a concern of ours in that we're not buying a domestic rating agency, and so we're going to have to find other ways to get that data other than what's publicly available on the ratings.
The thing that gives us confidence on the disintermediation in the market is China's stated policy of opening up the market. We're seeing some of those trends. I don't have those numbers handy, but those would be my answers. You guys have anything to add on the data side?
Yeah, I want to add something.
Oh
which is that every one of us has been in China, including Martina, frequently over the last couple of years, and we're very excited about the Chinese financial markets, commodity markets generally. One of the best ways in is going in with this golden opportunity we have where we've been given a opportunity to own 100% of a rating agency. It's a fantastic way to get into the market, but all of us here are very excited about the entirety of the Chinese market, but it's going to be a slow build.
Laurie, right there in front of you in the pink.
Thank you. This is Bogdan Cosmaciuc with Senator Investment Group. Question on, maybe for Ewout on financial targets. Thanks for providing that sensitivity to a potential slowdown or downturn. That's very helpful. If that downturn, let's say, happens in the next three, four years, so during this, during your planning horizon, can you still hit those margin targets, or are you basically thinking we're going to hit the low end of those targets? Can you hit the midpoint? In other words, do you need to see a continuation of the current economic environment throughout this planning cycle to hit those targets? Thank you.
Yeah. My answer on that would be very much it depends on the type of market, downturn situation. If it is a relatively shorter downturn situation, that is mostly where we have done a lot of the stresses. Those are more the short-term, moderate to severe stresses. I would say that we are clearly still being able, with respect to impact, deal with that and continue with those financial targets. If you're looking at a long-term downturn, where at some point, for example, in the subscription business, we will see an impact on renewal rates over a longer period of time, I think then those targets would probably shift a bit further out in the future.
Great. One more buy-side question right here.
Hi, this is Himanshu Bindal from Rothschild Wealth Management in London. My question is for Doug and for John. I think you've got some really powerful businesses here, especially the Ratings business, but then Platts and Index as well, where you can really increase prices and it's hard for customers to let go of sort of those businesses as suppliers. How do you make sure that the culture in those businesses stays in such a way that they are still customer-oriented, that the quality of the Ratings is at the highest level, and so on and so forth, so that the business is not managed just for this year or the next year, but the health of the business is maximized for next 5, 10, 15 years?
Well, first of all, it's fortunate that at the core of our culture is values. We have values around integrity, around how we think about excellence, how we think about relevance. We actually have a lot of dialogue about relevance and how we can ensure that what we provide to the markets is relevant, and it also creates and drives value. The culture that you talk about is one that we've spent a lot of time collectively, thinking about the last few years, how we ensure that we provide the value, we're relevant in the markets, and we do it in a way that we don't have a toxic culture that where we're always driving towards a higher performance.
I think that any one of us here would, for all of the businesses, the risk that you talked about is something that could happen. On the customer aspect, as you saw, very briefly in my opening slides, last year, we took a step back, and we visited over 150 customers as part of our strategic planning, and we listened to what they felt. I put some of those, some of the themes that we heard back about transparency, about trust, in addition to technology, other changes going on. We've reflected that in how we operate. I think some other people, and John, he asked you, I think you could also respond.
Yeah. You know, I think the number one input into our strategic plan was to compete on quality. You know, the people write about moats around this business, and I think that's a very dangerous attitude to have. So our number one input to our strat plan was we compete on quality. You mentioned pricing. The way to extend the value you extract from the market is to extend the value you give. Ratings360 is an example of how we're not staying complacent, but driving forward to add more value to the clients we serve.
If we do those two things, we don't get complacent because we recognize we compete on quality, and we're innovative on data content, and look for ways to extend value. I think that's what we want, a high-performance place that does things the right way, but is ambitious in its quests.
Thank you.
Okay. Let's, Peter, welcome back.
Thank you. Peter Appert from Piper Jaffray. Doug Peterson, I was hoping you'd talk a bit about M&A strategy and how it fits with the 75% capital return benchmark. It seems like that, just off the top of my head, might have precluded the SNL deal. Are you putting yourselves in a little bit of a box with that? Even acknowledging that I'm sure there's some year-to-year flexibility. Then just really quickly for Alex Matturri, I was hoping he could talk for a sec about self-indexing and how big that is in the market now, how big a threat that is. Thanks.
Thank you, Peter. On the first part of the question, when you think about how we have the kind of capacity we have, clearly we have capacity in our debt. If we wanted to do a larger transaction, we could always increase the amount of debt we have on our balance sheet. We also have some excess cash right now, some excess capital. We don't feel like we should be constrained by financial, in terms of size of a transaction just because we have the target of 75%.
We really believe that we have to look at potential acquisitions based on the quality of the asset, how it fits into the overall portfolio, what it's gonna drive for growth, what it's gonna drive for value, how it's going to impact our approach to our shareholders. We look at this on very clear parameters on how acquisitions could fit our portfolio. We don't want to do anything that's outside of what the businesses we're already in. We've looked at international opportunities. We've looked at new product expansions. We've looked at certain technology opportunities. We don't feel constrained by that 75%. We think we have flexibility that will allow us to do almost anything that we'd want.
Right. Self-indexing is not something that we really worry too much about, and I'll give you a couple of reasons. First of all, the big branded indices, right? The things that really drive usage are not something that's really replaceable, right? You can't replace the S&P 500, you can't replace a lot of these core indices. Where you see more price competition would be more in the kind of I would call it the fringe indices, things that are brand means a little bit less. There we tend to be very competitive on price. You know, we've got this more of a 2-tier pricing, you know, where the premium indices are what you pay for.
When you get to, use an example, a narrowly-based thematic index, that sort of stuff, it's really not worth it for most people to try to do that on their own. The new wrinkle nowadays is actually regulation, because to meet the regulatory standards is gonna start raising the barriers for a lot of people. The regulation in Europe is pretty far-reaching, and a lot of asset managers haven't really focused on it yet and what falls into that. Again, I think that's gonna be a cost of doing business for a lot of people. The big players will meet those costs. The smaller players may not be able to. Certainly not worth it for them.
Okay. Let's go to, let's see, Manav. Oh, here. I'm sorry. Yeah, second row. Keep your hand up, please. Thank you, Trish.
Hi. First question is for Alex. Just, you know, in terms of the margins that Ewout set out, you know, the mid to high 60s, I guess. I guess my question is why can't it be more, especially when we're looking at, you know, your competitors? Martin, for you know, now that Platts is finally broken out as a separate segment, thank you for that, Ewout. How does that change your approach in, you know, managing the business discipline? Like, is there change with that breakout that comes for us at least?
I'll take the in terms of our competitor, I know who you're talking about. You know, their business is a different business model. They're focused on just equities. They have a much simpler index structure. They don't have a fixed income business. They're not in commodities. They're not doing partnerships with exchanges where we effectively have a revenue share model approach with them. Again, it's just different businesses. The other factor I think in terms of where our margins can go, if you look at like what happened in the first quarter, you know, when trading volumes shoot up, that's a 100% margin business. There's a revenue mix element that's unique to our business compared to other index providers.
As far as Platts is concerned and the reporting, I mean, before we were reporting, we were held to strong financial discipline. In that sense, I think we were probably following best practice beforehand. Transparency obviously brings greater accountability. The types of things that we are thinking about are just on the expense side, particularly managing expenses over the calendar year. The types of things where in the past maybe we might have lumpy periods of expenses, we're thinking about those things to smooth, if you like, during the course of the year. Otherwise, it doesn't make a major impact.
Okay. Laurie, down here in the front. Alex?
Thanks. Alex Kramm, UBS again. I guess for Ewout and maybe Doug, I think, Doug, you just actually mentioned that you still have a lot of excess cash, and I think it's about $1 billion. A lot of that's sitting overseas collecting dust, given where rates are overseas. You know, it sounds to me like maybe M&A is something you're earmarking that for. At what point do you actually say, like, "All right, it's just sitting around here. We need to return this to shareholders"? Is there a timeline or how are you thinking about that excess cash? Just maybe secondly, I think John answered some of this already. In terms of the guidance, how much is China actually in the guidance?
I mean, is some of the costs build out in the margin guidance for ratings, or are you assuming any sort of revenues over the next few years? How could China impact the guidance that you just laid out?
Alex Kramm, on your first question, at the end of the first quarter, we had $1.8 billion of cash on the balance sheet. Came down from $2.8 billion at year-end, that was because of the $1 billion ASR, our first quarter is always the lowest in terms of cash, net cash generation. The 1.8, everything else taken, not taken into account, that should be built up again over the next few quarters. Very significant cash balance. You make a distinction between in the U.S. and outside of the U.S. In fact, we don't make that distinction anymore. For us, it's irrelevant because all of the cash is now largely unconstrained. It can be today in Europe, it can be tomorrow in Asia, it can be the day after in the U.S. and back again.
Because of the new tax legislation, that is now all unconstrained. For us, we're not thinking about it anymore in the sense of foreign cash versus U.S. cash. This is all cash that we have available. Our first priority is to reinvest those cash balances into our business. Again, a little bit of the flip side of the question of Peter. 75% of what we generate per year, we will return to our shareholders. By the way, Peter, that means 25%, still $600 million that's available annually to reinvest in tuck-in acquisitions or in other ways. Then we have the existing cash on the balance sheet that we would like to reinvest over time as well. I'm not going to give you a particular deadline with respect to the time before we would like to spend that.
Clearly, we hope that we have a lot of conviction, a lot of confidence from our shareholders that we are going to do the right thing with that cash balance. I think we have proven a lot in the way how we think about acquisitions, about investments, our valuation models, and the discipline we apply around it. Of course, over time, we're not going to sit on lazy cash. If it really takes a very long period of time, we have to think about other plans as well.
The China part?
You go ahead. You answer it.
With respect to the China plan, you should think about China and how it will impact the numbers over a longer period of time. The domestic greenfield startup that John was explaining will be incurring costs for the next few years that is probably higher than the revenues. Because we are building a new standard in the market, the revenues will grow slowly over time. I see it really as an optionality we are creating for ourselves, and then hopefully, over time, when the market gets more mature, it's moving more to a higher quality direction, and then we will take the benefit of it. You have to think about this that the first time you see really significant impact in terms of our financial reporting will be multiple years out in the future.
I think that it would be a fair expectation to have.
The only thing to add to that is we do expect our cross-border business in China to grow and have real be accretive to our results.
Let's go down here in front. Saad?
Hi. Thanks. I'm Saad from Edgewood Management. Question for you, Doug. We talk a lot about financial resilience, but I'd love to hear you talk about cultural resilience. Under your stewardship, the team and the organization has basically been built anew since the last financial crisis, which is amazing 'cause it's manifested in incredible operating performance. Conversely, do you worry that the organization's lost some of the muscle memory of sort of withstanding that crisis? How do you retain that given there's so much newness in the organization?
Well, first of all, I believe that we've done a really good job of building a team and building a culture in this organization. If you go back about 2-plus years ago when we rebuilt our brand, we renamed the company S&P Global, we took an opportunity to spend a lot of time as an operating committee and as a leadership team to talk about our history, to talk about our legacy. What were those strengths of our culture that had allowed us to be so successful and to deliver such strong performance? We've built a management system in the company that starts with a vision. You've seen it today, Powering the Markets of the Future.
We have a purpose around essential intelligence and delivering that so people can make decisions. That guides how we run the company. When you saw the framework today, that's really a management system. Our management system is built around monthly business reviews and financial reviews that Ewout does. We have a quarterly business review process, not just for the businesses, also with the functions. We do that as an operating committee. We've built this into the management system, into our culture that we're gonna have this vision, we're gonna have values, and then we have a system that keeps us accountable on how we measure and manage that.
I would just add, in the top two layers of our analytical practices and ratings, I can only think of one leader that wasn't here during the financial crisis. While we have made change in the data and IT organizations, we have tremendous continuity in our analytical organizations, and therefore, a lot of institutional knowledge.
Great. Trish, way in the back there. Teddy? Middle. Teddy. Yeah, right down that row.
Hi, it's Teddy Molson from Egerton Capital. I have two questions. First is for Doug. We've heard a lot about the importance of the brand. Given the importance of the brand, why, how are you confident that the risk of a local ratings agency in China doesn't overwhelm that? My second question is, you've talked a lot about capacity creation in the business. Is there any way to quantify just how much capacity over the next five years you're gonna create to invest? Do you have a feeling that this capacity should lead to a higher rate of organic revenue growth going forward?
First of all, in terms of the brand in China, our brand in China is very strong today. We have a lot of credibility. We're already embedded in the global investors. If you go meet with any of the Chinese investors that look at global markets, they're already using our products and services, whether it's CapIQ, it's our ratings business. They're benchmarking to the index business, commodities companies that are using Platts prices. We're already very embedded in the Chinese financial and markets culture. We're starting off with a strong brand there. When you think about a greenfield, a greenfield gives us an opportunity to start building, a building, planting seeds and planting trees in the market, planting flags around China.
It's a way that we can start slowly, start building our brand, hire the right people, have the right approach to serving the market. We're not getting then in a company that already has a rating system that we'd have to live with, we'd have to try to change. We had a lot of discussion about this greenfield versus going with an acquisition, the greenfield gives us an opportunity to build a business but also protect our brand. In terms of capacity, I think it'd be good if maybe Mike Chinn gave us some thoughts because he's running a couple of the big operational services where a lot of that capacity is gonna be coming from.
Sure. I think certainly capacity building is something we're all focused on. You know, John mentioned in his presentation leveraging data gathering assets so that it frees up capacity and allows people to do higher level work. You know, I guess for me, I would think across all of the divisions that kind of capacity building will be reinvested in a few ways. One is in higher quality in everything that we do. I think certainly in our business, John's already mentioned it, these guys may feel the same way. There's always room to do just better work and provide greater insight. Some of it should manifest itself there.
Certainly, freeing up capacity, and retiring some technical debt and some legacy systems should allow us to reinvest technology and software engineering horsepower into things that over the long term hopefully drive greater organic growth. I think that's a fair expectation.
John, just to clarify, you're not starting from scratch in China. You've got people on the ground there already.
We do. Yeah.
You do.
Yeah, we do. We don't operate in the domestic market, but we're showing we're not flat-footed either. We have a presence in China and in Greater China. We actually have a lot of presence in Greater China. It is not a white sheet of paper. We actually have a view.
Right. Hamzah in the back.
Hamzah Mazari from Macquarie. My question is for Doug. Doug, just on adjacencies, maybe frame for us how broad is your definition of adjacencies and where do you see the most opportunity in the portfolio in your segments? You don't have to pick your favorite child, 'cause I'm asking you to pick your favorite segment.
Well, this theme of adjacency is something that's really being driven by two things. One is the way that we're working together now as a team and as a company, where we have the ability to cross-fertilize and move opportunities across all the divisions as well as fertilize and grow them. Second, it comes back from the markets. When we listen to customers and we observe markets, we see what are those gaps that are being filled. When I think about adjacencies, we talked today about ESG, which is a combination of that that's coming from outside and what we can do internally. Supply chain analytics and SME credit is another one that over time we're gonna start doing a lot more work on.
Another one which Mike alluded to today is how are we gonna serve the market with our platform. These are three that right off the top of my head we've started working on. When we did our strategic work last year, we actually identified many more than that, another five or six that we probably felt were either not realistic, or they were too expensive to get into, or they'd require a complex acquisition. There's definitely three or four that we've started working on. In terms of the portfolio itself, I don't know how you could look at a company that has four stronger businesses. Just the envy that people should have for the kind of a portfolio that we've constructed.
Going back four years ago, five years ago, when we thought about these core concepts of being global, of building scale, of having strong brands, of being in the data and analytics and the markets business, this is how we built the portfolio. We've taken businesses that started out that were excellent, and they're all better, and they're all getting better all the time. We're even stronger now because we can work together as a group across the entire portfolio.
Great. Let's go way over here, and then I'll get you next.
Hi. Vincent from Autonomous. Ewout, question for you. I think you've talked before about how there's maybe, like, 7,000 folks offshore entering in data, cleansing data, and that's clearly expensive and inefficient. Is that something that's being attacked within the $100 million cost saving plan? Is that something you can address in the future?
Thank you for that question, Vincent. I think it's very important to say today that the $100 million expense reduction program is not the only efficiency program we have running in the company. There's many more initiatives outside of that. By the way, a part of the $65 million was announced in the third and the fourth quarter of 2017, but not all of that is in the run rate today. There's many other areas where we can look for efficiencies, particularly based on the new technologies, as Daniel and Nick have explained. Certainly, if you look at the 7,000 people in Market Intelligence, in terms of the data intake, ingestion, and linking, there's a lot of opportunities for efficiencies there as well.
At the same time, as we are also focused on commercial growth and revenue growth, there will be offsets to that in terms of growing the business as a whole, and hopefully we can repurpose a lot of that capacity in the sense of additional work that we will generate in the future. There are several examples of that already taking place today. Thank you for that question because it's important to point out that there are far more efficiency opportunities in the company than only that $100 million program. The $100 million is for the support functions, for real estate, and for our digital infrastructure areas.
Okay. Conor, final question.
Hey, Ewout, Conor Fitzgerald from Goldman Sachs. Just one more for you on your valuation model. Just trying to get your understanding of if you really think there's a 5x benefit from growing revenue versus driving some operating leverage. You know, why put out higher operating margin targets at all? Why not reinvest every marginal dollar back into the business? Should we think about that as even if you did, you don't think you could drive more growth? Just trying to get a sense, 'cause a 5x is a pretty low trade-off.
Yeah. Well, that's really a great question, actually a question we are discussing a lot as a team. If we have those opportunities, and we can make those investments, of course, we will do it. We would also like to invest in those opportunities where there is a real business case to grow, and where there is real metrics we can measure that the growth is really happening. It doesn't mean if you make the investment this year, there should be a return on investment invested capital next year. It could be longer out in the future. It could be a leading indicator. We are looking for business cases where we can invest in growth.
Actually, we have established a new committee, and we're all members of that new committee that is now coming together every quarter, where we're looking at very specific cases where we can invest more in future growth in the company. If the business case is healthy, then we will make an investment in that. We haven't set a specific budget. If there are more business cases that we can find, we will make those investments as well. The reality is there is a certain limit in terms of what we can do all at the same time. Therefore, what I said is there's a very large efficiency opportunity. The intention is to reinvest, but realistically, a part will flow through the bottom line, so therefore, end revenue growth and margin expansion at the same time.
I don't believe that we will be in a situation longer term where we always can do both. There will be moments several years out where we have to make very explicit trade-off decisions between one versus the other. We are in the fortunate situation that we can do both at the same time, in our view, over the next few years.
Thanks, Ewout Steenbergen. Doug's gonna close out. Let me just remind you that after Doug closes out, where you saw the showcase will be reopened. The showcase will be available. Our executives will be there, and so will a cold drink. Doug?
Thank you, Chip. I wanted to, first of all, thank all of you for either listening in or joining us today for our investor conference. As we started off, we've had a very strong run the last few years. Our performance has allowed us to return capital to our shareholders. We've improved our margins, our top-line growth. We've built a very strong management team. Our strategy has been one that was sound. Over the last couple years, and especially the last year, we saw changes going on around us which required us to take a step back and decide that we weren't gonna be complacent. We weren't gonna let ourselves be disrupted, and we had to try to become part of the disruptive culture that we were seeing changing business models everywhere around us.
We're very pleased today that we were able to share with you the framework that we're using for managing our strategy for implementing it. We're using that framework for allocating resources, for allocating capital, for defining how we're going to grow our business to expand into new geographies, into new product sets, how we're gonna be acquiring for the future. I'm really pleased that all of you are here today. We enjoy the interactions with the sell side and the buy side. It makes us stronger. You ask us tough questions, the tougher the better, because when we come back from meetings with you, it allows us to think about how we're gonna be better. Thank you for joining us. Thank you for being investors in our company.
I also want to end by thanking all of the people that are here in the room that made this possible. The people back here from Fusion, Celeste, [Papiya], all of those that made this a successful day. Again, please come join us for a drink. Go to the showcases, we really appreciate your interest. Thank you.