Moody's Corporation (MCO) Earnings Call Transcript & Summary

Good morning. Thank you again for joining us at BMO's Growth and ESG Conference. I'm Jeff Silber. I'm the Business and Industrial Services and Education Analyst here with BMO Capital Markets. We're continuing our fireside chat format. So I'm thrilled to be joined from representatives of Moody's Corporation. MCO is the ticker. This morning, we've got a really interesting guests. We've got Nick Reed, who is the Chief Product Officer at Moody's. Nick, thank you so much for joining us. Appreciate you coming in so early this morning.

No problem. Morning, Jeff. I mean [indiscernible].

That's right. We've already had a meeting this morning. So this is number two. So the way the format is going to work: This is a fireside chat format. I've got a list of questions. There's also an opportunity for those of you that are on the line to ask questions, to submit them ahead of time or even submit them while we're talking, and I'll be incorporating them into the discussion. I'm really excited about this conversation because this is a growth and ESG conference. We've been focusing a lot more on growth. This one is going to be just focusing on ESG. So again, really appreciate you joining us, Nick. And maybe we'll just start. If you can just give us a brief overview on yourself and what your role is at Moody's?

Sure. No problem. Well, people are probably already wondering why I'm here as the Chief Product Officer, to talk about ESG. I will say, I also run our ESG business. And maybe just to give you a bit of background on that, too. So Chief Product Office at Moody's Analytics is made up of, I'll call it, some central functions. So I look after our central product strategy area, our central commercial strategy area, our marketing, innovation and emerging markets. And so as part of -- and I'm now the Head of ESG at Moody's Analytics. And part of the reason for me having that kind of double-headed role, is that more and more, we're interested in working out how we can embed ESG as a capability into our existing product array as part of a product strategy. So as part of that kind of strategic approach, it just made sense that rather than run it as a separate and stand-alone business, we would look for opportunities to be able to work out how to inject it into kind of known workflows, known products and known customers. And so that's why I have that kind of double-headed and dual role.

Yes. So [ it's running a lot ] more than 1 half, that's for sure. So maybe we can talk a little bit about, from a big-picture perspective, what Moody's is doing from an ESG perspective. Maybe give us an overview of the ESG and Climate offerings that the company has.

It's actually really relevant to why it's here, too. So Moody's has made some acquisitions, I'll call it, over raw capabilities. Over the last kind of 3 or 4 years, we've bought a French-based company, Vigeo Eiris, a San Francisco-based climate risk company called Four Twenty Seven. And of course, we had the really large acquisition of RMS last year. And we already had on staff analytic and quantitative resources that we're thinking about the topics of ESG. And what we've been doing is bringing all of that together and then working out how to leverage the data that was kind of either created, curated, extracted or produced as part of those acquisitions. And combining it together with our quantitative processes, our kind of data management and data quality processes and the products that we already have that are servicing customers, particularly in banking and insurance, and working out how do we inject that capability directly into those workflows. And so we think about ESG offering, I guess, more as a kind of component-based business rather than a separate stand-alone business. Again, this is a kind of growing and evolving area. But more and more customers are asking us for, I guess, a series of things. They're asking us for the outputs of our work. So they are interested in the scoring mechanisms that we have to get pretty traditional historic business for us to be in, to be able to produce metrics and derived scores about a particular topic. That includes ESG. They're also really interested in acquiring and being able to get access to all of the underlying data that was due -- that was used to derive those scores in the first place. Because this is a pretty nascent area, there's kind of customer interest in saying, we want to, and we value the output that's produced by Moody's, but we're also really interested in doing our own research and our own understanding of what the underlying metrics are that drive the scoring processes, particularly in ESG. And then -- again, much more and more recently, customers are starting to say, "Actually, I don't just want that as a stand-alone thing. I want that as part of an existing workflow that I'm undertaking or an existing product that I'm using from Moody's." So if I'm a bank that I'm lending money to a customer, I don't want to think of or manage ESG as a separate risk. I would've think about it in the context of whether I should or shouldn't lend money to a customer. If I'm undertaking an underwriting process in insurance and I'm trying to price contract, I don't want to think about this as a separate and discrete thing. This is no longer just an intellectual exercise. This is actually pretty fundamental to those decision-making processes. And so the focus at Moody's is on being able to componentize those offerings and then directly inject them into those existing workflows, where we already have kind of relationships with customers, more so than just generally providing information to the marketing. And I would say, our point of differentiation is about our deep understanding of those workflows, combined with now a kind of growing and evolving expertise in ESG rather than necessarily just the [ pining ] on or providing research information to the market that can be kind of generically consumed by the investment community.

Got it. So who are your customers for these products? And has that been changing over time?

Yes. Like I said, we have a pretty consistent set of customers in the financial services world. And I would say, as it relates to ESG, the customers that we serve are evolving with the market. There were equity people, investment people. Asset management companies were more interested more quickly in topics like ESG and climate. In that world, we're noticing more of a move towards fixed income investment. Then I would say, in general, banks and insurance companies are much more interested in understanding the implications as a result of ESG, not just the raw information. But contextually, what does it mean to lots, what does it mean to default information. And so that -- again, a customer base that we know well, that we're already servicing. And what we're doing is injecting those components into that kind of world. And then I guess the third kind of customer segment that we have traditionally serviced that are interested in ESG impacts, are corporates that are interested in managing their supply chain. And so as part of our integrated risk assessment strategy, we've already been providing insights into who those entities are, who the beneficial owners of those entities are, whether those entities are sanctioned, for example, or whether there's any additional information that we can provide about whether they should or shouldn't be part of customer supply chain. And more and more, those supply chain conversations are factoring in any other risks that might be impactful to their ability to say, yes, we should onboard this supplier or how do we manage the risk of this supplier. And so again, kind of growing segment, I'll say, in corporates that are interested in things like supply chain management and the ESG implications of that.

We hear a lot about the lack of standards and comparability within this area. What is Moody's doing within that space to try to maybe standardize things?

Yes. It's actually a really interesting question, Jeff. So we've always prided ourselves on quality. We're an organization that for 100 years, has been focused on kind of driving quality data into the market and transparency in the market. I don't know that it has or is suddenly going to be a standard in ESG in the same way that there's a standard in credit. But the market is starting to shake out where there is a lack of quality in the underlying data and metrics that are driving these decisions. And so the market is sorting itself out there. It's got nothing to do with regulation. It's got nothing to do with the definition of standards. That's much more about saying, these are impactful to our decision-making processes. This is not an intellectual exercise anymore. And so therefore, quality is going to win when it comes to using the kind of ESG data and metrics that Moody's provide. And so as -- I don't know, as a standard bearer for quality, I think we're helping kind of drive the market less so in the absolute definition of what that standard might be. On the standard question, there's lots of discussions, more so in Europe than the U.S, about disclosure requirements, for example. Again, we're really interested in being able to push for and advocate for additional disclosures. Again, our view is, the more the information is readily available, that's not a disadvantage. That's an advantage to us because we've got an ability to combine that disclosed information with our own ability to produce insights around that information and then provide additional value to customers. And so this -- again, pretty nascent market. Then more and more, there's a requirement to disclose for the underlying corporate, we think the better ability for us to be able to differentiate the value of our analytic products.

I think we started talking a little bit about this, but you mentioned it's a nascent market. What trends do you expect to drive for future growth or demand for your ESG and Climate Solutions? And maybe what are the tailwinds you think that Moody's can take advantage of?

Yes. So I guess, we've kind of touched on it already. Like I said that more and more -- that the demand from customers is about the reality of the impact of ESG, not the kind of the research and kind of general interest on where it might be impactful. And I would kind of describe it as kind of where are the correlations, what are the correlated insights that come as a result of being able to understand the kind of multi-asset class climate and ESG indicators that we're producing. So it's really moving away from, "I should care about this, this might be interesting, how do I inform myself," much more into "I know that this is interesting. I know that this is impactful. And what I really want from a company like Moody's is to understand correlation." So we would refer to that more generally as our integrated risk assessment strategy. And those correlations might occur, I guess, much more directly between ESG and financial impact, credit impact, particularly, but also across risks. And so our ability to be able to pull all of the kind of relevant data and analytic information for a series of risks and then understand the interrelationship that exists between those risks to inform decision-making processes is a significant growth area, and we are noticing a significant customer demand in being able to gain that kind of correlated insight.

Okay. So there's a lot of companies trying to do this. Maybe we can talk about, from a competitive perspective, who are your competitors in this area. How do you differentiate your services offerings from them?

Yes. [ Moody's ] have always find this is a difficult question to answer because it generally depends on which market, which risk type. And because our strategy is a little more integrated than that, we tend to have kind of specific competitors in specific areas. I would say, there's a kind of concentration, I guess, in the production of the raw materials in ESG, so the kind of raw data and analytic products. And we think our point of differentiation is around our kind of analytic processes and the quality of the data that we produce. That's especially true as it relates to information for credit impact and financial impact because lots of that information flows from the ratings agency, and we have pretty well-established ability to be able to take that information and then apply it to a broader cohort to be able to understand kind of sectoral impacts. And for what it's worth, a big area of focus for us is on the direct connection between the inputs that are used as part of the ratings process to understand the credit implications of ESG and then the ESG scores that are produced on the Moody's Analytics side. Again, more and more customers are starting to say, we want to understand the direct connection that exists between those two things. That's part of your kind of point of difference. And so I guess where we would differentiate ourselves from our primary competitors, so the kind of Sustainalytics of the world, for example, that are operating in ESG, is that we're much more interested in the analytic output and the reason why rather than necessarily the opinion around the ESG performance. And so we're producing a score, and we recognize that, that score has some elements and judgment in it because it's a nascent market and because it can't all be analytic and data driven in the way that some other risk management can be. But we are interested in the analytical rigor around that scoring mechanism rather than just a pining on what might be implications of ESG. And that's really the difference between us and our competitors in this space.

Okay. That's interesting. So your role as Chief Product Officer, maybe we can talk about your approach to product development and how technology plays a role in this. And are there any new products or updates that you're really excited about?

Yes. Well, let's just take, I guess, one step back because it does relate to ESG. So more and more, Moody's Analytics product strategy is about componentization and then solution bundling to serve customers. And that's because we now have kind of at our fingertips an array of capabilities that we think we can inject directly into decision-making processes. So if you're talking about our kind of broad product strategy, it feels like we've acquired lots of the pieces. And what we've been really interested in is now saying, how do we deeply understand what customers need when they're undertaking stress-testing process, for example? And then, how do we build our products in a way that allows us to be able to go to the factory shelf, pick parts #1, #7, #5 and #9 because they're the relevant parts to solve that particular customer's problem? How do we bundle them, solution them and then deliver them to customers? Because we think that there's relevance in those parts. In other words, there's a relationship that exists between the risk types that we're now starting to build in our arsenal. And so that has a pretty significant technological implication. And so lots of our tech strategy is directly related to our product strategy. Because to be able to build those as componentized pieces, and deliver them really seamlessly to customers and enable customers to be able to use them and access them as if they were singular things, requires a level of architecture and coordination that's relatively sophisticated. And so our tech approach has been to, we would refer to it as platform things that can be platformed. In other words, build as utilities-relevant functionality or components that are leverageable in multiple workflows. So as an example, we're building a kind of growing capability in things like screening. Screening is a generic utility that I can apply to lots of different areas. So that's a kind of AI and machine learning process to be able to scrape and access hundreds of millions of websites and news articles and then take from that information, relevant information that might be part of a decision-making process for a customer. And so we need to be able to have the utility that's available and then produce an output and [ tune ] the output relevant -- kind of contextually relevant for that workflow. So we don't talk about ESG screening or lending screening or underwriting or KYC or sanctions, we have a general utility to be able to produce positive news because sometimes understanding the positivity of a situation for a particular counterparty might lead you to onboard them in your supply chain. Sometimes understanding the negative screening implications might mean that you make choices to not onboard that counterparty or to change the price at which you would lend the money. And so again, our technology strategy and our product strategy is to build those things as utilities and then make them available to customers as kind of seamlessly and easily as possible. And that -- like I said, ESG is just another example of that. I would say, you might -- the difference between the way that we would describe it and the way that we would talk about it now than we did, say, 2 or 3 years ago when we were assembling that capability and when we were buying access to the kind of data and analytics, is that we think about it much more as a relevant capability for lots of workflows rather than a separate and stand-alone business. So we don't think of having a business in ESG, we think of ESG as being a risk type that's relevant to our customers. And so we've got to work out how we can inject it into the workflows of our customers more seamlessly. So I guess kind of less of building separate and stand-alone ESG products and more of building ESG componentry and then architecting it in a way that makes it easily accessible by our customers.

Got it. We actually have some questions from the audience, I'm going to try to segue them into this conversation. And this one may fit well. When you're looking to add new capabilities, how do you decide whether to buy or build them on your own?

Yes. It's a kind of interesting and evolving question because sometimes our ability to access some of this information is limited because it needs to be created and curated rather than necessarily even bought, particularly when you're talking about data that hasn't been disclosed. I would say, in general, customers are interested in not just buying the outputs from us, but also buying the inputs. And so that drives our strategy a little more towards building, creating, curating, particularly as it relates to data than it does necessarily buying. But it doesn't exclude the requirement for us or a desire for us to buy certain data assets that might be too complicated, too expensive or too niche for us to kind of bother creating ourselves. But in general, because we [ want ] distribution rights and because we know customers are so interested in actually buying the raw product itself, it makes sense that we would, where possible, try and -- try and build, try and create that information ourselves. So again, kind of referring back to our tech strategy, we are interested in building a kind of data factory concept, so that our ability to be able to extract information out of documents and be able to convert that into something that's a little more digitized and then curate that and inject that into being able to build derived data assets or metrics that drive ESG methodologies, that kind of stuff. Our ability to be able to do that as a kind of topic-independent exercise is our focus because the more and more we can do that efficiently, the better we can then apply that to any topic, whether it's ESG or otherwise because we think there's real value in being able to digitize and then provide that data as an asset. I mean, we make hundreds of millions of dollars out of selling the [ raw ] product as much as we do selling the analytical output or the scoring output that we produce as a result.

Got it. Again, I'll try to incorporate some of these questions that we're getting. At the beginning of the conversation, you mentioned some of your major acquisitions in Vigeo Eiris and Four Twenty Seven and RMS. Maybe we can talk about each of those. What they gave? What kind of capabilities that they gave the company? And how you're integrating them within the rest of your business?

Sure. The Vigeo Eiris and Four Twenty Seven, the answer is pretty well integrated. I mean they were 3 and maybe 4 years ago now for those acquisitions. They are the foundation of our ESG business. Vigeo Eiris particularly gave us an ability to be able to produce a scoring mechanism. And so when we talk about ESG scores, double materiality scores produced by Moody's, the core of that scoring mechanic comes from Vigeo Eiris. And then, of course, we inject our analytic and quant capability to be able to make it more quantitative than qualitative. And the industry has also matured over the last kind of 3 or 4 years as well. So I think that has been pretty highly integrated company and acquisition. We still leverage the analytic capability from Vigeo Eiris in Morocco to be able to process in QA all of our ESG information. Four Twenty Seven, again, different kind of acquisition because it was really specifically focused on Climate. So if I just differentiate ESG and Climate for a little bit, Four Twenty Seven was physical climate risk acquisition. And so it's integration is actually a little more related to RMS because part of the RMS value proposition is about understanding the idea of catastrophe risk modeling. And of course, there's a relationship between climate-based catastrophes and an ability to understand the physical risk of that kind of climate change information and then injecting it directly into the RMS catastrophe risk modeling capabilities. And so I think the kind of VE acquisition as being a little more on the ESG side and Four Twenty Seven and RMS probably being a little more on the climate risk side. And then there's a bridge between the two because as it relates to things like transition risk, for example, or nonphysical climate risk, we are building a bridge between the kind of ESG concept and the climate concept to be able to say what are the macroeconomic implications as a result of climate change that might be impactful to our customers. How do we generally quantify that, and then how do we provide insight into customers about their underlying assets and the transition risk of those underlying assets, again, a kind of a growing area for us. And that's really the bridge that we build between climate risk capabilities and our ESG capabilities. The RMS acquisition is about 1 year old. Very, very natural acquisition for us. I've spoken to other people about this. We feel like kindred spirits with RMS. There's a bunch of really smart people that work there. There's a bunch of quants that are really interested in working alongside their peers in Moody's. And so we're noticing more and more an ability to have those kind of shared conversations directly with customers, where we can start to layer in some additional factors as part of things like underwriting insurance processing in RMS. And we're also more and more noticing our ability to take the kind of RMS cat modeling capability in theory outside of the insurance world into kind of sophisticated banking customers, so that they can make assessments about their own assets.

Okay. Why don't we continue on this theme again, I'll just incorporate some of these questions we're getting. Is there anything that you are missing in your product portfolio that you'd look to either acquire or build internally?

Missing, no. But we're -- I mean, this is a nascent market. The factors that impact an ability to be able to understand ESG performance, always evolving. And so we're kind of -- we always talk about things like our ESG methodology is -- it's kind of a nonstatic document. So I don't know what version we're up to. But essentially, we are continuously adapting and adopting new ways of thinking as it relates to our ESG methodology, based on available information. Again, Moody's point of difference is our ability to be able to quantify things, our ability to be able to be kind of data-driven and analytical about things. And so the more and more there's information that's disclosed in the market, for example, we think of that as being an advantage to us, not a disadvantage because it's less about it being a kind of commoditized disclosure, more about our ability to say, actually, our point of difference is our ability to then apply that disclosed and available information into an analytic process or a model process and then apply across our [ August ] database of 400 million counterparties, so that we can gain insight for a broader kind of set of customers on the basis of a smaller set of disclosures. So I would say, as it relates to data, we are noticing more and more interest in specificity around kind of green share, brand share and kind of bio information because customers are starting to notice that, that's more and more impactful to the assets that they own and the asset selection process. So just as some examples of things that we're more interested in being able to create and curate better quality data, but it's an ever-evolving topic. So we're kind of, I'd say, in the market, always interested in being able to work out how to quantify things as they relate to ESG.

And maybe just continuing with the theme of buy versus build, if you -- I'm going to paraphrase this a bit. If you find a company that you're interested in, what are the advantages for that company to join Moody's as opposed to another company?

Right. I guess just touching on the last point, reach more than anything else. So that the advantage of any additional data injection or any additional analytic capability into Moody's is reach. So absolutely unique value proposition is the enormous entity database that we have and an ability to be able to add kind of quantitative and predictive processes to be able to then apply what we know across that entire universe. So I would say, historically in ESG, people talk about coverage. But they talk about coverage in the context of investors. They talk about coverage in the context of kind of asset management community. And generally, they talk about kind of whether it's 8,000 counterparties or 10,000 counterparties or 15,000 counterparties. And I would say, our point of difference is that we have an ability to apply what we know to 400 million counterparties. There's a difference between a highly analyzed score and a predictive score. But again, our unique value proposition is to give insight into every counterparty that might be part of a company's supply chain rather than just listed entities. So rather than just counterparties that have been involved in kind of disclosure event to be able to be scored because they're interested in what their own ESG score is. And so the workflows that we're interested in servicing are much more about kind of the depth of that coverage -- sorry, the breadth of that coverage across the entire universe of almost -- unless you're a magical company where your suppliers are only listed entities, then, I would say, our proposition, particularly as it relates to things like supply chain management and supply chain onboarding for ESG are absolutely unique.

Got it. So the company has talked about its integrated risk assessment strategy. Can you explain what is that exactly? And how do your ESG and Climate offerings fit in?

Yes. I mean I guess the words that we used to describe it are integrated risk assessment strategy, I think of it as being about correlation more than anything else. So in the conversations that we've had with customers, and everyone on the call knows this, there is an inability to think about risk as a discrete topic. You can't think about credit risk or ESG risk or climate risk or cyber risk or any other kind of risk as being discrete because everyone understands that there's an interrelationship that exists between those risks, that more and more, we have a level of sophistication in being able to understand. And so integrated risk assessment is about deep expertise in any risk that might impact our customers' ability to make a good decision. And then understanding the correlation and the relationship that exists between those risks, so that we don't think about them discreetly. So again, more and more customers are saying to us, "It's not possible for me to just buy an individual solution that solves for cyber risk, for example, because if I don't understand the implications into my supply chain or I don't understand the implications of the credit impact of that risk as well as just the technical elements of that risk, then it doesn't matter quite so much that I understood just one of those elements. It's the interrelationship that's important." So our strategy is about building capabilities in each of those and then analyzing and understanding the relationship that exists between them. And then the output of that relationship is what's becoming increasingly important for our customers, which, again, I kind of describe as correlation more than anything else, which is about saying, "Actually, now that I understand the relationship that exists between those risks, what is the correlation of those risks? And can I produce derived products that give insight into those correlations, particularly in banking and insurance as it relates to loss and default." And so our ability to have, I'll call them, adjusted scores, again, it's a relatively unique proposition. So we would have historically talked about, say, a climate-adjusted probability of default. Now what we're talking about is kind of insert-risk-here-adjusted probability of default, depending on what the industry is, depending on what the sector is, and being able to understand what the correlation effect of those risks are.

Okay. We're still getting some questions in from the audience. And this one might be broad, but I'm assuming this is referring to what you do in your role from an ESG and climate perspective. Are there any regulatory issues that we need to be aware of?

I'm always interested in making sure that I specify the difference between the regulation that might impact our customers and the regulation that might impact us because there's a slightly different answer on the direction that you want to take. So particularly in Europe, I guess, more than everywhere else, there's a conversation going on about particularly disclosure regulation for counterparties. And so we have a commercial opportunity in that space because we want to be able to provide the underlying data analytics and reporting framework to be able to allow customers in Europe to meet those regulatory requirements. And so we're pretty heavily involved in the kind of industry discussion and debate about how to shape those regulations and how to make sure that there's some level of standardization in the information that's disclosed, so that's it's possible to have some level of comparability in the disclosures around ESG. I guess on the other side of the regulation fence, we know that there's, again, an evolving discussion about the regulation of data providers in Europe and an evolving conversation about the implications of regulation for things like rating activity. And so again, we don't shy away from talking about regulation or being a regulated entity. I think it's a point of difference for us. We're amazing at being a regulated entity. We've been regulated for a long period of time. It's one of the things that we're really good at. And so it's -- where there might be other providers in this market, particularly data providers that don't have the level of process and rigor around how they undertake their activities, I get that there might be a level of nervousness. What -- I guess, kind of our focus on this topic is saying, we think we provide a really good quality product. Our focus is on being able to make sure that where we can leverage tools and techniques and processes that give us the kind of certainty about the quality of the output of our product, but that stands us in good stead, should there be any regulation, particularly in the data management space and ESG.

Okay. Again, I'm going to try to paraphrase this question, and I'm assuming this is beyond regulation since we just discussed this. But are there any major differences either in the countries or regions where you are involved in selling ESG and climate-related data?

Yes, there are. I mean, primarily, I guess, the difference is between Europe and the U.S. Again, most people on this call know and understand the political environment, particularly in the U.S. The difference is, I guess, in the focus on disclosure and the focus on standardization in Europe compared to the focus in the U.S. on impact. There's more of a conversation in the U.S. on the impact that just the provision of this information has on industries and on kind of decision-making processes. And so that I would kind of differentiate those two areas on those grounds. We have customers in both that are interested in data and analytics independent of those two discussions and debates. And primarily because we're focusing relatively sophisticated customers, they recognize and understand that this is, I would say, very little to do with whether they're required to do so and a little more about the fact that this is incredibly impactful to the decision-making that they need to make. And so therefore, they're interested in our products and services, independent of the debates that might go on about the merits of impact or otherwise.

So you just touched about this a little bit, and this might be a sensitive topic, but I'll just ask the question since somebody asked it. How does the political environment affect your business?

Yes, it affects the people in our business that are focused on the politics in the U.S., I guess, more than it does anything else. It doesn't particularly impact the way in which we run and manage ESG. Because we're an analytics company, we think we stand in pretty good stead, independent of the debate because we're interested in transparency, we're interested in disclosure. We're interested in data as a way of being able to drive good decision-making processes. And particularly in Moody's Analytics, we're not particularly interested in what I would call, opinion forming or opinion shaping. We're interested in saying, here's the real product, here's a derived product. Both are interesting to decision-making processes and how can we help you customer inject it into relevant workflows. There are other parties and other parts of Moody's that are interested in producing opinions, and we kind of leave it to them. That's the way that I think about the kind of Moody's Analytics approach to this. So we get to stay a little out of that element of politics. And our focus is on, like I said before, making this as quantifiable as possible because in my mind, that's how to solve for some of the to kind of open questions about the merits or otherwise of these topics, is to just say, the more information is disclosed and the more we can make -- is about kind of quantified risks rather than kind of qualified opinions, the better.

Okay. Maybe the last couple of questions will broaden out the discussion in terms of your broader role within Moody's Analytics as Chief Product Officer. The numbers that Moody's Analytics have been putting up have been phenomenal, especially we've seen a lot of capital market disruption, specifically on the MIS side of the business. What's driving the continued growth within Moody's Analytics?

Yes. So it's actually pretty related to some of the things that I've already talked about. Our growth is driven by customers buying more than one thing from us. That's kind of a very, very simple way that I would explain it to people to say, as a result of acquiring and assembling pretty awesome set of capabilities that cover a series of risks that are impactful and important to our customers, our ability to be able to inject them directly into decision-making processes of our customers and then add a second, third and fourth component or widget or risk type or kind of available element from our arsenal of stuff, is pretty fundamental to our growth story. And so we've had a real focus on our product strategy and technical side to make that true. And now we're starting more and more to see that in practice with customers, where our ability to be able to more deeply service them, our ability to be able to offer them more as a result of the arsenal of things that we have, is assisted in our growth strategy. And then, of course, we're interested in acquiring more elements that might be relevant to their decision-making processes. And RMS was a really good example of that, where there were some capabilities, particularly in the catastrophe risk modeling space, that we thought was going to be relevant to be able to more deeply service the insurance customers that we already have and then apply to the noninsurance world, where it might be relevant. And so our continued ability to be able to acquire the capabilities that we know our customers are interested in and then build them and combine them in a way that makes them more easily available to the customers that we've already got, is what's driving that growth agenda.

Okay. Again, another one from the audience, and I'll just paraphrase this. So there's lots of talk about a potential recession, whether it's in the U.S. or globally. Are you doing anything different in your side of the business to prepare for that?

Are we doing anything different? So as it relates to our customers, no, not particularly, this is the moment when customers rely on us more. These are the types of environments where customers have deeper, better conversations about how we can help, particularly as it relates to stress testing, macroeconomic modeling and the analytic insight that we can provide to their decision-making processes. On our side of the fence, again, we've been relatively open about undertaking a good housekeeping review of kind of efficiency and our cost base. And so we've been going through those processes again. Like most large companies, we've used this as an opportunity to make sure that we're as efficient as we can be. But outside of that kind of pretty stereotypical action, no, we're not undertaking anything. We think this is an opportunity as much as anything else.

Okay. Just a good one from the audience, and maybe it's a good closing question. And again, I'll just paraphrase this. So we're in our growth ESG conference 5 years from now, what are the hot topics in your area that we're going to be talking about?

Yes. So I think that the hottest topic will be about impact. I think we're starting to see more and more conversations move away from what's available and is it relevant to what's the underlying impact as a result of it being available and a result of it being relevant. And so I'd say, the difference between now and 5 years is a much more sophisticated conversation in the same way that we would have a sophisticated conversation about other risk types to talk about the implications of the risk, the impact of the risk and the correlation of that risk to other risk types rather than talking about the merits or otherwise of a particular underlying element of ES or G or rather than talking about future disclosure requirements or future regulation requirements. I think we'll be having a much more nuanced conversation about what happens as a result of this information now being much more available and the analytic information about correlation being kind of driven by companies like Moody's Analytics.

Okay. This has been great. I know this conversation has been very wide ranging. Was there anything specific that you might have wanted to talk about that we didn't get a chance to address?

No. I think we've covered on most things. Again, I know we're going to have some follow-up with some people. I'm happy to talk about, I guess, on the product strategy and tech side or on the ESG side that people feel comfortable to talk about either of those things.

All right, fantastic. Nick, really appreciate your time. This has been really interesting, much different than many of the conversations we've had over the past couple of days. So thanks, everybody, for joining. And again, Nick, really appreciate your time.

No problem. Thanks very much, Jeff.

All right. Have a good day.

Bye.