Q&A | Controversies in the Private Market: A Conversation With Sustainalytics' Senior ESG Product Manager

Morningstar Sustainalytics has recently extended its research coverage to include privately held companies from within the Morningstar PitchBook Unicorn 30 Index (UI30). The index tracks the 30 largest and most liquid “unicorns,” or late-stage venture capital-backed private companies valued at $1 billion or more, including businesses such as SpaceX, Anthropic, OpenAI, and Stripe.

In this Q&A, we speak with Remco Slim, Senior ESG Product Manager, who oversees Sustainalytics’ controversies research and global standards screening ESG products. We spoke to Remco about the company's enhanced controversies research, the growing relevance of private markets and ESG controversies linked to high-growth firms, and how investors can use these insights to support due diligence, portfolio monitoring, and investment decision-making.

Sustainalytics: Hello Remco, thanks for joining us. Firstly, could you explain exactly how Sustainalytics assesses controversies?

Remco Slim: So, companies are mentioned in the news or are talked about on the street every day, whether it’s about their employees and how they treat them, or the products that they put into the market and how they’re being used.

From an ESG perspective, our goal is to turn a fragmented and noisy news landscape into clear, decision-useful insights for investors. What are the actions that are controlled or performed by a company that impact society or the environment? Additionally, what risk does this create? This information is relevant for an investor that wants to be aware of and monitor these impacts and risks.

We analyze all the news that's available and scrape the public domain for any updates on a daily basis. Our analysts then determine whether this information is related to social, environmental, or governance topics, for example, such as product safety or how products are being used. They then categorize this information, using our methodologies to objectively rate it on a scale from one to five to create a signal measuring how severely a company is implicated in controversies or controversial events.

SUST: In terms of our controversies coverage, why did we decide to extend our research coverage to the companies in the Morningstar PitchBook Unicorn 30 Index? 

RS: Over the past year in particular, we started to receive questions on whether we could provide ESG ratings for companies that are still privately held, but are venture-backed or potentially seeking an initial public offering (IPO).

As Morningstar CEO Kunal Kapoor also noted, when you look at historical trend lines, we are seeing less publicly listed companies. Private markets are starting to behave more like public markets, and so it was important that we started to provide insights into private companies too. From an ESG perspective, we need to bring the same quality, consistency, and decision‑relevant ESG signals our clients rely on in public markets into private markets. Last year, Morningstar launched the PitchBook Unicorn 30 Index, which focuses on private companies with large valuations that are likely very liquid in terms of their interest from investors.

Thanks to this index, our research team has access to a defined set of companies and their valuation estimates provided by PitchBook, namely the 30 largest, that are very innovative and growing quickly.

In the short-term, this allows us to review a set of companies that have similar characteristics in terms of their size and valuation, but also the level of public scrutiny that they receive, which is similar to that of listed companies.

SUST: Looking at the 30 companies in the Unicorn Index, what types of controversies are they tending to experience?

RS: Our controversy research is updated on an ongoing basis, but as of May 2026, we identified a total of 29 controversies, which we measure through “Events,” or individual controversies that we rate on a hurricane scale from one to five. A company can have multiple events.

Out of the 30 companies, we found that SpaceX, followed by OpenAI, are the two companies with the highest number of controversies that our analysts are monitoring: SpaceX has 13 controversies and OpenAI has nine. The highest score was category two out of five, which signifies a moderate controversy.

When you drill down to the origin of, and the type of companies in, this Unicorn Index, 23 out of the 30 are part of the Enterprise and Infrastructure Software subindustry. We see a similar pattern as with publicly listed companies, namely that Business Ethics incidents are the most prevalent event indicator that we find controversies for. For example, we identified four incidents on this topic for Anthropic, and nine for OpenAI. 

We also identified Social and Community incidents as a second topic, where we see that one company is facing scrutiny as its product has been linked to alleged incidents regarding the use of its chatbot and language around violence.

SUST: Last year, we enhanced our controversies research to include impact signals alongside financial signals, incorporating a double materiality approach to assessing company events. For the Unicorn 30 Index, what are the outcomes of these controversies from a double materiality perspective? 

RS: That's a very good and relevant question. It's important to emphasize that for our ratings, we apply the same approach and methodology for private companies as we do for public companies. This means that for the impact signal, we rely on publicly available information and allegations reported in regulatory filings, media, or non-governmental organization sources. For the risk signal, we use financial metrics to estimate the financial health of a company, and we also link it to the financial materiality of a controversy, such as the potential fines or revenue affected; this can be linked to the controversy and estimated by our analysts.

Given the double materiality approach, to estimate risk we need to account for the fact that the unicorns are not listed. Due to the absence of market cap data for private companies, we are using the valuation estimates from our colleagues at PitchBook to measure the risk.

Finally, for double materiality, the valuation estimates for unicorns are, of course, based on future growth estimation and assumptions regarding market dominance. This results in relatively low to moderate risk event scores for these companies, as we apply the same methodology that we use for other companies with high valuation.

SUST: With respect to all the data and controversies information that Sustainalytics now provides, how can investors make sense of this information? And how might they go about incorporating all of this data into their private markets investment strategy?

RS: We believe that our coverage expansion demonstrates to our client base that we can enable ESG integration methods or screening approaches to monitor privately held companies. These companies are often in a pre-IPO stage but are nonetheless facing public or regulatory scrutiny on aspects of their product governance, for example, or any areas that investors or asset managers might want to incorporate in their decision-making.

SUST: Great, thank you for sharing all of that. Finally, why is this change important? And what happens next?

RS: We see this as an important but initial step towards expanding our coverage of private companies within our controversies and global standards screening research. We are expecting to work with our clients to collect feedback and preferences, and to make sure that we apply the same rigorous methodologies and processes to these companies.

Sustainalytics is not just looking at companies with high valuations in terms of what they’re producing, or the revenue derived from that product; we’re assessing corporate controversy events through the lens of 41 different event types and 100 different incident topics. Looking across the entire ESG domain of these companies, we’re trying to make sure that we highlight anything ongoing from an impact or risk perspective that might negatively impact an investor.

Institutional investors — who perhaps need to report to their beneficiaries or to regulators — need to demonstrate that they’re doing their sustainability due diligence on both the financial characteristics and the company’s ESG credentials, claims, impact, and risk.

Even for investors not assessing these companies with ESG criteria in mind, it’s still essential that they’re aware of any regulatory scrutiny that these companies may be under, or any significant societal impacts. And Sustainalytics’ controversies research, with its robust methodologies, can also help with risk and reputation management of anybody involved in the IPO itself, such as the underwriters, banks, law firms, etc.

However, at the end of the day, it comes back to value versus values. In Morningstar’s 2025 Voice of the Asset Owner Survey, stakeholder pressure was cited as the top reason for an organization considering ESG in the investment process. Ultimately, the end client that is being invested for, is interested in these controversies, and ESG is still relevant.