Douglas L. Peterson

President and Chief Executive Officer

Dear Fellow Shareholder:  

S&P Global achieved strong results in 2018. We extended our record of growth by never losing sight of our values, our purpose or our aspirations. That means delivering essential intelligence to our customers today, and always.

Looking back at last year, I see our people at their best: serving the needs of our customers and our communities, making advancements across every part of our company and creating an impact virtually everywhere across the globe.

We recorded another year of double-digit growth in adjusted diluted earnings per share, despite volatile credit markets, and surpassed our target to return at least 75% of our free cash flow, excluding certain items, to shareholders by delivering more than 100%. We developed new capabilities to improve the customer experience. We found new ways to serve the causes that drive prosperity around the globe and support the communities where we live and work. And we introduced programs to help employees to acquire new skills, improve the way they work and feel even better about being part of S&P Global.

I am pleased we delivered solid financial performance in 2018 in the face of market volatility during the fourth quarter of the year. Despite a decline in global bond issuance, we were able to increase revenue and profitability last year, and we generated earnings in-line with the guidance we provided to investors. These results are testimony to our diversified business portfolio and value we offer to our customers.

We are proud of all that we achieved. But we’re not dwelling on the past; we’re not complacent. We’re looking ahead and moving forward.

A little over a year ago we introduced our plan for S&P Global to Power the Markets of the Future with our essential intelligence. That’s not a meaningless slogan. It’s our vision. It’s our long-term strategy and it’s the trusted management framework we use to set goals, allocate capital and other resources and hold ourselves accountable.

We developed this framework by listening to our customers, paying close attention to the competitive landscape and watching key market trends.

Six foundational capabilities support this approach and each is critical to our future success.

I want to share some of the stories in each of these categories that illustrate how our employees are executing our strategy and helping us achieve our purpose of providing the intelligence that is essential to allow customers to make decisions with conviction.

1.  Global

About 40 percent of our revenue is derived from outside the U.S. We believe there are still plenty of substantial long-term growth opportunities for us to capitalize on as global trade flows grow and as capital markets open up in emerging, as well as developed countries.

I share the concerns of many business leaders that geopolitical issues such as trade disputes, trends towards isolationism and dysfunctional political systems create headwinds for global companies. We all will have to navigate these external forces with patience and foresight.

In our case, China represents an excellent example of planning for the future with a global focus, despite ongoing U.S.-China trade tensions today.

China is the third-largest bond market in the world, with an estimated $11 trillion in outstanding corporate debt. The market is expected to grow as more corporate financing shifts from loans and global investors look to enter China. As it does, we’ll be there to support the move to a more liquid, sophisticated capital market.

Paving the way is the Chinese government’s recent decision to remove foreign ownership restrictions on credit rating agencies as a way of attracting more global investment.

In response, we’ve prepared to enter the domestic market by establishing our own local credit ratings business to complement S&P Global Ratings’ longstanding presence in China, which rates bonds issued offshore by Chinese entities. Earlier this year, the Chinese government formally notified us that we are permitted to operate a Credit Ratings Agency (CRA) in the domestic bond markets. This approval marks the first time that a company wholly owned by an international CRA has been able to rate domestic Chinese bonds. Investors should think of this as a start-up operation. As the market matures, our domestic ratings agency will too, and that is a very attractive prospect.

We have other promising plans to bring more transparency and insights to Chinese capital markets.

S&P Global Market Intelligence has been testing new processes to develop a sentiment analysis that provides financial risk indicators of Chinese companies. Our teams are analyzing public disclosures to search for potential signals of financial risk for public and private Chinese companies. This information is valuable to commercial banks and non-financial corporates for counterparty risk and supply chain analysis. We have filed a patent for the unique approach we took to fuse the techniques needed to tap a previously unused, unstructured data set, and expect to bring this solution to market later this year.

2.  Customer Orientation

Over the last few years, we’ve brought even more focus to how we serve customers across capital and commodities markets. That work continues.

Demonstrating the importance of this endeavor, I hosted our first Commercial Leadership Conference. We brought together leaders from sales, marketing and other key functions across our divisions to discuss ways to enhance the value of our content, improve product delivery and make every customer touch point a high-quality one.

In that spirit, last year, we formed an Editorial Council to identify opportunities for collaboration, standardization and efficiency across our news, editorial, research and publishing operations. This cross-divisional effort will foster stronger internal teamwork, innovation, deeper market insights and accelerate our ability to deliver greater value to our customers.

As financial markets become more sophisticated, so do the demands of our users. It’s, therefore, important that we continue to build relationships with both our existing clients as well as new ones. Market outreach and demonstrating leadership are essential. For example, I had the privilege of being in Tokyo last year for S&P Dow Jones Indices’ 10th Annual Japan Exchange Traded Fund (ETF) Conference. This is the largest ETF conference in Asia and the second largest in the world. A decade ago we started this event with just a handful of market participants. Today we have 29 partners and attendance keeps growing, increasing to nearly 900 last year, underscoring the power of building enduring customer relationships, the popularity of indexing and the role we play in Asian markets.

S&P Global Ratings is demonstrating a customer-oriented approach by introducing a great deal of additional transparency to rated issuers by providing a more robust view of corporate, insurance and financial institution risk through Ratings360, a powerful digital solution, on the new S&P Global platform. Across every corner of our company we’re working on building a modern, digital, integrated platform and upgrading the user experience.

3.  Technology

New and emerging technologies are allowing our employees to get creative in the ways we serve customers.

To support this priority we have more than doubled the amount of technology investment devoted to "Change the Business" initiatives and we’ve acquired or organically grown capabilities to do things much differently than we have before.

In 2018, we acquired Panjiva and Kensho, welcoming an amazing group of talented data science, artificial intelligence and machine learning experts.

The artificial intelligence and technology professionals of Kensho are supporting projects in all of our divisions, including help with predictive distress models at S&P Global Ratings and working with S&P Global Platts to apply AI and machine learning techniques to the collection and examination of market data used in our price assessments. We’ve only really explored the tip of the iceberg in terms of realizing the full potential of Kensho-led innovation and productivity.

Enhancing the search capabilities of our products offers enormous promise. We take online search for granted in our everyday personal lives. It’s so effortless to find what you want amid the vastness of the Internet. But on financial business platforms everywhere, it’s not so easy.

S&P Global has so much deep, rich data. Yet currently our customers can only uncover a small portion of it all, in part, because of the limitations of the search bar. We’re changing this steadily, bit by bit. For instance, last year we released the initial beta version of a Kensho-driven search capability on the Market Intelligence platform to improve keyword and topic search to generate responses that are more relevant.

Technology is serving as a value-creator across S&P Global. We added capabilities to help customers discover and visualize complex relationships, and last year, S&P Global Platts developed a blockchain application, the first for us. Our blockchain network allows market participants to submit weekly inventory oil storage data to the Fujairah Oil Industry Zone—the host of the Middle East’s largest commercial storage capacity for refined oil products—and the local regulator. This represents a significant upgrade to the speed and security of what had been manual, email driven processes, and it is the foundation for more frictionless commodities trading and financing in the future.

In addition to those projects, we are investing in innovative technology platforms across our ecosystem both directly and through partnerships with outside venture funds. Through San Francisco-based GreenVisor Capital and Singapore-based Arbor Ventures, we are gaining access to a wide range of emerging businesses and striking partnerships that address customer needs with new technologies and business models.

4.  Innovation

We clearly recognize the need for innovative approaches to sharpen our competitive edge.

To that end, we established a rapid innovation group to help us identify breakthrough projects in which we should invest time and resources. This program employs an internal venture capital model, funding ideas that align with emerging technology and disruptive, new opportunities. Because of this program, S&P Global Platts is planning to introduce the next generation of real-time analytics, leveraging machine learning, AI and alternative data sources, to help inform commodity-trading decisions.

Technology is obviously enabling innovation at S&P Global. However, there are other drivers. Consider, for example, our expanding portfolio of products and services catering to the growing needs of companies and investors interested in environmental, social and governance (ESG) data, benchmarks and analytics.

Investors, such as sovereign wealth and pension funds, and companies, especially in Northern Europe and Asia but also increasingly in North America, are seeking out new ways to measure and glean insights about ESG risk factors.

We've responded by developing new product offerings. For example, we unveiled an evaluation tool last year to enable companies and investors to align their ESG strategies with the United Nations’ Sustainable Development Goals.

I'm also very pleased the Government Pension Investment Fund for Japan, the world's largest pension fund, selected two of our new carbon-efficient indices as the benchmarks for its ESG investment strategy. Now there is approximately $10 billion in assets directly indexed to these two indices.

Climate change poses considerable risk to the private sector globally. In addition to the solutions that help our clients mitigate the challenges presented by climate change, S&P Global has formally expressed support for the Taskforce for Climate-Related Financial Disclosures’ recommendations. We conducted a comprehensive climate scenario analysis across our businesses in 2018 and we will be publishing a report on our findings in 2019.

5.  Operational Excellence

High-quality operations are essential to our ability to Power the Markets of the Future.

Data, technology, risk and compliance all come together to form the backbone necessary to operate effectively, reliably and consistently.

How do we do that? Bringing an Agile framework, leveraging Lean methodologies and employing automation are a few ways, always anchored by the tone at the top.

Our Agile framework breaks down silos, decentralizes decision making and ensures a constant customer focus. We now have 300 Agile, or scrum, teams working across the company.

Automation is another. We are finding many places where we can hand off logic-based, repetitive work to robots. This is freeing up our people to do more critical thinking and higher-value tasks. Bots will not replace our people; they are enhancing our productivity by giving our employees more time to do interesting and rewarding projects.

The combination of technology, especially data science, and the Market Intelligence business’ long-time strength in operational excellence is creating an exciting new opportunity to improve productivity.

The S&P Global Market Intelligence team is using machine learning models to analyze the massive number of documents they ingest each year. These models assess the relevance of the documents and determine which ones should be sent to specific teams so the data they contain can be used in our insights. This approach has reduced the number of documents handled by our analysts by more than a half a million annually. This is a big step forward in our quest for operational excellence.

All of these efforts, plus improvements in our real estate footprint and other areas, are helping us achieve the productivity savings programs we announced last year. We expect these programs to generate approximately $100 million of run-rate cost savings over three years.

Last but certainly not least, operational excellence means we are moving ahead with our ongoing commitment to our robust risk, internal control and compliance culture.

6.  People

I am so proud of the people of this company. Our people are the foundation of everything we do and every day they exemplify our core values of relevance, integrity and excellence.

To help us create a stronger workplace culture, we hired Dimitra Manis in 2018 as our Chief People Officer. Dimitra is a fantastic addition to our Operating Committee, and under her leadership, we are demonstrating what it means to put our people first.

For example, we’re fostering a culture that embraces the Agile and Lean mindsets I mentioned earlier, which will increase collaboration and the speed of our work.

You see our progress in other areas: we are making diversity and inclusion an even higher priority; we recently introduced progressive benefits; and to support our communities, we have expanded the number of days our people can use to volunteer their time.

Additionally, we're focused on making sure we recruit and develop people with the technology skills we need to succeed. Throughout the year we all participated in a program called EssentialTECH and we have now launched a Data Science Academy. This strategic initiative provides a multidisciplinary blend of data inference, algorithm development, and technology education to those employees who want advanced, hands-on training, with the understanding that data science is critical to helping us solve analytically complex problems.

Women, Work and Wealth

It's not just our own people we’re supporting. Through our data, insights, philanthropic efforts and volunteerism, we're taking steps to expand economic opportunities for the underserved and support advancement for women everywhere.

Earlier this year, we began a campaign called #ChangePays to elevate the conversation globally about the important role women play in the workforce and economies. According to our research, if the U.S. increases the number of women in the American labor force and thereby accelerates U.S. GDP, doing so will add $5.87 trillion to global market capitalization in 10 years. As we move ahead, I invite our employees, investors, clients, and global business leaders to join us in elevating awareness around the benefits of greater workplace inclusivity.

To advance this agenda, we also are leveraging the S&P Global Foundation to distribute grants to nonprofit partners committed to help women thrive in today’s economy.

Powering Markets of the Future

You can see the many ways we are shaping our future by the multitude of examples of our employees working together, across every part of our company.

I want to close by acknowledging Mike Chinn, who led our Market Intelligence franchise and was responsible for data and technology innovation. Mike announced he is leaving the company early in 2019. I thank Mike for the outstanding job he did integrating SNL and setting the strategic direction of the business.

We're fortunate to have a deep bench of leaders who can step in and make immediate contributions. We’re very pleased that Martina Cheung, who was leading our Risk Services business, has succeeded Mike running Market Intelligence and that Nick Cafferillo is now our Chief Data and Technology Officer.

I can't imagine a better time to be at S&P Global. As I look ahead and across the globe, we’re more strongly positioned than ever to provide the essential intelligence our customers need to make decisions with conviction. I'm confident that we’ll deliver for them and all of our stakeholders.

Thank you for your support that enables us to Power the Markets of the Future.

Sincerely,