S&P Global Q2 2021 Earnings Call Transcript

Participants

Corporate Executives

• Robert Merritt, Senior Vice President of Investor Relations
• Douglas L. Peterson, President and Chief Executive Officer
• Ewout Steenbergen, Executive Vice President, Chief Financial Officer

Analysts

• Manav Patnaik, Barclays PLC
• Jeff Silber, BMO Capital Markets
• Craig Huber, Huber Research Partners
• Trevor Romeo, William Blair
• Jeff Meuler, Robert W. Baird
• Ashish Sabadra, RBC Capital Markets
• George Tong, The Goldman Sachs Group, Inc.
• Owen Lau, Oppenheimer Holdings Inc.
• Kevin McVeigh, Credit Suisse Group AG
• Toni Kaplan, Morgan Stanley

Presentation

[Operator]

Good morning. Welcome to S&P Global's Second Quarter 2021 Earnings Conference Call. [Operator Instructions] To access the webcast and slides, go to investor.spglobal.com. [Operator Instructions]

I would now like to introduce Mr. Chip Merritt, Senior Vice President of Investor Relations for S&P Global. Sir, you may begin.

[Robert Merritt, Senior Vice President of Investor Relations at S&P Global]

Thank you for joining today's S&P Global Second Quarter 2021 Earnings Call. Presenting on today's call are Doug Peterson, President and CEO; and Ewout Steenbergen, Executive Vice President and Chief Financial Officer. We issued a news release with our results earlier today. If you need a copy of the release and financial schedules, they can be downloaded at investor.spglobal.com. Before we begin, I need to provide certain cautionary remarks about forward-looking statements. Except for historical information, the matters discussed in today's conference call may 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 reports filed with the U.S. Securities and Exchange Commission. In addition, as announced late last year, S&P Global and IHS Markit entered into a definitive merger agreement. In March, shareholders of both companies overwhelmingly voted in favor of the merger. The merger is pending regulatory approval, and we currently expect to close in the fourth quarter of 2021. This call will touch on the merger but does not constitute an offer to sell or buy or the solicitation of any offer to buy or sell any securities, nor shall there be any sale of securities in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to the registration or qualification under the securities law of any such jurisdiction. No offering of securities shall be made except by means of prospectus meeting requirements of Section 10 of the Securities Act of 1933. In connection with the proposed transaction, S&P Global and IHS Markit has filed a registration statement on Form S-4 with the SEC, which includes a joint proxy statement and a prospectus.

S&P Global and IHS Markit have filed other documents regarding the proposed transaction with the SEC. Investors and security holders of S&P Global or IHS Markit stock are urged carefully read the entire registration statement and joint proxy statement prospectus, which is available on our website and sec.gov. In today's earnings release and during the conference call, 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. The earnings release and the slides contain exhibits that reconcile the difference between the non-GAAP measures and the comparable financial measures calculated in accordance with U.S. GAAP.

This call, especially a discussion of our outlook, contains statements about expected future events that are forward-looking and are subject to risks and uncertainties. Factors that could cause actual results to differ materially from expectations can be found in our filings with the SEC and on our website. I would also like to call your attention to a European regulation. Any investor who has or expects to obtain ownership of 5% or more of S&P Global should give me a call to better understand the impact of this legislation on investor and potentially the company. We're aware that we do have some media representatives with us on the call. However, this call is intended for investors, and we would ask that questions from the media be directed to Ola Fadahunsi at (212) 438-2296.

At this time, I would like to turn the call over to Doug Peterson. Doug?

[Douglas L. Peterson, President and Chief Executive Officer at S&P Global]

Thank you, Chip. Welcome to today's earnings call. At the beginning of the quarter, we knew that the earnings in the second quarter of 2020 had been very strong due to a surge in liquidity-driven investment-grade issuance and from management actions we took to reduce spending to deal with the incredible uncertainty from the COVID pandemic. It's remarkable that the financial results we reported today surpassed those of a year ago. These results don't just happen. Our people make them happen, and I want to thank them all. Now let's turn to our second quarter financial highlights. We reported very strong financial results, with revenue increasing 8% and all four businesses delivering revenue and adjusted operating profit growth. Indices delivered the strongest revenue growth based on the large gains in ETF AUM. Adjusted expense growth was higher than normal at 9% largely due to significant cost controls in the prior period due to the pandemic and increased performance-related incentives this quarter.

After raising guidance on our first quarter earnings call, we're raising 2021 guidance again based on these strong results and our expectations for the remainder of the year. Ewout will provide details in a moment. I'd also like to share some additional highlights from the second quarter. The most important initiative of the year continues to be our upcoming merger with IHS Markit. This is an incredibly transformative opportunity for our company and our customers. Momentum for the merger with IHS Markit continues to build. Countless employees from both companies are working together on numerous integration planning work streams. We continue to engage with global regulators in anticipation of closing the merger in the fourth quarter of 2021. While we don't have any new updates on the merger to share with you today, I can assure you that considerable progress is being made. The iconic Dow Jones Industrial Average celebrated 125 years this quarter, and we introduced several new ESG-related products.

We'll provide further details on these accomplishments on today's call. And finally, CRISIL named Amish Mehta as the new Managing Director and CEO effective October 1. Amish joined CRISIL as President and Chief Financial Officer in 2014 and assumed his current responsibilities as Chief Operating Officer in 2017. He has over two decades of diverse experience across telecommunications, oil and gas and business advisory services. Amish will succeed Ashu Suyash, who has decided to move on to set up her own venture. Over the last six years, Ashu has led CRISIL's transformation to become a leading, agile and innovative global analytics company. Under her leadership, CRISIL has not only consolidated its ratings leadership position but also grown its global business. Ashu has been at the forefront of the ESG agenda for CRISIL and the launch of several new offerings and platforms in India and the global markets. I'd like to express our deep appreciation of Ashu's leadership and contributions. To recap the financial results for the second quarter, revenue increased 8% to $2.1 billion. Our adjusted operating profit increased 8%, and our adjusted operating profit margin declined 40 basis points to 58.3%.

As you know, we measure and track adjusted operating profit margin on a trailing 4-quarter basis, which increased 90 basis points to 54.5%. As a result, our adjusted diluted EPS increased 6%. Each quarter, we highlight a few key business drivers and important projects underway. This quarter, let's start with ratings bond issuance trends. During the second quarter, global bond issuance decreased 9%. In the U.S., bond issuance in aggregate decreased 19% as investment-grade decreased 51%, high-yield decreased 8%, public finance decreased 7%, while structured finance increased 229% due to large increases in every category, particularly CLOs, which increased 580%. European bond issuance decreased 11% as investment-grade decreased 32%, high-yield increased 104%, and structured finance increased 74% with gains in every asset class except ABS. Of particular note were CLOs, which increased more than 300%. In Asia, bond issuance increased 8% overall. The data on this slide only depicts bond issuance. When we include bank loan volumes, overall global issuance decreased 2%. One of the first questions investors ask whenever there is a strong quarter of issuance is how much of this was pull-forward? On this slide, we show the profile of bond maturity data from different points in time.

As you can see, the upcoming maturities in the second half of this year and in the next few years have not changed much in the past six months. So despite the flurry of issuance in the last few months, there doesn't appear to have been much pull-forward activity. Since bank loan ratings are an important element of ratings revenue, and they're not included in our bond issuance slide, we like to disclose our bank loan rating revenue each quarter. The bank loan market continues to see strong demand amid the reopening of the economy and the vaccination rollout as potential inflation puts the floating rate asset class in focus. With an incredibly strong CLO market and retail investors continuing to pour money into loan ETFs and mutual funds, the market has easily digested these elevated volumes. In fact, assets at leverage loan funds jumped to an 18-month high at the end of June. All of this has contributed to an unprecedented level of bank loan rating revenue this year, with the first half of 2021 already exceeding all last year. Second quarter revenue was $157 million, more than triple the second quarter of 2020.

The next two slides look at the combined high-yield issuance and leveraged loan volume for the U.S. and Europe. Data is not readily available for the rest of the world. This slide shows that the combination of global leveraged loan and high-yield issuance in the first and second quarters of 2021 has dramatically exceeded any quarterly total in the past three years. This slide depicts the combination of high-yield issuance and leveraged loan volume by the use of proceeds of the funds raised. The category with the largest increase in the second quarter was M&A and LBO activity. The leveraged loan market and the CLO market are dependent on one another as many of the leveraged loans end up in CLOs. The CLO market continued at a torrid pace in the second quarter. Investor demand for floating rate investments, their search for yield and the relatively strong CLO performance during the 2020 pandemic have contributed to increased CLO issuance this year. There are not a lot of companies in the world still selling a product they created 125 years ago.

But on May 26, 1896, the Dow Jones Industrial Average was launched. Still serving as Wall Street's bellwether, at the end of 2020, $37 billion of ETF AUM was indexed or benchmarked against this iconic Dow Jones Index. At the time of the Dow's introduction, investing in the stock market was considered highly speculative activity. And so in its early years, the Dow achieved little prominence outside of Wall Street. Ironically, it was the market crash of 1929 that brought the Dow's reputation to the attention of everyday investors as the index lost nearly 30% of its value over the course of two days. Before that, investors had been more focused on their individual stocks. But after the crash, investors were more interested in following general market conditions that Dow made that possible. Each year, S&P Dow Jones Indices releases the annual survey of assets. This chart depicts the highlights of that survey for 2020. Asset levels in actively managed funds that benchmark against our indices increased 23% to $11.4 trillion. Assets and passive funds invested in products indexed to our indices increased 17% to $7.5 trillion. Numerous indices support the $7.5 trillion, including the S&P 500, the largest with $5.4 trillion in assets.

There are several other notable categories with considerable AUM growth, including sector indices that increased 24%, global indices that increased 62% and fixed income indices, which grew 86%. Just over a year ago, we featured the launch of the S&P Global Marketplace on our earnings call. Today, I'd like to share with you the tremendous reception it has received by our clients. The site currently features 139 tiles of content and solutions, representing all four divisions and Kensho. So far, we have booked 189 deals, and there have been 600,000 page views. We also recently launched Marketplace Workbench in partnership with Databricks, allowing clients access to a modern cloud-based platform for big data testing and analysis. This slide also depicts the most popular categories and the client types with the most active users. Congratulations to all those involved in creating a site that uses unique technology to simplify our clients' ability to identify, access, evaluate and utilize unique data and solutions. If you haven't visited marketplace.spglobal.com yet, I encourage you to do so. Turning to our investments in ESG. We continue to launch new products and grow our ESG franchise across the company.

After recording ESG revenue of $65 million in 2020, we delivered revenue of $43 million in the first half of this year, with second quarter revenue increased over 50% to $22 million versus the prior period. With the launch of social and sustainability framework alignment opinions that we introduced on our call last quarter, Ratings now has four products. Overall, Ratings completed 13 ESG Evaluations, 11 Green Evaluations, 16 SAM benchmark engagements and 10 social and sustainability framework alignment opinions in the quarter. Market Intelligence launched electric quarterly reports tracking U.S. power purchase agreements. These provide our clients with broad new insights in how energy revenues and renewable power purchase agreement pricing are trending. Market Intelligence also entered into an agreement to provide Trucost carbon and environmental data to State Street's clients. These clients will access functionality, including mapping carbon footprint and other environmental data portfolios, TCFD reporting features, applying Trucost Carbon's Earnings at Risk, Paris alignment and physical risk data intelligence. We launched a climate credit analytics product in partnership with Oliver Wyman to help banks comply with climate stress testing regulations.

And we launched an SFDR data solution that allows firms operating in the European Union to meet newly formed sustainable finance disclosure regulation requirements by drawing on a wide range of ESG data sets from across S&P Global. In Indices, we had $25.8 billion of ESG ETF AUM at the end of the second quarter. This is an increase of 290% since the end of the second quarter of last year. Our Indices business also launched ESG Dividend Aristocrats Index series, partnered with Evolve, for the launch of index ETFs that offset the carbon footprint of stocks and worked with a German federal pension plan that reallocated EUR nine billion of assets to equity indices utilizing our EU climate transition benchmark. Platts began publishing daily carbon credit price assessments, reflecting nature-based carbon credit and household device carbon credit projects that are intended to bring additional transparency to carbon prices and carbon trading activity. Platts launched the world's first daily carbon neutral LNG price assessment, which involves offsetting the carbon emissions through the purchase and retirement of carbon credits. Platts also strengthened its global suite of hydrogen prices with new hydrogen price assessments for the U.K. and a new 2-degree warming scenario to the market-leading global integrated energy model.

Let me now turn to our outlook for global issuance and GDP. After issuance growth of 15% in 2019 and 17% in 2020, our Ratings Research Group's prior 2021 forecast called for a decrease of 2%. The latest forecast was issued earlier this week and calls for a decrease of 1% without international public finance. The level of issuance in 2020 remains, in aggregate, hard to beat, but the 2021 total should still come in at a historically high total, likely surpassing 2019. The two largest changes compared to the forecast last quarter include structured finance, which went from a 6% gain to a 20% gain; and nonfinancials, which went from a 7.5% decrease to a 12% decrease. Please note that this is a bond issuance forecast. This is not a revenue forecast. For example, it doesn't address nontransaction revenue and doesn't include leveraged loan activity.

The peak of the pandemic appears to be behind us, particularly for the most advanced economies as vaccinations become widely available, severe COVID-19 cases fall and economies reopen. But we still see inevitable fits and starts with COVID risk still elevated. This is happening earlier and faster than previously assumed, driving both growth and inflation. The macro outlook continues to improve. We have raised our global growth forecast by 40 basis points to 5.9% in 2021. This reflects stronger performance across the board in the first half of the year. Our 2022 to 2024 outlook shows a stronger U.S. but lagging emerging markets. Risks are shifting from the pandemic to the pace of the recovery. In particular, rising inflation in the U.S. and some emerging markets points to a possible bumpy transition from the ultra-low rates and easy financing conditions to the post-COVID-19 steady state. And with economies on demand, policy normalization and sustainability are coming into sharper focus. Finally, Platts is forecasting that oil will remain above $65 a barrel through 2021. This is positive for the health of the oil industry.

I will now turn the call over to Ewout Steenbergen, who is going to provide additional insights into our financial performance and outlook. Ewout?

[Ewout Steenbergen, Executive Vice President, Chief Financial Officer at S&P Global]

Thank you. Let me start with our second quarter financial results. Doug covered the highlights of strong revenue and adjusted earnings per share growth. I will take a moment to cover a few other items. While there were some modest divestitures since the second quarter of 2020, the revenue associated with them was not large enough to result in a difference between reported and organic revenue growth. Adjusted total expenses increased 9%, and I'll provide some additional color on this in the next slide. Our net interest expense declined 20% due to the refinancing of a substantial portion of our debt last year. The increase in the adjusted effective tax rate was due to an increase in taxes on foreign operations and the successful resolution of tax examinations in the prior year. Our full year tax rate guidance remains unchanged. Our adjusted expense growth during the quarter was larger than normal at 9%.

There are several reasons. First, second quarter 2020 expenses were impacted by pandemic-related management actions taken last year. Second, due to strong financial results year-to-date, performance-related costs, including incentives, commissions and royalties, have increased. Third, ForEx increased expenses. Finally, I want to make it clear that our business-as-usual expenses remain under control. During the quarter, changes in foreign exchange rates had a positive impact on adjusted EPS of $0.03. The only meaningful impact was in Ratings, where adjusted operating profit was positively impacted by $15 million. Last quarter, we introduced three new categories to provide insights into the type of expenses that are going to be incurred related to the pending merger. The first category is transaction costs. These are costs related to completing the merger. They include legal fees, investment banking fees and filing fees. The second category is integration costs. These are costs to operationalize the integration.

They include consulting, infrastructure and retention costs. The third category is costs to achieve. These are costs needed to enable expense and revenue synergies. They include lease terminations, severance, contract exit fees and investments related to product development, marketing and distribution enhancements. During the second quarter, the non-GAAP adjustments collectively totaled to a net pretax loss of $75 million. They included $9 million for merger transaction costs, primarily legal fees; $39 million from merger integration costs, primarily consulting fees; $2 million for cost to achieve; a $3 million lease impairment; and $22 million in deal-related amortization. And there was an after-tax adjustment with respect to the revaluation of deferred tax liabilities related to a U.K. income tax rate change. This quarter, all four divisions delivered increased revenue and adjusted operating profit. On a trailing 4-quarter basis, adjusted operating profit margin increased significantly in Platts and Market Intelligence, while Ratings had a modest gain and Indices had a decrease of 100 basis points. I'll provide color on the individual business results in a moment.

Now turning to the balance sheet. Our balance sheet has low leverage and ample liquidity. We have cash and cash equivalents of $5.2 billion, debt of $4.1 billion, an undrawn revolver capacity of $1.5 billion and no commercial paper outstanding. Our adjusted gross debt to adjusted EBITDA improved since the end of last year to 1.8 times. Free cash flow, excluding certain items, was $1.6 billion in the first half of 2021, an increase of more than $100 million or 8% over the prior year period. Due to the pending merger with IHS Markit, share repurchases have been suspended. Now let's turn to the division results. Ratings revenue increased 7% as strong investment-grade comps were more than offset by strength in bank loan ratings, structured finance and nontransaction activity. Adjusted expenses increased 10%, primarily due to increased incentives, salaries and ForEx. These resulted in a 5% increase in adjusted segment operating profit and a 100 basis point decrease in adjusted segment operating profit margin.

On a trailing 4-quarter basis, adjusted segment operating profit margin increased 30 basis points to 63.4%. Please keep in mind that the 68.1% adjusted segment operating profit margin achieved in the second quarter is temporarily elevated based on the surge of issuance in high-yield, leveraged loans and structured finance. In China, we see continued momentum and interest in our ratings. We completed 13 ratings in the second quarter and 31 in the first half of 2021 compared to 22 in all last year. Nontransaction revenue increased 19%, primarily due to a more than tripling in new entity ratings revenue, growth in fees associated with surveillance and Rating Evaluation Service revenue that more than doubled due to heightened levels of M&A activity. Investors' search for yields and increased risk appetite continues to enable weaker credits to raise debt. Transaction revenue decreased with a substantial decline in investment-grade bond issuance from last year's record quarter, mostly offset by an increase in bank loan ratings activity, structured finance and high-yield bond issuance. This slide depicts Ratings revenue by its end markets.

The largest contributor to the increase in Ratings revenue was the 86% increase in structured finance driven by CLOs, ABS, CMBS and RMBS. In addition, corporates declined 2%, financial services revenue increased 4%, governments increased 5%, and the CRISIL and other category increased 12%. Turning to S&P Dow Jones Indices. The segment delivered 16% revenue growth primarily due to gains in AUM linked to our indices. In the second quarter, adjusted expenses increased 19% largely due to increased incentives, salaries, royalties and new product investments. The adjusted segment operating profit increased 15%, and the adjusted segment operating profit margin decreased 80 basis points to 71.1%. On a trailing 4-quarter basis, the adjusted segment operating profit margin remained strong but decreased 100 basis points to 69.2%. Revenue growth was mixed this quarter. Asset-linked fees increased 28% primarily from gains in ETFs, augmented by smaller gains in mutual funds and insurance and over-the-counter derivative activity. Exchange-traded derivative revenue decreased 20% on reduced trading volumes. The second quarter of last year had elevated volatility related to the pandemic and the stock market recovery. Data and custom subscriptions increased 11%.

While the prominence of our U.S. indices is widely understood, we have been partnering with exchanges around the world to expand our international presence. These include relationships with exchanges in Australia, Brazil, Canada, Japan, Korea and others.

This chart is a new disclosure that depicts the steady progress we are making to grow revenue in these markets. The revenue is split across asset-linked fees and data and custom subscriptions. For our Indices division, over the past year, ETF net inflows were $173 billion, and market appreciation totaled $653 billion. This resulted in quarter-ending ETF AUM of $2.4 trillion, which is 51% higher compared to one year ago. Our ETF revenue is based on average AUM, which increased 56% year-over-year. Sequentially versus the end of the first quarter, ETF net inflows associated with our indices totaled $64 billion, and market appreciation totaled $158 billion. As I just noted, exchange-traded derivative revenue faced a strong comparison. Nevertheless, activity at the CBOE increased in the second quarter, with S&P 500 index options activity increasing 8% and VIX futures and options activity increasing 43%. Activity at the CME equity complex decreased 12%. And here is another new disclosure. You have seen that the revenue from exchange-traded derivative activity can be very volatile from quarter-to-quarter. What I don't think is apparent is the strong underlying annual growth that has taken place.

This chart depicts a seven year CAGR of 9%. While the trend line is not perfectly upward sloping, the annual growth is much more consistent than the quarterly figures might suggest. Market Intelligence delivered revenue growth of 8%. More than 1/3 of the revenue growth was from recent product investments, which increased by more than 40%. This was primarily from ESG, 451 Research, Panjiva, S&P Global Marketplace, aftermarket research and SME data. Adjusted expenses increased 6% primarily due to cost of sales and royalties. Adjusted segment operating profit increased 11%, and the adjusted segment operating profit margin increased 100 basis points to 35.4%. On a trailing 4-quarter basis, adjusted segment operating profit margin increased 100 basis points to 33.4%. Looking across Market Intelligence, there was solid growth in each category. Desktop revenue grew 5%. Data Management Solutions revenue grew 13%, and Credit Risk Solutions revenue grew 10%. And now turning to Platts. Reported revenue increased 9%, an uplift over recent quarters. Our core subscriptions increased 9%, including about $2 million in benefits from the timing of contract renewals.

It is notable that more than 1/4 of the growth came from new products, including ESG and LNG. Oil prices and commodity prices in general are at a level where most of our customers can profitably operate. Global Trading Services increased 4% mainly due to strong LNG and petroleum volumes, partially offset by lower natural gas volumes. Adjusted expenses increased 10% primarily due to incentives, growth initiatives and commissions, and the adjusted segment operating profit increased 8%. Adjusted segment operating profit margin decreased 40 basis points to 57.9%. The trailing 4-quarter adjusted segment operating profit margin increased 170 basis points to 55.9%. While petrochemicals was the fastest-growing category this quarter, every category delivered meaningful growth. And one final new disclosure. Here, you can see the impressive revenue growth that Global Trading Services has delivered over the past 10 years. While this category is volatile from quarter-to-quarter, it has demonstrated a 10-year CAGR of 18%. We're not providing 2021 GAAP guidance because given the inherent uncertainty around the merger, management cannot reliably predict all the necessary components of GAAP measures.

And this slide depicts our adjusted guidance. While we expect that the merger will occur in the fourth quarter of this year, we're providing adjusted guidance on a stand-alone basis. The third column shows our new 2021 adjusted guidance, with all the line items that changed highlighted. We're making these changes because we now expect greater revenue growth primarily due to improved outlooks in Ratings and Indices. Therefore, our revenue guidance is increased from a mid-single-digit increase to a high single-digit increase. Corporate unallocated is decreased by $5 million to a new range of $135 million to $145 million due to less project spending than originally anticipated. Operating profit margin is increased by 40 basis points to a new range of 54.4% to 54.9%. And this results in a $0.40 increase to adjusted diluted EPS guidance to a new range of $12.95 to $13.15. And finally, free cash flow generation has been increased by $100 million to a range of $3.5 billion to $3.6 billion. In conclusion, 2021 is turning out to be a very strong year for the company. All our businesses are delivering solid growth. We continue to expand our ESG product offerings, and we are very excited about the upcoming merger with IHS Markit. With that, let me turn the call back over to Chip for your questions.

[Robert Merritt, Senior Vice President of Investor Relations at S&P Global]

Thank you. [Operator Instructions] Operator, we will now take our first question.

Questions and Answers

[Operator]

Thank you, Mr. Merritt. Our first question comes from Manav Patnaik with Barclays. Your line is open.

[Manav Patnaik, Analyst. at S&P Global]

Thank you. Good morning. I guess just my first question is around just your ESG efforts. So the $22 million you called out this quarter growing 50%, I think, is that all the products that fall under this new Sustainable1 brand that you have? And can you just talk about whether -- what your annual forecast for that might look like just given the high-growth rates?

[Douglas L. Peterson, President and Chief Executive Officer at S&P Global]

Good morning, Manav. This is Doug. Thank you for joining the call today, and thanks for the question. As you know, we're very excited about what we've been doing with ESG. It's an area where we see a lot of growth, a lot of interest from our customers. And when we put together Sustainable1 for us, this is an ability -- provides us ability to look across the entire portfolio and provide the services and products that are being issued and being demanded by our customers so they can manage their own positions. As you know, we have products across Ratings, ESG Evaluations, Indices. Last year, our Indices grew 290% of ESG AUM, up to $25.8 billion. Across Market Intelligence, we launched the Climate Credit Analytics, which are being used by banks, by risk managers, by asset managers to look at the portfolio impact of climate. In Platts, we have a whole suite of price assessments. Voluntary carbon markets has just been launched as well as carbon-neutral LNG. So we see high demand in the market. We're having great engagement with our customers. We continue to develop new products and, in particular, around climate. This is an area where with our original acquisition of Trucost, we were able to bring in place a really strong set of climate analytics, including a person named Richard Mattison, who is the founder of Trucost, who's now the President of Sustainable1, which is our ESG business model, which is reporting to Martina Cheung. So we're very pleased with the progress. But let me hand it over to Ewout to talk a little bit more about the numbers.

[Ewout Steenbergen, Executive Vice President, Chief Financial Officer at S&P Global]

Manav, with respect to the results, these are the complete results for our ESG operation across the company. So we have built a horizontal P&L where it includes all of our activities for ESG and all of our divisions. If you look at the growth so far this year, first quarter growth was 64%; second quarter, 53%. We still expect that this year, total revenues will end up approximately at $100 million. And then for 2024, the forecast is that will exceed $300 million in total ESG revenues. So we're growing very rapidly, and we are quite positive about the outlook.

[Manav Patnaik, Analyst. at S&P Global]

Got it. And then just a quick question on the Ratings margins. You talked about how it's elevated for the different categories. But just maybe on a multiyear outlook, like how should we think about what the -- what are the different factors that will drive the continued margin expansion of pretty healthy levels today?

[Ewout Steenbergen, Executive Vice President, Chief Financial Officer at S&P Global]

With respect to the Ratings margins, I would like to point you at the trailing 4-quarter margins that were 63.4%, up 30 basis points. We've seen a very large increase in the margins in Ratings last year, 460 basis points. And for the full year, the best direction I can give to you is think about margin for the full year in line with where we are for a trailing 4-quarter basis. From a longer-term perspective, we don't have new aspirational margin targets for our divisions. We think the right moment to announce those is after completion of the merger with IHS Markit. But a couple of factors that you have to take into consideration. Of course, there continue to be positive secular trends behind the Ratings business. As long as GDP is going up and we see positive economic momentum, there will be positive revenue growth for the Ratings business. Also, of course, all our businesses have always operating leverage. So operating leverage will be a benefit. We do think, over time, we need to invest in some analytical capacity because of the level of volumes that we're seeing. But that's a good problem to have. So some investments need to be made in analytical capacity. So that is the best I can give to you with respect to the outlook. But overall, I would say very strong results by the Ratings business and really topping a very strong year last year.

[Manav Patnaik, Analyst. at S&P Global]

Got it. Thank you.

[Operator]

Thank you for your question. Our next question is from Jeff Silber with BMO Capital Markets. Sir, you may ask your question.

[Jeff Silber, Analyst. at S&P Global]

Thank you so much. Wanted to shift gears over to China. Obviously, there's been a lot of news over the past few weeks, some -- I think there was a new data security law that would go into effect in a couple of months. And then we've just seen more broader risk in a number of different industries. Can you talk about what's going on there and the implications it might have for your business?

[Douglas L. Peterson, President and Chief Executive Officer at S&P Global]

Thank you, Jeff. Yes, we have -- as you know, we built a domestic rating agency in China. two years ago when we launched that, we had the decision to go with a wholly owned subsidiary. In addition, we've been expanding our business with Market Intelligence on the ground as well, building an onshore China business. We understand that the new data security law, which is going to be going into place in September, is related to managing domestic information. Since we've been building our businesses onshore as domestic onshore businesses, we think that we'll be able to meet the requirements of the domestic law. So the data security law for onshore businesses should -- we should be able to meet those requirements because we're building new businesses from scratch, and they're onshore businesses. Related to the general business environment, clearly, there's a lot of noise at the macro level between the United States and China. We pay attention to that very closely. But at the financial services sector, we still see very open regulators. They're open to bringing in foreign players into the market. We continue to see foreign banks and foreign asset managers get licenses of 51% to 100% own licenses. And we continue to get excellent reception in the market for our domestic Chinese Ratings business.

[Jeff Silber, Analyst. at S&P Global]

Okay. That's helpful. And just keeping with the regulatory statement, maybe shifting back to the U.S., we've seen some announcements out of Washington in terms of some greater scrutiny on mergers. Are you seeing any additional pressure in terms of the INFO merger? And can you also just remind us what the milestones we need to be looking out for before the deal closes?

[Douglas L. Peterson, President and Chief Executive Officer at S&P Global]

Yes. Thank you on that. As you know, we're obviously engaged right now, very, very -- almost continuously with the regulators for our own merger. It's a very constructive dialogue engagement that we're having with them. And when it comes to what we're seeing ourselves that our merger is really about combining two very complementary businesses. We're engaged with the antitrust regulators and have proposed a divestiture of INFO's OPIS and coal businesses based on that feedback. But we don't really see any major roadblocks coming up in our way, but we do continue to track the environment very closely. And we do continue to expect that the transaction will close in the fourth quarter of this year.

[Jeff Silber, Analyst. at S&P Global]

Okay, great. Thank you so much.

[Douglas L. Peterson, President and Chief Executive Officer at S&P Global]

Thanks.

[Operator]

Thank you for your question. Our next question comes from Craig Huber with Huber Research Partners. You may ask your question.

[Craig Huber, Analyst. at S&P Global]

Yes, Hi. You went out of your way to talk about the lack of pull-forward given this -- despite the strong debt issuance here recently. Can you talk, if you would, Doug, about the future here in terms of debt issuance? And obviously, the stock, the total amount of debt outstanding has grown significantly here. How does that make you feel going forward for your Ratings business going forward given how strong high-yield has been here recently and we have few quarters of record investment-grade here over the last year and stuff? But I mean, how optimistic are you going forward for your Ratings business?

[Douglas L. Peterson, President and Chief Executive Officer at S&P Global]

This is something that, obviously, we watch very closely. And this last quarter had some of the largest swings I've ever seen since I've been in this company of different asset classes of issuance. As an example, the -- in the U.S., corporates were down 63% year-on-year of issuance. Europe was down 35% in corporates. Investment-grade globally was down 26%, although high-yield was up 27%. You saw some of the numbers. CLOs were up almost 500% globally, 580% in the U.S. So we saw a lot of swings. But we take a step back and we look at a few really important factors for going forward on issuance, both for what's going to be the rest of the year, which we mentioned we expect will be down about 1% for total issuance. And I'll come back to that in a second. But we look at economic growth, which is starting to become very robust. We do think it will level out once we get through the pandemic but at a pretty robust level for the U.S., Europe and Asia. That's beneficial for us. Once debt goes on to balance sheets as bonds or as rated loans, it typically continues to be rated loans or a rated bond. So we see the pipeline of that, that's been increasing. In addition, we watch things like mergers and acquisitions, which are very robust right now, which are helping the current environment, especially for high-yield and loans. But when you look at the ability for markets around the world to shift from being bank markets to capital markets, you look at overall economic growth, you look at low interest rates, which we expect are going to continue for some time in the major developed markets, these are all things that are beneficial for our long-term outlook for Ratings. Since you did ask the question very briefly on 2021 forecast, we expect that the overall market is going to be down about 1%. Last quarter, we said that was going to be down about 2%. So that's a short-term view. That doesn't include loans, which we still think are also going to be robust for the rest of the year.

[Craig Huber, Analyst. at S&P Global]

My follow-up question, if I could ask, Market Intelligence was very strong here, obviously, up 8% organically. I haven't seen a number like that in quite a while. I mean, obviously, it tells me that the underlying health of your end markets there, your customers there is quite good. Can you maybe comment on that? And also what's driving that strong growth? And do you think it will continue here?

[Ewout Steenbergen, Executive Vice President, Chief Financial Officer at S&P Global]

Craig, we saw growth across the Market Intelligence product lines. Desktop, as you've seen, 5% growth. You recall, last quarter, the growth in Desktop was a bit lower. And we told you that, that would be -- just be temporary. And we are happy to see it coming back to mid-single-digit growth. Also, the Data Management Solutions and Credit Risk Solutions grew a bit faster than what we would expect from a longer-term perspective. Overall, what we are seeing is healthy commercial activities and sales levels during the second quarter, particularly sales to U.S. corporates has been very strong. And we also have seen very strong renewals in our book of business. So overall, book of business growing very well, active users going up by 10%. And I think it's an overall reflection of the positive economic environment that we're in at the moment.

[Craig Huber, Analyst. at S&P Global]

Great. Thank you.

[Operator]

Thank you for your question. Our next question is from Andrew Nicholas with William Blair. You may ask your question.

[Trevor Romeo, Analyst. at S&P Global]

Hi, good morning. This is Trevor Romeo in for Andrew. First, just kind of wanted to touch on Platts. It was nice to see the revenue growth acceleration there. I know you mentioned $2 million came from contract timing, but still seemed like a nice kind of sequential increase in the past few quarters. So I was just wondering if you could spend a minute or two diving a bit deeper into the growth drivers there and kind of how sustainable that is going forward.

[Ewout Steenbergen, Executive Vice President, Chief Financial Officer at S&P Global]

Good morning, Trevor. Definitely, one of the stronger quarters in terms of revenue growth of Platts over the last few years. And if you take that $2 million matter out from a timing perspective, you still see very significant growth driven by strong commercial momentum in the core and insights businesses. But also the Global Trading Services volumes are growing. What we're seeing in general is our customers are getting healthier with the current commodity prices. So clearly, the commodity price environment is helping our customers, and that is ultimately also helping the growth of the Platts business.

[Trevor Romeo, Analyst. at S&P Global]

Got it. Thanks. And then on the Indices segment, I've noticed a few recent announcements related to, I guess, kind of new S&P cryptocurrency indices. So I was just kind of wondering if you could broadly talk about your long-term vision for those types of indices and how you're thinking about the size of that opportunity. Thank you.

[Douglas L. Peterson, President and Chief Executive Officer at S&P Global]

Thanks, Trevor. Well, first of all, when -- we're looking at the cryptocurrency market and digital finance more broadly than just indices. We don't necessarily have a clear strategy to articulate there yet, but it's something that we see growing for opportunities for research and analytics and other things around that. But we started it with the index business. The market for cryptocurrency assets, it's growing. You can see that there's a lot of interest in it. And this also goes beyond just crypto into obviously as well blockchain. We announced the first indices in partnership using the data pricing from a company called Lukka that we have an investment in. It's a New York-based company that provides data and analytics as well as crypto asset software. We have launched since then a few different indices, eight to date. There's an S&P Bitcoin, S&P Ethereum. We have a Cryptocurrency MegaCap Index and a couple that provide broad index, which includes values from over 240 coins. We have a team that is looking at this quite carefully in addition to using some of our expertise from Kensho to analyze the trends in the market. We think that this is going to become an asset class that, over time, would potentially become more acceptable to investors. We see that many of the major financial institutions have started trading desks or businesses around this. So this is an area we will continue to invest to grow in it. It's quite small right now. And I don't have enough ability to give you any market sizing or pricing on it yet because this is really a brand-new market.

[Trevor Romeo, Analyst. at S&P Global]

All right. Thank you both for the detail.

[Douglas L. Peterson, President and Chief Executive Officer at S&P Global]

Thanks, Trevor.

[Operator]

Thank you for your question. Our next question is from Jeff Meuler with Baird. Your line is open, Sir.

[Jeff Meuler, Analyst. at S&P Global]

Thank you. I guess I was surprised by how strong Ratings' nontransactional revenue was in the quarter and how much it accelerated in a slightly down ratings environment. I was hoping you could talk through how mix is impacting, I guess, Ratings' nontransactional revenue and how sustainable the growth is.

[Ewout Steenbergen, Executive Vice President, Chief Financial Officer at S&P Global]

Yes, we have seen growth in nontransaction by all the underlying components. So that's the reason why you saw such a strong growth in the nontransaction this quarter. So let me expand a bit on that. So one component is new entity credit ratings. It's about 1/3 of the overall growth in nontransaction that came from new entity credit ratings. Another 1/3 of the growth came from surveillance, and that's being helped by the larger number of bonds outstanding based on the surge of issuance last year. And then the rest is a buildup of Ratings Evaluation Services driven by the M&A, the positive M&A environment that Doug already explained, program fees. And also the CRISIL results were very strong this quarter. So you could say all the underlying components were really pointing to a positive direction. What I can say is in terms of outlook for the full year for nontransaction, we are now expecting high single-digit growth in this category.

[Jeff Meuler, Analyst. at S&P Global]

Okay. Thanks for that. And then just given the Marketplace slide and what I would think would be a good opportunity post merger close, if you could help me understand, to what extent is this -- and I see like the most active user categories. But to what extent is Marketplace expanding your reach into new customer relationships? To what extent is it increasing your relationships with existing? And how important are the partnerships, I think, Snowflake and now Databricks, to the go-to-market versus a, I guess, internal go-to-market effort?

[Douglas L. Peterson, President and Chief Executive Officer at S&P Global]

Yes. Thanks, Jeff. This is really an important part of our -- if you want to call it, our distribution and client engagement strategy across the company. We realized a few years ago that our customers, that the use cases were going to be shifting and that the different profiles of the users of our businesses were going to be shifting. More people are going to be using models and modeling. They're going to be wanting to get data that have been curated. It had been cleaned. It was easy to use. And then we realized over the last couple of years as we started launching that there were many users that also would like to have tools that they could quickly analyze data or even directly link it into their own data. So this is where Databricks and Snowflake come in. We've added, as you see, 169 different titles with ESG and credit analytics and some other data -- market data being the most highly used so far. When it comes to our customers, the profile of the personas that are using it are slightly different, but they're the same customers.

So it's a lot of corporate customers, hedge funds, asset managers, risk managers inside financial institutions. So many times, it's similar types of customers that we already have, but it's different profile personas inside of those customers that are using this new data and these new analytical tools. We see a lot of people using Python when they bring the data over into their own systems to do data science analytics. But it's something that we're quite excited about. And we're also learning. We get a lot of ideas from our -- directly from our clients of new ways to enhance it or new data sets that they'd like to see included in it. But we're really pleased with the results of this. I would recommend that everybody go take a look at it. If this was a call that Chip Merritt could have a chance to share his screen, he would. And he'd show us all of the different opportunities you have to use data for what you're actually doing in your jobs every day. And thanks for the question.

[Jeff Meuler, Analyst. at S&P Global]

Thanks, [Indecipherable].

[Operator]

Thank you for your question. Our next question is from Ashish Sabadra with RBC Capital Markets. You may ask your question.

[Ashish Sabadra, Analyst. at S&P Global]

Thanks for taking my question and congrats on a solid quarter. My question was on product innovation. You highlighted 1/3 of the revenue growth in Market Intelligence as well as 1/4 of revenue growth in Platts coming from new products. And we've seen acceleration -- revenue growth acceleration in both these businesses. My question was how do you think about product innovation post INFO merger? With more incremental data and capabilities, how do you think about your ability to innovate going forward? Thanks.

[Ewout Steenbergen, Executive Vice President, Chief Financial Officer at S&P Global]

Ashish, we are really excited about the opportunity to even further accelerate our product innovation together with IHS Markit because you know our strategy, if you take a few step backwards. Our strategy is we are growing in our core businesses because of positive secular trends. But then we would like to grow, in addition to that, based on all the new product innovation. And we're investing in that now for the last two, three years. We have a very specific investment program. And we're very happy that this year, you are seeing some of the clear benefits coming out of it in growth in our segments and some of the growth items that you already pointed out. With IHS Markit, actually, we believe we are even better positioned for future growth because we are strengthening three of our four divisions. And those divisions will be very complementary in terms of nature of activities that are coming together. And then on top of it, we will also grow even more in the growth adjacencies, the markets around ESG, energy transition, private company data, the third-party assessments and so on. So even the growth adjacencies, we will be stronger positioned to grow in the future based on the combined company. So actually, it's one of the key reasons why we are doing this merger because the combined company, in our view, can grow faster than the two companies will be able to achieve stand-alone.

[Ashish Sabadra, Analyst. at S&P Global]

That's very helpful color. And maybe just a quick question on cost synergies, particularly post the INFO merger. You have obviously given that target. But in addition, both S&P and INFO independently were pursuing cost takeout initiatives. So post the merger, how should we think about it? Would you plan to combine all of that? And also any update that you can provide on S&P's independent cost takeout synergies -- cost takeout initiatives? Thanks.

[Ewout Steenbergen, Executive Vice President, Chief Financial Officer at S&P Global]

Overall, I see all of those productivity programs are moving forward in a way and we're making a lot of good progress. A couple of the questions you asked, let me break those down. So first, the S&P Global productivity program that we have today, the $120 million productivity program, we're planning to give you an update either during the third or the fourth quarter earnings call. We would like to do that update as close as possible to the completion of the merger so that you know how far we have been able to come on a stand-alone basis. But what I can say is we were at $49 million at the end of last year. And we're making very significant progress this year with respect to that program. I can't talk too much about IHS Markit, but they have a stated productivity and efficiency program to expand margins by 100 basis points every year.

Of course, that will be all combined into synergies and expense synergies that we're going to achieve after the completion of the transaction. I cannot give you any update on those numbers. What we have said is we will come back to you, if appropriate, after the completion of the transaction with updates, if we have any updates to those numbers. But clearly, we are working in the integration planning on further substantiating and supporting those synergy numbers from a bottoms-up perspective. And we are getting more and more comfortable over time with respect to those numbers. The expectation is that then the combined company in the future will be able to expand margins by 200 basis points for the first few years. So all of those commitments are still in place.

[Ashish Sabadra, Analyst. at S&P Global]

That's very helpful color. Thanks once again. Congrats on such a solid quarter. Thank you.

[Ewout Steenbergen, Executive Vice President, Chief Financial Officer at S&P Global]

Thank you.

[Operator]

Thank you for your question. Our next question is from George Tong with Goldman Sachs. You may ask your question.

[George Tong, Analyst. at S&P Global]

Hi, thanks. Good morning. You're forecasting 2021 global debt issuance to decline 1%, excluding loans. Can you discuss your outlook for the individual debt categories, including loans, and how you expect the evolving macro and interest rate environment to impact issuance?

[Douglas L. Peterson, President and Chief Executive Officer at S&P Global]

Yes. Thanks, George. So first of all, let me go through the components then of that 1% down. We look at the corporates, and we -- corporates so far are down this year about 12% overall, as I mentioned earlier. So far this year, in corporates, they're down 40% in the second quarter. But we expect that overall, they're going to be down about 12%. So that's that category. Financial services have actually been a little bit more robust than we had originally expected. We thought they were going to be up about 4%, but we think it will go up as high as 10%, but our midpoint is about 7.5%. Just as an anecdote on that. The last quarter, Bank of America issued $28 billion. JPMorgan issued $23 billion. It looks like the banks are starting to use our balance sheets again. And in Europe, all of the largest -- of the 10 largest issuers in Europe that were all in the $4 billion to $6 billion range, almost all of those, exception of one, were a financial institution.

So we think financial issuance will be up for the year. Structured finance, we think, will be up about 20% for the year. We see that the structured finance market is still going quite strong. As we mentioned in the second quarter, it was up over 147% overall. We don't think that, that pace will continue in structured finance, but we see it up 20%. We had originally said in our prior forecast it would be up about 6% in 2021 as opposed to now raising it to 20%. We look at public finance. We still think that's going to be down about 5%. Public finance issuers have not been as active. If there is an infrastructure program approved in Washington and we do see a revitalization of infrastructure investment in the U.S., public finance will probably go along with that. So overall, we see bond issuance down about 1% when you add all of that up together. We think that loans are going to continue to be strong. I don't have a specific number for the year what they're going to be up, but they'll continue to be up. You saw the numbers of how strong they've been compared to the prior years. But the pipeline is strong. The M&A pipeline is strong.

When it comes to interest rates, interest rates are still quite low. Spreads are low, and interest rates are low. Spreads are not at the lowest they've ever been, but they're close to low areas, especially after the spike that we saw last year in the end of the first quarter and into the second quarter when the pandemic first started. So we do think that there's going to be a lot of strength in loans and then subsequently from that CLOs as well for the rest of the year. Just one other tidbit. We see that in the ABS area, which goes between the loans and ABS, we see a lot of activity related to autos, related to corporate banks, corporate restructurings of their balance sheets, etc.. So we still see a lot of activity, interest rate-driven. But recall that last year, there was a lot of liquidity issuance that was driven by investment-grade corporates. That has basically gone away, and you saw that from the big drop. And that's been substituted now by loans, by structured finance, by ABS, etc.. We think that, that's going to continue for the rest of the year. And then as I mentioned in an earlier question, we see that all of this positions us well for the long run.

[George Tong, Analyst. at S&P Global]

Very helpful. You're increasing your guidance for revenue growth to high single digits from mid-single digits previously. Can you elaborate on your latest segment growth expectations for the year, including how much of the upwardly revised guidance reflects 2Q outperformance versus an improved second half outlook?

Ewout Lucien Steenbergen, S&P Global Inc. - Executive VP & CFO

[Ewout Steenbergen, Executive Vice President, Chief Financial Officer at S&P Global]

George, let me give you the components by each of our segments. I only give you guidance for a full year basis. And I think you probably can derive from that the outlook for the second half of the year. So for Ratings, we are now expecting revenue growth at a high single-digit level. So that's up from mid last quarter to now high single digits. Market Intelligence is still at a level of mid- to high single digits. Platts has gone up from mid- to mid- to high single-digit revenue growth. And the index business now we are expecting low double-digit revenue growth. That's up from high single digits to low double digits. So three of the four segments we're increasing the revenue outlook for the full year. And then also for the company as a whole, the revenue outlook has been increased to high single-digit growth.

[George Tong, Analyst. at S&P Global]

Very helpful. Thank you.

[Ewout Steenbergen, Executive Vice President, Chief Financial Officer at S&P Global]

Welcome.

[Operator]

Thank you for your question. Our next question is from Owen Lau with Oppenheimer. Your line is open.

[Owen Lau, Analyst. at S&P Global]

Good morning. Thank you for taking my question. Quick question on Kensho Scribe. I think it was recently launched for commercial use. Could you please talk about the traction there? And then broadly speaking, could you please talk about the progress of deploying Kensho into the overall business? And what have you learned so far? Thank you.

[Ewout Steenbergen, Executive Vice President, Chief Financial Officer at S&P Global]

Owen, we continue to be very excited about all the Kensho initiatives that are continuing within the company. Kensho, in the meantime, has developed a complete AI toolkit for unstructured data with many different elements that are in that toolkit about entity linking, data extraction, speech to text, search, Codex, named entity recognition, many other initiatives that have been developed. And those tools are being used across the company. Let me give you two specific examples, including the one that you were referring to with respect to Scribe. So Scribe is the speech-to-text algorithm engine. And we are using that for our own businesses, for example, for our earnings call transcript business. And the more you can teach those algorithms based on the actual activity, the better they become, the stronger is your engine. So all of our activities with respect to our earnings call transcript business is now being done through Kensho Scribe. And the quality is really very high at the moment and further improving over time. That's indeed being sold now also to external customers. So we have a few external customers now that are interested in this engine because it's one of the best products that is out there. And so we are actually very excited about the fact that Kensho can now pivot to external customers as well with some of its products. Let me give you a second example. This is about Market-on-Close in the Platts business. At 26 markets now this is being implemented, and we have reduced 75% of the time between the market close and publishing our prices, which is, of course, very important for our customers because the closer that time gap, the better it is for them, 14 markets still to go. So in other words, Kensho initiatives are continuing, and we continue to be very excited about the transformative nature that Kensho is bringing to S&P Global.

[Owen Lau, Analyst. at S&P Global]

Got it. That's very helpful. And then a follow-up question, something related to the INFO acquisition. But could you please remind us the benefit of owning the data versus like renting the data from S&P point of view? For example, can you like create additional products or services by owning that data versus maybe you may not be able to do by renting that data? Thank you.

[Douglas L. Peterson, President and Chief Executive Officer at S&P Global]

Owen, thank you for the question. When we look at the IHS Markit merger and when we originally conceived of it and as we continue to go through our analysis to work on our integration planning, we see that there's lots of opportunities across the company. It goes well beyond just the data. There are many different ways that we can have complementary data usage. As an example, the fixed income indices is one of the ones that we talk a lot about because they have fixed income data. They've got the fixed income business that already exists. They have the reference data. So we can quickly put their index business together with ours, increase our asset class coverage as well as innovate in new areas like multi-asset class indices. So beyond just the data usage and the data linkage across the company, there's many more opportunities. As an example, deploying some of IHS Markit's software, software tools, workflow tools, things that we don't have as much at S&P Global, bringing that expertise into two markets -- into new markets like ESG, like climate, we're very excited about things like that. So the combination goes well beyond data. Data is fundamental to it. Bringing those data together like their Data Lake and our Marketplace reference data that can be used across our company, that's sort of a nice to have. It's necessary. But beyond that, to be sufficient and to really make this exciting, it goes also into analytics, into research, into software tools, etc.. So we continue to be excited about this. And data is fundamental to it, but it goes well beyond that.

[Owen Lau, Analyst. at S&P Global]

All right. That's very helpful. Thank you very much.

[Douglas L. Peterson, President and Chief Executive Officer at S&P Global]

Thanks, Owen.

[Operator]

Thank you for your questions. Our next question comes from Kevin McVeigh with Credit Suisse. You may ask your question Sir.

[Kevin McVeigh, Analyst. at S&P Global]

Thank you so much. I think you folks did a really nice job talking about kind of the debt cycle overall. Ewout, you talked about kind of client searching for yield as you're going a little bit further down the credit stack. Where are we in that process? And then how do we reconcile that? Because, obviously, it feels like the bond market is a lot healthier relative to the last cycle, maybe not as much excess. So Doug, does that help offset maybe some of the tougher comps as we push this duration out a little bit? Just any puts and takes around that?

[Douglas L. Peterson, President and Chief Executive Officer at S&P Global]

Yes. When we look at the debt cycle and we try to see where we are, clearly, the interest rates are quite low. But there's -- if you want to think it's almost like a supply and a demand issue. There's an incredible amount of supply of liquidity. A lot of that liquidity is positioning for a higher rate or an inflationary market, which means that they've moved into floating rate instruments. And so you see a large amount of funds have moved into floating rate instruments, which means that there's a lot of liquidity available for floating rate loans and CLOs. So you can see that there's been a shift of liquidity in that direction. But when we look at this more in the longer run, there is a debt cycle, which is -- we're going through right now, but that's going on to people's balance sheets. There is a large amount of that issuance has been investment-grade, and the investment-grade has been holding up.

The debt levels and interest rate coverage levels are still strong. We've been holding to our standards for what would be an investment-grade issuer. And then when you look at the many, many high-yield issuers who have been coming out, clearly, the market understands the risk they're taking when they invest in a deep, high-yield issuance. But we think that when you look at some of the slides that we showed today of the balance sheets, of the maturity schedules which are coming up, that this bodes well in the long run for the overall markets. That doesn't mean that every single quarter is going to be -- always be up. We saw this quarter a lot of movement of some very strong growth in some areas, a lot of decreases in others. And we expect that we're going to see that, especially as the markets reaccommodate.

[Kevin McVeigh, Analyst. at S&P Global]

Super helpful. And then just real quick on the buyback, Ewout. I know you're restricted right now with the deal, but can you just remind us of when you could potentially be back in the market pending deal closure? And how we should think about that relative to capital allocation overall?

[Ewout Steenbergen, Executive Vice President, Chief Financial Officer at S&P Global]

Absolutely, Kevin. Buybacks, we would probably not be able or most likely not be able to do buybacks before the completion of the merger. Then our thinking at the moment is that after completion of the merger, we do a catch-up. And a catch-up is in relation to the loss period that we're not able to return capital to our shareholders at the level of our capital targets, the at least 75% return of capital targets that we were not able to achieve since the mid of last year until the fourth quarter of this year. Also, you have to take into account there that IHS Markit itself cannot do any share buybacks. So you have to take that in consideration, as well as potential proceeds of some of the divestitures. We would like to do that catch-up because we would like to go as quickly as possible into the rhythm of our new capital return target of at least 85% of our free cash flow. And the combined company will be a company that very soon, after the completion, will get to a level of approximately $5 billion or north of $5 billion of free cash flow, very significant amount. So we would like to go back into a normal rhythm as quickly as possible. I can't give you specific numbers. I know there's a big question on The Street about numbers in terms of the buybacks and the catch-up. I can't give you specific numbers. But philosophically, this is the way we would like to approach this. And overall, I think we will be in a very good position to get back into our normal rhythm with respect to our capital return targets.

[Kevin McVeigh, Analyst. at S&P Global]

Very helpful. Thank you.

[Operator]

Thank you for your question. We will now take our final question from Toni Kaplan with Morgan Stanley. You may ask your question.

[Toni Kaplan, Analyst. at S&P Global]

Thanks very much, I was hoping you could give some additional color regarding how you're thinking about any potential benefits from the proposed infrastructure bill.

[Douglas L. Peterson, President and Chief Executive Officer at S&P Global]

Yes. Thanks, Toni. Well, first of all, I'm encouraged to see that there is a bipartisan process going on in Washington around infrastructure. It's something that we need in this country, both the bipartisanship as well as investment in infrastructure. We think that there will be a few potential benefits from that. The first is just general economic growth. We have done a lot of research and analysis on infrastructure over the years, and infrastructure generally leads to growth beyond just the investment in infrastructure itself. We estimate that it's somewhere about 1.7 to 1.9 times additional economic growth that comes from infrastructure. So when you build an airport, around an airport, you get rental cars, you get gas stations, you get activity inside the airport from people buying food and gifts, etc.. So we see that there is a potential economic benefit, which should help growth.

It also helps jobs. All of that helps business climate generally, which obviously is beneficial to us. More specifically, if there is an infrastructure bill, we do think that despite much of it being discussed as being funded by the public sector that there will be opportunities for public-private partnerships, which would bring with them potentially debt financing. The municipal bond market could take on more activity if there's going to be local investment in infrastructure. And then the companies themselves, construction companies, the large projects, they're going to need financing as they go through the projects themselves. So we think that this will be, in general, beneficial to the overall economy. I think it's a good signal from Washington. And then overall, it could have some benefits to us, particularly for the Ratings business.

[Toni Kaplan, Analyst. at S&P Global]

That's helpful. And just looking at first half index margins were about 71%, and that's typically your highest incremental margin business with margin degradation usually coming from reinvestment. So just thinking about that, how should we think about the medium-term targets for margins within index? Should we sort of build off the low 70s number? Or are there additional investments that you might want to make that could bring that level down? Thank you.

[Ewout Steenbergen, Executive Vice President, Chief Financial Officer at S&P Global]

Toni, I can give you some guidance for the full year 2021 margins for the index business that we expect to be at the high 60s level. If you look at the trailing 4-quarter level for index, it was 69.2%. So more or less the same margins for the full year as we have today on a trailing 4-quarter basis. It's exactly for the reason that you are mentioning. In fact, for a business that is having such a high margins, the best thing you can do from a value creation perspective is to grow that business as fast as you can. So investing in new product initiatives, we believe, is a very positive thing for the index business. And that is exactly what we are doing at this point in time. We're investing in ESG indices. We're investing in Kensho new economy indices, in multi-asset class indices, in new capabilities with respect to rapid index development. So overall, these levels of investments are still relatively modest from a bigger picture perspective, but good investments that should position our index business for future growth.

[Toni Kaplan, Analyst. at S&P Global]

Perfect. Thanks so much and Congrats on the quarter.

[Douglas L. Peterson, President and Chief Executive Officer at S&P Global]

Thank you, Toni. Thanks so much. And thank you, everyone, for joining the call today and for your support. As you can see, we're very pleased with the performance of this quarter, and we're also very excited about all we've been doing at the company and all we can do. Going back, we highlighted today the Dow Jones Index, which was the Dow Jones Industrial Index, which is 125 years old. And at the same time, we're bringing brand-new, innovative research and analytics to the markets through what we talked about with Kensho, with ESG Evaluations, with climate analytics with the Credit Climate Analytics, with new benchmarks from Platts, with our China expansion. And so we have so much new innovation going on. We're also excited about that to see how that starts to play out and also highlighted by what we've been doing with the Marketplace. But on top of that, we're excited about the IHS Markit merger. The progress is good. We're very pleased with all of the things we're learning about the company across both teams, especially the quality of the people. But I want to end by thanking our employees again who have been working under what I would call unusual circumstances. But it's exciting to start opening up our offices again to see people at the offices, to get a little bit of travel going again. So again, thank you to our employees. Thank you, everyone, on the call, and I hope everyone gets at least a little bit of time to enjoy part of the summer. Thanks again.

[Operator]

That concludes this morning's call. A PDF version of the presenters' slides is available now for downloading from investor.spglobal.com. Replays of the entire call will be available in two hours. The webcast with audio and slides will be maintained on S&P Global's website for one year. The audio-only telephone replay will be maintained for one month. On behalf of S&P Global, we thank you for participating and wish you a good day.