S&P; Global (SPGI) Q4 2022 Earnings Call Transcript – The Motley Fool

S&P Global (SPGI 0.03%)
Q4 2022 Earnings Call
Feb 09, 2023, 8:30 a.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Good morning, and welcome to S&P Global’s fourth quarter and full year 2022 earnings conference call. I’d like to inform you that this call is being recorded for broadcast. All participants are in a listen-only mode. We will open the conference to questions and answers after the presentation, and instructions will follow at that time.

To access the webcast and slides, go to investor.spglobal.com. [Operator instructions] I would now like to introduce Mr. Mark Grant, senior vice president of investor relations for S&P Global. Sir, you may begin.

Mark Grant — Senior Vice President, Investor Relations

Good morning, and thank you for joining today’s S&P Global fourth quarter and full year 2022 earnings call. Presenting on today’s call are Doug Peterson, president and chief executive officer; and Ewout Steenbergen, executive vice president and chief financial officer. For the Q&A portion of today’s call, we will also be joined by Adam Kansler, president of S&P Global Market Intelligence; and Martina Cheung, president of S&P Global Ratings. We issued a press 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. 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. A discussion of these risks and uncertainties can be found in our Forms 10-K, 10-Q, and other periodic reports filed with the U.S.

Securities and Exchange Commission. In today’s earnings release and during the conference call, we’re providing non-GAAP adjusted financial information. This information is provided to enable investors to make meaningful comparisons of the company’s operating performance between periods and to view the company’s business from the same perspective as management. The earnings release contains exhibits that reconcile the difference between the non-GAAP measures and the comparable financial measures calculated in accordance with U.S.

GAAP. I would also like to call your attention to a specific European regulation. Any investor who has or expects to obtain ownership of 5% or more of S&P Global should contact investor relations to better understand the potential impact of this legislation on the investor and the company. We’re aware that we 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 our media relations team, whose contact information can be found in the press release. At this time, I would like to turn the call over to Doug Peterson. Doug?

Doug Peterson — President and Chief Executive Officer

Thank you, Mark. Welcome to everyone joining today’s earnings call. We’re looking forward to a very exciting and innovative year at S&P Global. As we shared with you at investor day, we’re accelerating the pace of innovation and taking advantage of all we have to drive profitable growth over the next three to five years.

In 2022, we built on the incredible history of S&P Global to position the company to create significant value for our customers, our people, and our shareholders in 2023. 2022 is a year of resilience, decisive action, and discipline. As we look at our financial highlights, I want to remind you that the financial metrics that we’ll be discussing today refer to non-GAAP adjusted metrics for the current period and for 2023 adjusted guidance and non-GAAP pro forma adjusted metrics in the year-ago period, unless explicitly called out as GAAP. Adjusted results also exclude the contribution from previously divested businesses in all periods.

Adjusted revenue decreased 4%, or 3% on a constant currency basis. As everyone on this call knows, we saw dramatic decreases in debt issuance, which drove the decline in our revenue and earnings. But what you would not be able to tell from the headline revenue growth rate is that our business has become far more diversified and resilient. While we saw a 26% decrease in our ratings revenue, the vast majority of that decrease was offset by a 6% growth in our other businesses.

That growth came despite FX headwinds, an unstable macroeconomic environment, and the suspension of our commercial operations in Russia. We also took decisive action to preserve margins in 2022. Despite significant inflation throughout the year, we were able to keep our adjusted expenses relatively flat year over year due to outperformance on our cost synergies and management actions around incentive compensation, discretionary spending, and the timing and prioritization of strategic investments. Our teams have a lot to be proud of, and we’ve done a remarkable job setting the company up for a strong 2023.

We introduced our initial guidance today, which includes 4% to 6% revenue growth and a 10% to 12% EPS growth. Importantly, we’re not moving engineering solutions to discontinued operations. So, both of these figures include the half-year contribution we expect from engineering solutions in 2023. Excluding the impact of engineering solutions, we would have expected revenue growth to be approximately 6% to 8%.

Amongst the impactful accomplishments in 2022, we completed our merger with IHS Markit and took important steps to optimize both our operations and portfolio of businesses. We optimized our capital structure as well, lowering our average cost of debt at fixed rates, protecting our earnings from further interest rate volatility. We introduced a bold strategic vision in our investor day, powering global markets, and outlined our key growth priorities for the next few years. We’re looking forward to updating our investors on our progress against those initiatives as we move forward.

We also continue to shape the secular transition from active to passive asset management and, just last month, celebrated the 30th anniversary of the first index-based ETF, which is based on our S&P 500 index. As we look to the strategic initiatives we had at the beginning of 2022, it’s clear that we continue to make great strides. We outperform our original 2022 cost synergy targets by more than 20%, generating $276 million in cost synergies fully realized in 2022 compared to our original target of $210 million to $240 million. We successfully integrated our major infrastructure software systems, including what our ERP vendor told us was the fastest integration ever for a company of our size.

We continued to drive commercial momentum, generating nearly 7,000 synergy cross-sell referrals post-merger. We also made great progress with our strategic investments and our transformational initiative to optimize our technology spend. Lastly, we continued our relentless focus on making sure S&P Global remains a destination of choice for our people and candidates. Our internal people survey indicated 90% or more of our employees endorse our culture and our efforts in diversity.

We continue to invest for long-term growth in 2022. We made several small acquisitions to bolster and round out our offerings and private market solutions, as well as sustainability and energy transition. We also had several important new product launches and upgrades that will drive customer value and financial performance in 2023 and beyond. We took steps to optimize the portfolio of businesses at S&P Global.

We made several merger-related divestitures that were required by regulators, but we also decided to divest the engineering solutions division and announced an agreement to sell the business to KKR. These decisions helped position S&P Global in growth markets where we can leverage our strengths across the entire business. As always, we will continue to be disciplined stewards of the business and periodically review the portfolio of assets to determine the optimal structure at any given time. Shifting toward financial performance.

The largest macro contributor to our 2022 results has been the sharp decrease in global debt issuance, which continued to deteriorate as we move through 2022. For the full year, we saw a 28% decrease in global rated issuance or 31% decrease when including the impact of leveraged loans. This is particularly noticeable in high-yield issuance, which decreased 77% from the extraordinarily high levels we saw in 2021. The issuance environment certainly impacted our financials in 2022, but we were pleased with the execution from the teams across the company despite those challenges.

As I mentioned previously, our aggregate financial results provide clear evidence of our commitment to disciplined execution. Excluding the ratings business, revenue growth would have been 6% in 2022 and adjusted operating margin would have expanded by approximately 200 basis points. Ewout will discuss the fourth quarter financials in a moment. Each of our divisions performed admirably in 2022.

We saw positive revenue growth in four of our six divisions and constant currency growth in five of our six divisions. We believe the strength and discipline shown in 2022 sets us up for a return to positive overall revenue growth and margin expansion in 2023. We continue to deliver impressive results and sustainable one. In 2022, we grew ESG and climate revenue by 50% year over year to more than $200 million.

As we outlined at investor day, and as you’ll see in the appendix, we’ve updated our methodology beginning in 2023 to include all of our sustainability and energy transition products and will be disclosing sustainability and energy transition revenues rather than just ESG revenue going forward. Under the new methodology, we generated $247 million in 2022, and we expect growth of more than 30% from that base in 2023. We ended 2022 with ESG ETF AUM reaching $40 billion. That growth is particularly impressive when you consider it as the net impact of an 18% increase in AUM from net flows and a 14% reduction in AUM from price depreciation, resulting in 4% net growth year over year.

We continue to launch new indices based on climate or sustainability factors in 2022, including the new S&P/BMV Green, Social and Sustainable Target Duration Bond Index. We also launched new products in market intelligence, commodity insights, and mobility. Within ratings, we completed 133 sustainable financing opinions, 33 green evaluations, and 100 second-party opinions. At the core of our sustainability efforts are the corporate sustainability assessments.

These remain a key differentiator versus our competitors as they enable us to collect an enormous amount of data directly from corporations around the world. For the methodology year that ends in March 2023, we have already increased CSA survey participation to more than 2,900 companies, representing a 30% growth year over year. We expect more than 3,000 companies to participate by the end of March. The company also continued to advance its own industry-leading practices in sustainability.

We issued or 11th annual sustainability impact report and fourth annual TCFD report. We launched $1.25 billion in sustainability-linked notes and adopted the sustainability-linked bond framework. We ensured the long-term funding for the S&P Global Foundation via the one-time grant of $200 million. And our efforts continue to receive recognition from several leading third parties.

I’d now like to shift the presentation to our outlook for 2023. The latest global refinancing study was issued earlier this month. The total amount of global debt maturing in this study is $11.1 trillion over the next five years. This is actually up 3% from the study a year ago and up 7% from last year’s study when looking at over the full nine years.

Importantly, this shows us how the maturities have evolved over the next few years, while 2023 expected maturities have unsurprisingly decreased over the course of 2022. If we look at maturities in the years 2025 to 2027, we see a 12% increase from last year’s study. That increase jumps to 23% looking at maturities in 2027 to 2029. The bottom line is that there is a very healthy pipeline of debt maturities coming over the next several years.

Now, looking at total rated debt outstanding, we continue to see a compound growth rate of 5% and a continued year-over-year increase in total debt outstanding on a constant currency basis. Historically, outstanding debt usually gets refinanced, and we don’t see any reason why this decades-long trend would change. After market declines in issuance in 2022, our ratings research group anticipates that issuance will return to positive growth in 2023. The forecast calls for issuance gains of 8.5% for nonfinancials, 3% for financial services, 5% for U.S.

public finance, and a decrease in structured finance of 7%. Please note that this is an issuance forecast, not a revenue forecast, and does not include leveraged loans. Our financial results and guidance are more closely tied to billed issuance, which can differ materially from market issuances we have described in recent quarters. For 2023, we expect billed issuance to be up approximately 2% to 6% for the full year.

Now, let’s move to the latest view from our economists. They’re forecasting global GDP growth of 2.2% in 2023. While GDP growth is expected to be positive, we also expected to be a story of two halves. Right now, we’re assuming a mild recession in the first half, followed by stabilization in the second half.

Each year, we carefully assess the external factors facing the company. This slide depicts those that we think are most important going into 2023. There are a number of potential positive impacts this year and potential headwinds, many of which we’ve outlined on this slide. There are also a number of factors that could impact our business positively or negatively or different ways in different parts of the business.

Volatility in the equities and commodities markets is a great example as it can be a headwind to certain parts of our business while serving as a tailwind to global trading services and commodity insights and exchange traded derivatives in our indices business. While we certainly aren’t immune to the macroeconomic environment, we’re confident that investing for growth in these times of uncertainty and through the cycle is the right way to create long-term shareholder value. While others may give in to the temptation to hunker down, we want to make sure that we’re aggressively taking the steps to position S&P Global for years of profitable growth. That’s why I’m so excited to finish my prepared remarks on this slide.

We’re optimizing our technology spend for growth. We’re leveraging the most powerful platforms available to make sure product development teams can rapidly bring new features and products to market. We recently announced a long-term strategic partnership with Amazon AWS to further the technology vision we laid out for you at investor day. This agreement allows us to consolidate contracts and drive long-term savings through a collaborative relationship with one of the world’s most innovative technology companies.

Kensho continues to be a key contributor to the culture of innovation within S&P Global. We have a bold vision for how to leverage the newest breakthroughs in machine learning and artificial intelligence, and not only make those technologies available to our customers but truly embed them throughout the organization to drive growth and efficiency. I visited Kensho’s offices last fall and was impressed to see the work that Kensho’s R&D team had been doing with respect to large language models and their transformative potential. Since then, Kensho has made significant progress on models that leverage unique data across the enterprise, with the potential to power innovation using AI and machine learning to accelerate product and technology changes across all of S&P Global.

This is very exciting. We will also continue to make strategic organic investments in areas like private markets and sustainability and energy transition, and will selectively pursue opportunistic acquisitions that enhance our growth in innovation. As we begin reporting our vitality revenue this year, we will continue our long practice of transparency and accountability. It is truly an exciting time to be at S&P Global.

And now, I’d like to 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

Thank you, Doug. The adjusted financial metrics that we’ll be discussing today refer to non-GAAP adjusted metrics for the current period and for our 2023 adjusted guidance and non-GAAP pro forma adjusted metrics in the year-ago period, unless explicitly called out as GAAP. Adjusted results also exclude the contribution from previously divested businesses in all periods. Let me start with our fourth quarter financial results.

Adjusted revenue decreased 6% to $2.9 billion, largely driven by a challenging issuance environment and macroeconomic conditions. Excluding ratings, fourth quarter revenue would have increased 4% year over year. Adjusted corporate unallocated expenses improved from a year ago, driven by a combination of synergies and reduced incentive costs. Adjusted expenses were roughly flat for the full year, demonstrating strong expense discipline across the company.

For the fourth quarter, expenses decreased 4% compared to prior year. Adjusted operating profit margin contracted by 160 basis points to 41.2%, primarily driven by revenue declines in ratings. Excluding ratings, adjusted margins would have improved more than 280 basis points year over year. Our adjusted net interest expense increased 9%, driven by higher total debt levels, partially offset by lower effort cost of debt.

Adjusted effective tax rate was up modestly, but right around the midpoint of the guidance range we provided for the full year. We exclude the impact of certain items from our adjusted diluted EPS number. Among those items in the fourth quarter were approximately $175 million in merger-related expenses, the details of which can be found in the appendix. We generated adjusted free cash flow, excluding certain items, of $1.4 billion in the fourth quarter.

In 2022, we completed our $12 billion accelerated share repurchase program with final share delivery executed earlier this week. Turning to expenses, as I noted, we managed to keep adjusted expenses roughly flat for 2022 despite the high inflationary environment. I’m pleased to report we acted decisively and delivered more than $400 million in expense reductions for the full year. Actions taken include pull-forward in synergies, a reduction in incentive accruals, adjustments to the timing of certain investments, selective hiring, and limiting consulting spend in some areas.

Looking more closely at the largest contributor to those expense savings, I would like to provide an update on our synergy progress specifically. In 2022, we have achieved $276 million in cumulative cost synergies. And our annualized run rate exiting the fourth quarter was $422 million, representing 70% of target after only 10 months. We continue to make progress on our revenue synergies with $19 million in cumulative synergies achieved and an annualized run rate of $34 million.

The cumulative integration cost to achieve synergies through the end of the fourth quarter is $807 million. For 2023, we expect to achieve cost synergies and revenue synergies of approximately $510 million and $60 million, respectively. We originally targeted 80% of the cost synergies in 2023. But with the outperformance in 2022, we’re now targeting 85% of the $600 million target.

We also originally expected 50% of our revenue synergies in 2024. But with the divestiture of engineering solutions, we now expect approximately 45%, though the full target of $350 million is unchanged. Now, let’s turn to the division results. Markets intelligence revenue increased 3% with strong growth in data and advisory solutions, offset by slower growth in desktop and declines in enterprise solutions.

Adjusted expenses decreased 2% this quarter, driven by continued realization of cost synergies, lower incentive compensation, and real estate spend. Segment operating profit increased 16%, and the segment operating profit margin increased 360 basis points to 31.4%. On a trailing 12-month basis, adjusted segment operating profit margin was 31.8%. Looking across market intelligence toward growth in most categories and on a pro forma basis, desktop revenue grew 3%, data and advisory solutions revenue grew 7%, enterprise solutions revenue was down 4%, and credit and resolutions revenue grew 4%.

For desktop, we continue to see strong demand for our subscription offerings, like Capital IQ. Overall desktop growth was below our expectations, though, due primarily to the impact of some one-time sales from products reported in our desktop line. For enterprise solutions, softness in our capital markets volume-based products continue to weigh in on the business lines performance as revenue decreased 4%. This was partially offset by strength in private markets and software solutions.

Now, turning to ratings. Ratings continue to face difficult market conditions this quarter as issuance volumes remained muted, with revenue decreasing 29% year over year. Transaction revenues saw slight improvement sequentially but decreased 51% compared to the prior year on continued softness in issuance. Nontransaction revenue decreased 6% on a reported basis and 3% on a constant currency basis, primarily due to lower initial issuer credit ratings and rating evaluation services, partially offset by increases in CRISIL.

As a reminder, ICR and RES revenue are historically correlated with the relative strength of the issuance environment and M&A activity, respectively. And the declines we’re seeing here are purely indicative of those market conditions. In the fourth quarter, surveillance and frequent issuer fees increased year over year on a constant currency basis. Adjusted expenses decreased 13%, primarily driven by disciplined expense management and lower incentive expenses, partially offset by increased salary expense.

This resulted in a 40% decrease in segment operating profit and a 910 basis points decrease in segment operating profit margin to 48%. On a trailing 12-month basis, adjusted segment operating profit margin was 55.9%. Now, looking at ratings revenue by its end markets, the largest contributor was the well-documented decline in issuance, partially offset by 6% growth in CRISIL and other revenue. And now, turning to commodity insights.

Revenue increased 4%, driven by solid performance across all business lines. However, debt growth was impacted by a $13 million headwind due to the Russia-Ukraine conflict and a $4 million commercial settlement in the fourth quarter of 2021. Excluding the impact of Russia-Ukraine and this commercial settlement, commodity insights would have grown approximately 8% year over year in the fourth quarter. It’s important to note we suspended commercial operations in Russia in March of 2022.

Therefore, the first quarter of 2023 is the last remaining period that we will see a material impact in the year-over-year growth rates. Adjusted expenses were roughly flat for the quarter, primarily due to higher compensation, an increase in T&E expense, and bad debt provision, partially offset by merger-related synergies, lower consulting spend, and advertising and promotion costs. Segment operating profit increased 10% and, the segment operating profit margin increased 230 basis points to 44.6%. The trailing 12-month adjusted segment operating profit margin was 44.3%.

Looking across the commodity insights business categories, price assessments grew 5% compared to prior year, driven by continued commercial momentum and strong subscription growth from market data offerings, particularly in gas and power and liquefied natural gas. Energy and resources data and insights grew 4% in the quarter, driven by continued strength in gas, power, and renewables. Advisory and transactional services increased 3% in the quarter as we saw higher demand from energy transition advisory solutions, partially offset by revenues generated from a 2021 event that wasn’t repeated in the fourth quarter of 2022. Moving to upstream, I’m pleased to report the business line grew 4% in the fourth quarter, while upstream ACV has had good momentum ex-Russia.

The revenue growth this quarter was primarily driven by upfront revenue recognition of certain software products that are not recurring. We expect upstream growth in the low single-digit range for 2023. In our mobility division, revenue increased 9% year over year, driven primarily by strong and broad-based performance across dealer, manufacturing, and financials. Adjusted expenses increased 15% in the fourth quarter, driven by increases in headcount versus the year-ago period.

Timing of advertising spend and cloud expenses, we expect expense growth to moderate in 2023. This resulted in a 2% decrease in adjusted operating profit and 380 basis-point margin compression year over year. On a trailing 12-month basis, the adjusted segment operating profit margin was 39%. Dealer revenue increased 9% year over year, driven by strong demand for CARFAX subscription products.

Manufacturing grew 8% year over year, driven by strength in Polk Automotive Solutions and the conclusion of several major vehicle deals. Financials and others increased 10%, primarily driven by continued strength in our insurance underwriting volumes and new business. Turning to S&P Dow Jones indices, revenue increased 4% year over year as growth in exchange-traded derivatives offset declines in asset-linked fees revenue. During the quarter adjusted expenses increased 8% as there was an uptick in one-time outside services spend and continued strategic investments, partially offset by decreases in compensation and other discretionary areas.

Segment operating profit increased 2%, and the segment operating profit margin decreased 140 basis points to 62.2%. On a trailing 12-month basis, the adjusted segment operating profit margin was 68.4%. Asset-linked fees were down 2%, primarily driven by lower AUM in ETFs. Exchange-traded derivatives revenue increased 34% on increased trading volumes across key contracts, including a more than 70% increase in S&P 500 index options volume.

Data and custom subscriptions increased 6%, driven by new business activities and price realization. Over the past year, market depreciation totaled $506 billion. ETF AUM net inflows were $157 billion, and this resulted in quarter ending ETF AUM of $2.6 trillion, which is a 12% decrease compared to one year ago. Our average ETF AUM decreased 8% year over year.

Engineering solutions revenue declined 4% in the quarter, driven primarily by the negative impact of the timing of the Boiler Pressure Vessel Code, or BPVC, which was last released in August of 2021. Adjusted expenses increased 5% due to planned investment spend, offset by favorable FX. Before moving to guidance, I wanted to highlight some of the key drivers of our expected 2023 results and how these tie in with the core messages we delivered at our investor day. S&P Global is all about growth.

2023 will be a year of growth across the company, driven by customer growth, product enhancements, revenue synergies, and strategic initiatives. We’ll continue to invest in our people, and you will see the annual reset of our incentive compensation targets. We’ll also continue to invest in technology as we drive innovation and position the company for accelerating growth. In order to help investors see and assess the positive impact of these investments, we’ll begin disclosing a few new metrics with our first quarter 2023 results, including our vitality revenue, which is the revenue generated by innovation in a new or enhanced products from across the organization.

We’ll also disclose the revenue generated from products in our two key strategic investment areas, private markets, as well as sustainability and energy transition. In addition to these new disclosures, we’ll begin a regular cadence of inter-quarter disclosures to help investors measure performance of market-observable products. We will begin disclosing ETD volumes and the year-over-year growth rate of billed issuance on a monthly basis in arrears starting later this month, when we will disclose the January 2023 data. In addition to the monthly disclosures I just outlined, we’ll also disclose billed issuance volumes on a quarterly basis, broken out between investment grade and high yield.

We know that in a full-of-doubt and potentially uncertain market, transparency and accountability are more important than ever. And S&P Global maintains its commitment to best-in-class disclosure and reporting for our shareholders. Now, moving to guidance, as noted in our press release, due to the pending divestiture of engineering solutions, we’ll not be providing GAAP guidance at this time. And this slide depicts our initial 2023 adjusted guidance for revenue.

We expect 4% to 6% growth, reflecting our continued belief of a mild recession in the first half of 2023 and then some economic strengthening in the back half of the year. Excluding the impact of the divestiture of engineering solutions, we expect revenue growth to be between 6% to 8%. We expect corporate unallocated expense of $140 million to $150 million. The year-over-year growth is driven in part by a reset of incentive compensation and the expectation of approximately $10 million to $20 million in stranded costs from engineering solutions post-divestiture.

We expect to expand operating margin to the range of 45.5% to 46.5%; diluted EPS, which excludes deal-related amortization, of $12.35 to $12.55, which is an 11% year-over-year increase from the midpoint. Adjusted free cash flow, excluding certain items, is expected to be approximately $4.3 billion to $4.4 billion. We continue to target a return of at least 85% of adjusted free cash flow to shareholders through dividends and buybacks. We also plan to utilize the net after-tax proceeds from the engineering solutions divestiture for share repurchases.

As such, our board has authorized a $3.3 billion share buyback for 2023, which we plan to begin with a $500 million ASR, which we expect to launch in the coming weeks. Lastly, we expect a quarterly dividend of $0.90 per share. The following slide illustrates our guidance by division. Beginning with market intelligence, we expect growth in the 6.5% to 8.5% range and margins between 34% and 35%.

As we mentioned at our investor day, this is a skilled business that’s well positioned in growing markets, such as private markets and supply chain, and we’re confident in our ability to accelerate growth as we let the 2022 headwinds from program-driven businesses and FX. In ratings, we expect revenue to grow between 4% and 6%, with growth to be driven by volume and price and continued growth in nontransaction revenue. Our assumption is for billed issuance to be up between 2% and 6% in 2023. Margin for ratings are expected to be between 56% and 57%.

In commodity insights, we expect revenue growth in the 6.5% to 8.5% range and margins between 46% and 47%. We expect continued strength in commodity markets generally and look forward to lapping the Russia impact after the first quarter. Similar to our market intelligence division, we expect commodity insights to see expense benefit from further realization of synergies in 2023. In mobility, we expect revenue to grow between 6.5% to 8.5% and margins between 39% and 40%, driven by some normalization of auto supply chain, price realization, new business, and new product adoption.

Importantly, we expect expense growth to moderate quickly and substantially from the outsized increase in the fourth quarter. We expect expense growth to be below revenue growth in 2023. In indices, we expect revenue to be flat to up 2% with margins of 66% to 67%. As we indicated in our investor day, revenue from asset-linked fees lacks movements in underlying asset prices, so the 2022 decline in the S&P 500 will negatively impact this year’s revenue.

We’ll also lap the very strong comps in exchange-traded derivatives. Before I turn it over for Q&A, I would like to take a moment to thank our people at S&P Global. The highlight of 2022 was the closing of our merger with IHS Markit. But what made it a highlight was the incredible dedication and execution demonstrated by our people.

We saw strong, decisive action in the speed of execution of our cost synergy plan. We delivered critical system integration along a very fast timeline, rationalizing our real estate footprint, and, at the same time, continued our strategic investments. 2022 truly was a year of transformation. But it was also a year of foundation.

We intend to build on that foundation and drive strong growth in 2023 and for the years to come. And with that, we’ll have Adam and Martina join us and turn the call back over to Mark for your questions.

Mark Grant — Senior Vice President, Investor Relations

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

Questions & Answers:

Operator

Thank you. Our first question comes from George Tong from Goldman Sachs. George, your line is open.

George Tong — Goldman Sachs — Analyst

Hi. Thanks. Good morning. You expect 2% to 6% growth in billed issuance in 2023.

Can you bridge your expectations for billed issuance with guidance for ratings revenue growth of 4% to 6%, including how you expect pricing and issuance mix to impact revenue?

Ewout Steenbergen — Executive Vice President, Chief Financial Officer

Good morning, George. This is Ewout. Let me give you a couple of those components. As you know, we are always breaking out ratings revenue in two categories, transactional and nontransactional.

What you see in the transactional category is a combination of price and volume. And on the volume side, we have stated the 2% to 6% growth for billed issuance. And then, if you think about nontransaction, we continue to see — expected to see growth in the annual fees. Also, continued positive growth in ratings is to be expected.

And then, ICR and RES, that’s a bit uncertain because that depends very much on the overall economic environment. So, those are some of the components that will add up to that range of 4% to 6% revenue expectation for ratings in 2023. So, I would say, overall, quite constructive after 2022.

George Tong — Goldman Sachs — Analyst

Got it. Market intelligence revenue growth decelerated in the quarter due to slower growth in desktop and declines in enterprise solutions. Can you elaborate on trends you’re seeing in desktop and enterprise and why you believe performance may improve in 2023?

Doug Peterson — President and Chief Executive Officer

George, this is Doug. Before I hand it over to Adam, I want to welcome Adam and Martina to the call today. As you met our presidents at the investor day in December, first, we’re pleased to ask a couple of them to join us on each of the earnings call. And today it’s going to be Adam and Martina.

But, Adam, over to you.

Adam Kansler — President, Global Market Intelligence

Thanks, George. We’re very confident in our desktop business, but our desktop revenue in this quarter didn’t perform how we expected. Let me give you a little bit of color on that. Financial services industry, obviously, under pressure, you see that belt tightening now, so some of the larger sell-side banks.

And they’re taking a cautious approach right now, and we’re not immune to that. That said, our core desktop offering continued to grow extremely well. Within that desktop revenue line, you have certain products that are nonrecurring in nature. Consulting and advisory engagement is tied to our desktop offering.

These are the products that saw that impact in Q4. As we look out to 2023, we remain confident in our desktop growth, and we’re excited about our forward-competitive position. We saw active user growth up 9% this year. This is great growth in a challenging year and important driver for us as we renew and expand our relationships with our customers in 2023.

We’re delivering significant upgrades in the offering. Speeds increased dramatically, new features being released. You saw we announced our ECR data live on our desktop in 2023, fixed income and loan capabilities coming. So, while Q4 not quite the quarter we expected, we’re very confident and excited about that growth forward.

I’ll just spend two seconds on enterprise solutions, I know you asked about that as well. Understand that revenue line as really two separate components: software solutions, our customers use for workflow compliance and portfolio monitoring; and a section for industry platforms that are really directly impacted by capital markets activity and volumes. That first group performed really well this year, and we expect that to continue to perform really well into 2023. A lot of those are double-digit growth businesses.

The second bucket, the industry platform, is really impacted by significant drops in capital markets activity. That saw a negative double digit impact in the current year. When we look forward into 2023, we expect that negative impact to moderate as we lap those comparables and as markets stabilize. So, we do have a very positive outlook for enterprise solutions as we go forward into ’23.

George Tong — Goldman Sachs — Analyst

Very helpful. Thank you.

Operator

Our next question comes from Andrew Steinerman from JPMorgan. Andrew, your line is open.

Alex Hess — JPMorgan Chase and Company — Analyst

Yes, hi. This is this is Alex Hess on for Andrew Steinman. Maybe I’ll start with the 2024 revenue synergy target, that was lowered modestly and, I believe, was mentioned that that principally reflects engineering solutions. But with the focus of the investor day having been on innovation, can you maybe update us on where 2022’s vitality index came in, how net promoter score is tracking, and sort of what gives you confidence that maybe that target remains pretty achievable?

Ewout Steenbergen — Executive Vice President, Chief Financial Officer

Good morning, Alex. Thanks for being on the call. You ask a couple of questions. So, let me walk through each of those.

2024 revenue synergies are slightly tuned down due to the divestiture of engineering solutions. We had assumed a number of revenue synergies both in engineering solutions, as well as in some of our other segments in collaboration with engineering solutions. For example, commodity insights shares a number of customers together with engineering solutions. But we are not concerned about that at all because we are finding so many new revenue synergies across the company that we are still firmly committed to the 350 million number in total over the five-year period.

You’re also asking about, in general, the commercial momentum within the company. We’re actually really happy what we are seeing. There’s a lot of innovation, a lot of new product development, a lot of really very strong customer interactions around all of that. You’re seeing that we hit our revenue targets for ESG sustainability for 2022.

And with respect to vitality, what we told you was that we have a target to get to vitality over 10% over the next few years. I’m actually very happy to report that we already got there in 2022. So, our vitality was just over 10% last year as another indication of the level speed of innovation that we’re increasing within the company.

Alex Hess — JPMorgan Chase and Company — Analyst

Great. Thank you so much. And then, maybe to turn to your billed issuance assumptions. Can you maybe walk us through the degree to which that is weighted to the back half of 2023 versus, you know, maybe facing some steeper comparisons in January and the first half of this year?

Martina Cheung — President, Global Ratings

Thanks for the question. Alex. This is Martina. We — consistent with our overall view for 2023, both for macroeconomic, as well as market issuance, not feeding into our billed issuance, we would see the chances for a mild recession in the first half with some recovery in the second half.

And so, you could expect to see a little bit more softness in issuance in the first half, followed by some recovery in the second half.

Alex Hess — JPMorgan Chase and Company — Analyst

Thank you.

Doug Peterson — President and Chief Executive Officer

Thank you, Alex.

Operator

Our next question comes from Toni Kaplan from Morgan Stanley. Ms. Toni, your line is open.

Toni Kaplan — Morgan Stanley — Analyst

Thank you so much. I wanted to ask about multi-asset class indices. I know it’s a really meaningful opportunity, and you’re investing a lot there. And it seems like the market opportunity is really massive.

You have leading brands, you know, within indexed products. And so, my question is, right now, do clients think that there’s a need for multi-asset class indices? Or will it be a matter of convincing them that it’s better than having a combination of, you know, separate equity and fixed income indices, like a hybrid is being used now? Just what makes multi-asset class indices better than just waiting, you know, equity and fixed income indices. Thanks.

Doug Peterson — President and Chief Executive Officer

Yeah. Thanks, Toni. As you know, the basis of the index business that we have is about transparency. It’s independence.

It’s the ability for a client to understand exactly what’s in the portfolio at any point in time. Where we’re especially seeing multi-asset class demand is in the insurance industry. The insurance industry, which has many types of products, is looking to multi-asset class to use it for. They use it for annuities, they use it for wrappers.

And we’re also seeing that bank-structured product guests are also looking at multi-asset classes. So, we’re seeing a lot of growth in this. You ask the question about what is the difference. The difference is that you can put together a single product which meets the needs of a client.

And we’re seeing that this is, right now, very high demand coming from those two industries. As ETFs are built from the multi-asset classes, then you start getting trading around them. So, we see the entire ecosystem starting to grow. And it’s also part of the trend where you’ll see active to passive anyway.

So, I think it’s very important you ask the question. It’s one of our growth areas, And across all of the index businesses, it’s one of the — that we’re most excited about. Finally, because we have, within S&P Global now, one of the leading franchises of fixed income with iBoxx, CDX, and iTraxx, we can actually produce these products on our own, all in-house.

Toni Kaplan — Morgan Stanley — Analyst

Terrific. Then, as a follow-up, I want to ask about commodity insights growth. I know long term, sort of thinking about 8% at the midpoint and, like, when I look back at sort of legacy Platts and resources within IHS, you know, I guess, Platts wasn’t really there, resources on its own wasn’t there in sort of a normal market. Is it the sustainability part that’s really going to drive you to that higher level of growth? Or I guess what’s the bridge to get from, you know, sort of like a normal mid single-digit level up to the eight? Thanks.

Ewout Steenbergen — Executive Vice President, Chief Financial Officer

Toni, if you think about the overall market dynamics in the commodity markets, we think that currently, those markers are very constructive for our customers, and that is going to be helpful also for the growth of the business over the next few years. Well, first one point to highlight is that in 2022, we saw some headwinds from Russia, from the Russia-Ukraine conflict, and the fact that we stopped our commercial relationship with Russian customers. So, obviously, that headwind is going away going forward. Secondly, what we’re seeing is that our customers are both focused on traditional energy resources and new energy resources.

So, we’re benefiting from both trends at the same time, where there’s, of course, a lot of activity going on with respect to the current market prices in terms of exploration and additional capital expenditures that we’re seeing. But our customers, at the same time, are also focused on energy transition and needs help from us. So, we are providing data insights, research, advisory, all of that around energy transition at the same time. So, we believe this business has a lot of secular tailwinds over the next few years.

What we told you is that, at investor day, that we expect this business to grow in the 7% to 9% range in 2025 and 2026. And we think, absolutely, that is possible. We are very committed to hitting that number.

Toni Kaplan — Morgan Stanley — Analyst

Fantastic. Thanks.

Doug Peterson — President and Chief Executive Officer

Thanks, Tony.

Operator

Our next question comes from Alex Kramm from UBS. Alex, your line is open.

Alex Kramm — UBS — Analyst

Yeah. Hey, good morning, everyone. Maybe you can touch on the margin outlook a little bit, but particularly interested in the quarterly seasonality or cadence. I know in the past, there’s been some surprises here and there in some of the segments.

So, maybe, Ewout, you can help us between, you know, synergies coming in and maybe typical seasonality, what we should be — what you would call out in particular as it relates to maybe the seasonality we saw in 2022. I understand ratings is probably going to be driven a lot by issuance. But maybe in the other segments, anything to call out?

Ewout Steenbergen — Executive Vice President, Chief Financial Officer

Alex, a couple of items to think about. First, in terms of seasonality, I realize that we are facing still high comps for the first quarter because the economy started to go more south from March of last year, as well as the impact of the Russia-Ukraine conflict also started about in March. So, first quarter comps are still a bit high. The second item to think about here is that we are now expecting, as we also said during the investor day, a mild recession in the first half of the year and then some economic strengthening in the back half of the year.

And the third element that I can say is, you know that we are running a very tight ship with respect to expenses. So, we are definitely starting this year, given the economic uncertainty, in a very careful way. And then, we need to fund this right because the most important thing is that we are going to benefit once the markets start to turn, when the GDP is going up, that we’re starting to benefit from a growth perspective. We have a lot of growth investments in our plan for this year, as you know.

So, we have two time it right, that we’re going to make those investments at the right moments so that we are going to be a large beneficiary once the markets start to spring up again. So, those are a couple of the elements you should think about in terms of timing for this year.

Alex Kramm — UBS — Analyst

OK, fair enough. And then, maybe just a follow-up to the market intelligence question to Adam earlier. Maybe you can be a little bit more specific what you expect in the more capital market-sensitive areas. I know there was clearly some headwinds that you discussed earlier.

Do you expect those businesses to be kind of like flattish? Or do you expect capital markets activity to actually recover decently? So, maybe you can just talk about that. And if you can tie that in with maybe the selling environment a little bit more, about what you’re seeing right now, that would be helpful as well.

Adam Kansler — President, Global Market Intelligence

OK. Thanks, Alex. In the very first part of the year, you still have pretty significant year-on-year comparables because markets were still strong in the very early parts of 2022. As we come through 2023, we do see some resilience in the early part of this year, but we do see a lot of cautiousness still in markets.

And you see aggregate activity levels as well as we do. As we get toward the latter part of the year, your year-on-year comparison starts to flatten out quite significantly. And for us, internally, thinking about what we expect in the year, we budgeted modest increase in total activity across capital markets platforms. We’ll obviously see how the year develops, but we think that’s the right call as we sit here today.

Alex Kramm — UBS — Analyst

OK. Very good. Thank you.

Doug Peterson — President and Chief Executive Officer

Thanks, Alex.

Operator

Our next question comes from Jeff Silber from BMO Capital Markets. Jeff, your line is open.

Jeff Silber — BMO Capital Markets — Analyst

Thanks so much. I wanted to dig a little bit further into your outlook for this year. You’ve talked about expecting a mild recession in the first half and recovery in the second half. I know it’s early, but we’re about six weeks into the new year.

And if anything, economic growth seems to be better than expected. If that’s the case, then we either avoid a recession or push it off a little bit. Where could we see the upside in your forecast?

Ewout Steenbergen — Executive Vice President, Chief Financial Officer

Jeff, the forecast, the guidance we’re giving is middle of the road. It’s management’s best estimate. This is our best expectation for the market and for the full year at this point in time. I can give you a couple of underlying elements in terms of assumptions that have gotten into our plan.

So, for example, with our market sensitive businesses, think about the index business, the assumption is flat equity markets this year for the full year. You could say January looks a bit better and February so far as well. But we’re not changing our plan on a month-to-month basis. So, on average we are expecting markets to be flat.

That is the assumption that had gone into the index outlook, as well as 20% declines in ETD volumes coming from elevated levels last year, as well as flows to be more or less in line of what we have seen in previous years. And then, with respect to the other market-sensitive businesses, we already gave you some of the assumptions for ratings. So, that has gone into the plan. We think this is our best estimate at this point in time, given everything we know about the company and the markets.

Jeff Silber — BMO Capital Markets — Analyst

OK. I appreciate the color. Let me switch gears and focus on AI. Doug, I appreciate you addressing this issue.

Obviously, it’s a hot issue in the markets today. You guys seem to be ahead of the game with your purchase of Kensho a number of years ago. Where have you gotten the most traction there? And what should we look for going forward?

Doug Peterson — President and Chief Executive Officer

Well, thank you, Jeff. We’re very pleased by the investment we made in Kensho. In addition to investments we’ve made across the entire organization in decision sciences and AI machine learning, I recently spent some time with Kensho in Cambridge, and they were able to show me some of the R&D they’re doing on large language models, which is something that’s in the press every day right now. We’re seeing that, for the financial markets, we’ve been able to harness the data in the language that we already have inside of the company to develop some very interesting products.

But since Ewout overseas Kensho, I think I should handed over to him to finish the answer.

Ewout Steenbergen — Executive Vice President, Chief Financial Officer

Jeff let me first give you a number of data points in terms of what Kensho is exactly doing today for the organization, and it’s actually really mind-blowing if you hear these numbers. So, a product called Kensho Link has saved over 2 million hours, ingesting datasets, strategic datasets, expanding datasets for our customers. Also, Link has, at this moment, achieved 1 million unstructured private markets, private entity data into our database, into our platforms and connected to the market intelligence ID numbers of those entities. Our two other products called Extract and NERD that have enriched 73 million documents on the Cap IQ Pro platform.

It has ingested 10.5 million investment research report on the Cap IQ Pro platform. And Scribe, which is our language speech-to-text model, is saving 250,000 hours of men work per year for transcripts. Annual savings of that are approximately $9 million. And the list can go on.

But those are some data points. Sometimes, it’s not really understood what Kensho is exactly doing, but it’s really impressive, and I hope you agree with me when you hear those numbers. But now shifting to the future of Kensho. Because you’re right Kensho’s really sweet spot is natural language processing.

And everything that we’re reading today about large language models is exactly in that sweet spot. So, Kensho is, today, already developing a financial language model called FinLM, which is trained on the S&P global data assets. It’s very expensive to develop large language models. The cost of the compute is very high.

But if you have stronger datasets, higher quality datasets, actually, that’s a differentiating factor. So, we are avoiding very significant compute time and cost, so to say. Also, Kensho has developed something new that’s the Kensho Solver, which is the AI solution to enter the most complex financial number questions. You also can read about large language models actually not being so strong in math, and we are working on a solution in this area as well.

So, if you add it all up, I think what Kensho can be doing for the company and where it’s working on, it’s very impressive. And we’re very pleased that we’re so far ahead in acquiring this company already five years ago.

Jeff Silber — BMO Capital Markets — Analyst

All right That’s extremely helpful. Thanks so much for the color.

Operator

Our next question comes from Craig Huber from Huber Research Partners. Craig, your line is open.

Craig Huber — Huber Research Partners — Analyst

Great. Good morning. My first question would focus a little bit, if we could, on the ratings outlook you have for billed issuance this year. Curious if you could give us a little further thought on your outlook for this year for high yield and for bank loans? Maybe throw in CLOs, if you would, as well.

Martina Cheung — President, Global Ratings

Hi, Craig. It’s Martina here. Thanks for the question. So, our outlook for this year is overall up 2.5%.

The underlying factors are, I think, Doug has highlighted in his presentation, but 8.5% on corporate, 3% on FS, U.S. public finance around 5%. And we’re projecting a decline in structured finance loans of about 7%. We don’t break out high yields and bank loans specifically, Craig.

But what I can say is, as you all know, high yield in 2022 was a really low year. And so, we see growth in the high-yield markets this year. I think on the bank loans and CLOs, maybe what I can just touch on is the expectation for the research team underpinning that 7% decline in structured finance does reflect some concern around the pipeline for CLOs, which we characterize or capture in the structured finance there.

Craig Huber — Huber Research Partners — Analyst

OK. Thank you. And my follow-up, when you think about pricing throughout the portfolio, where should we expect pricing that might be higher this year than normal, maybe a more normalized 3% to 4% pricing? What areas would you highlight the price might be coming ahead of that? Thank you.

Ewout Steenbergen — Executive Vice President, Chief Financial Officer

Greg. In general terms, we always start to think first about what we do for the customer, the value we generate. The good news is that most of our products are must-have products with a very high contribution to our customers. And obviously, that is the first thing, first element we take into consideration when we start to think about pricing.

Pricing, obviously, needs to reflect also our cost price. Cost price is going up, given the higher inflationary environment. So, we believe we have — across the board, depending on facts and circumstances, customer relationships, depending on certain products in one area or another area. But in general, we have an opportunity to pass on the higher price increases, given the higher inflationary environment.

Craig Huber — Huber Research Partners — Analyst

That’s it. Thank you.

Doug Peterson — President and Chief Executive Officer

Thanks, Craig.

Operator

Our next question comes from Faiza Alwy from Deutsche Bank. Faiza, your line is open.

Faiza Alwy — Deutsche Bank — Analyst

OK. Yes. Hi. Good morning.

So, my first question is I want to take advantage of Martina being on the call. Martina, it seems like the high-yield market has really outperformed expectations so far this year. It’s only been a few weeks. But I think just today, we have, you know, a new deal announced for win, which is high yield and I think has been surprising.

So, give us your view on — has this been surprising for you? And how do you expect sort of the high-yield market to evolve through the course of this year?

Martina Cheung — President, Global Ratings

Yeah. Thanks so much for the question. Look, I mean, as I mentioned in the last point, ’22 was just a really low base from which compared. So, we absolutely do expect to see growth in high yields.

As it relates to January and this week, it’s really too early to call. We still have quite a few puts and takes on this in terms of the macro variables. But overall, I would guide to what we’ve been saying around our expectations, first half, second half, how the macro factors play into our overall issuance expectation, and how that plays into our billed issuance trends.

Faiza Alwy — Deutsche Bank — Analyst

Got it. Thank you. And then, secondly, a bigger-picture question around the revenue synergies. You know, you’ve talked about an 85 million run rate for 2023.

Give us some additional color on, again, sort of where you’ve seen these revenue synergies take place, where you had the best results. And then, how do we bridge sort of what’s the next step to get to that, you know, 350 million long term?

Ewout Steenbergen — Executive Vice President, Chief Financial Officer

Faiza, let me start with a general answer and then hand it over to Adam for some additional color in market intelligence. So, in general, what we are seeing is very good activity from a cross-sell perspective. We’re speaking about 6,700 referrals or leaks that have already been generated, both intra-division and inter-division, with very, very positive conversion levels across the company. So, what we are seeing in general is that customers are really happy to talk to us about what more we can bring to them, how we can add more value.

The next phase is, of course, to start to focus on new product development. So, that will be the next wave of revenue synergies. But we feel we’re definitely well on track ahead of the timing and the planning that we had originally. And I hand over to Adam for some additional color.

Adam Kansler — President, Global Market Intelligence

Thanks. It’s a great question because this is probably the most exciting part of what happens in a merger and bringing together the set of capabilities that we now have. In 2022, this was mostly about cross-sell, selling our products to expanded customer bases. That gave us a good early start.

And then, this first year, we were able to perform on that type of synergy realization. As we move into 2023, as Ewout described, it really becomes about building new products that we’re able to now deliver because of a combined set of capabilities. Already in 2023, I think five of our combined product capabilities are already generating revenue. We have over 20 in the pipeline, and this is just in market intelligence alone.

These are things like building our sustainability data and capabilities into our workflow solutions, expanding the capacity and capabilities of our desktop with fixed income and loans information, bringing together workflow solutions and incorporating much larger data sets for customers. So, think about a private markets customer who also wants to look at public company comparables or basic financial analysis. Those types of combined product offerings are what give us a lot of confidence in our total revenue synergy targets of over $300 million as we get out into later years and, as I mentioned, the most exciting part of what we’re doing.

Faiza Alwy — Deutsche Bank — Analyst

Great. Thank you so much.

Operator

Our next question comes from Owen Lau from Oppenheimer. Owen, your line is open.

Owen Lau — Oppenheimer and Company — Analyst

Hey, good morning. Thank you for taking my questions. Could you please add more color on your partnership with AWS you announced yesterday? And I think it’s also somehow related to how you will deploy Kensho in this partnership. But how should we think about the incremental revenue and expense control opportunity here will be quick? Thanks.

Doug Peterson — President and Chief Executive Officer

Owen, this is a relationship that we’ve had for many years and when we put together the two companies and had our merger, we realized that both of us had already very strong relationships with AWS. We had been on a cloud switch for many years. A few years ago, before the pandemic, I was visiting an acre of data site where we had hundreds and hundreds of servers, and I said, “Why do we have all these servers? Should we be in the business of having server farms?” And we started the transition of moving to AWS. So, over the years, we’ve developed an incredible partnership with them.

And you saw yesterday the culmination of the merger where we’ve come together to combine contracts, to come up with a new approach to how we’re going to run our day-to-day operations. But most exciting is the opportunity this brings for strategic cooperation, for developing new products, for being able to serve customers with completely new opportunities. When we look at our data sets that we have, some of the data that AWS has, how we can bring those together to do completely new innovation. We talked earlier about large language models, the other types of artificial intelligence, and machine learning that are shaping markets of the future.

We think that the two companies together can accelerate what we’re already doing. We see that AWS is for us has been an incredible partner. We’re pleased with this approach to a contract. We just signed the contract yesterday.

In addition, we will follow up with some strategic aspects later on and follow up. But you asked some questions about the financial aspects, and I’ll ask Ewout to answer that part.

Ewout Steenbergen — Executive Vice President, Chief Financial Officer

Good morning, Owen. If you think about the contractual agreements we’re having with AWS, this is about a $1 billion spend in total over the next five years. To put that in perspective, we will continue with a multi-cloud philosophy. And in total, according to our forecasts, we would actually be spending more than a billion on cloud compute over the next couple of years.

So, this is not an increase in spend in total. This is exactly in line — or actually is — our total cloud forecast is actually higher than this particular number. But what this brings to us is two very significant benefits. The first is, of course, that by combining the S&P Global and IHS Markit contracts at this moment in this new partnership with AWS, we will be able to generate very significant cost synergies as part of the new contract.

And secondly, as Doug already said, and this is actually more important from my perspective, is the strategic partnership because this will help to advance our technology innovation. We will be able to combine leading technologies and platforms and data sets of both companies. We will be able to add specific capabilities that we are having on both sides, including the Kensho AI capabilities, of course. And the most important, that will end up with a really very incredible customer experience that we expect to enhance over the next few years.

Owen Lau — Oppenheimer and Company — Analyst

Got it. That’s very helpful. And then, the other one is on your investment in private market. So, what kind of end goal or what kind of new solutions you will be launching this year? And I know you’re going to provide more disclosures on revenue this year, but do you have any target this year? Thank you.

Adam Kansler — President, Global Market Intelligence

Hi, Owen. It’s Adam. Happy to take that. So, private markets continue to expand.

You’re seeing continued issuance of private debt; increasing regulatory pressures for disclosure; needs to monitor, report, test and report against sustainability metrics; manage large private equity and private credit portfolios. That requires things like valuations, reporting tools, portfolio monitoring tools. These are all areas where we already have a significant footprint, and we’re well-positioned to deliver additional solutions to the market. While you see in this year some tempering and fundraising, I think everyone agrees this is an asset class that will continue to grow and the types of solutions that I described, workflow solutions, regulatory reporting, valuations, portfolio monitoring, all have significant room for continued growth.

Martina Cheung — President, Global Ratings

Owen, this is Martina. I’ll just add a little bit here from a ratings standpoint. So, private markets, it does contribute quite a bit to our overall business, whether it’s in syndicated loans, through M&A, LBO activity, etc. And we also, obviously, rate the asset managers, the portfolio companies, sponsors, BDCs.

And we do quite a bit of credit analysis work to support multiple uses in that sector. We have good relationships with key players, and we’ve been ramping up engagement over the last couple of years. Lot of good dialogue, a lot of interest in new opportunities. What we saw in private debt specifically in 2022 was a growth that was fueled somewhat by the closure of the public markets.

And we have heard a lot of interest from customers with pent-up demand looking to come out to the public markets. But overall, we see there’s a lot of opportunity here, not just in business and activity coming back to the public markets, but also in working very closely with our private market clients.

Owen Lau — Oppenheimer and Company — Analyst

Got it. Thanks, all.

Doug Peterson — President and Chief Executive Officer

Thanks, Owen.

Operator

Our next question comes from Stephanie Moore from Jefferies. Stephanie, your line is open.

Stephanie Moore — Jefferies — Analyst

Hi. Good morning. Thank you for the question. I wanted to touch on the mobility business.

You know, I think there’s a lot of dynamics that are happening in 2023, whether it’s a decline in used car prices, increased production in new. How do you view the business as going to kind of stack up this year, just given all these dynamics? I think in the — you know CARFAX is proven to be pretty resilient, but, at the same time, I think could benefit in this environment. But I’d love to get your thoughts on maybe that’s not the right way to think about it, or if there’s other drivers that we should be aware of. Thanks.

Doug Peterson — President and Chief Executive Officer

Yeah. Stephanie, this is Doug. When you look at the mobility business, you have to think about all of the different capabilities that we have across the business. And this starts with CARFAX, which you mentioned.

There’s a set of products on automotiveMastermind, Polk Analytics. What you think about is it all the way from the OEMs, to the suppliers, to the dealers, to the insurance companies, to the financial institutions that are financing the automotive sector, all of them are looking for data and analytics. And we’ve seen an incredible digital transformation that’s taken place over the last three years with a lot of volatility in the automotive markets. And all of this has driven all of these different types of players to the mobility business for data, for analytics, for research, for forecasting.

In addition to that, we see an incredible transformation taking place in the industry with electric vehicles. And so, electric vehicles is also introducing a new element, which is also bringing all of these types of people back to the markets for more data and analytics. We’ve seen that we can benefit in different types of markets depending on whether it’s used cars, it’s new cars, whether it’s how a dealer is going to be working with incentives. And so, we believe that the market — that the business is very resilient depending on whatever the factors are.

We’re watching it very carefully, and we actually use our own data to forecast our own business.

Ewout Steenbergen — Executive Vice President, Chief Financial Officer

And Stephanie, let me give you in terms of some of the revenue drivers, a little bit in addition to what Doug said. So, with the market normalization, the higher inventory levels, the prices for new and used cars that are coming down, we see the following dynamics for our revenue drivers. On the one hand, that will mean that margins for OEMs and dealers most likely will come down a bit, having an impact on some of the retention levels. But on the other hand, we have the marketing and sales products that are being used, and there will be a higher demand going forward for those products.

So, you could say there’s a kind of an offset in terms of the new dynamics in the different revenue streams that we’re having. Therefore, we are quite confident that we are able to hit that 6.5% to 8.5% growth level in the current automotive markets and the new dynamics that we’re seeing.

Stephanie Moore — Jefferies — Analyst

Thank you. And then, just given the current market dynamics, do you think that we could expect to see maybe a more of a more potential M&A activity, as well as, you know, are there other opportunities as you kind of evaluate your current portfolio for maybe divestitures or sales that might make sense kind of going forward? How would you characterize those opportunities? Thanks.

Doug Peterson — President and Chief Executive Officer

As you know, we look at the key secular trends and drivers of value in that across all of the markets. And you heard us talk about those on investor day that relate to things like the changes that are taking place in capital markets, internationalization of financial markets, private markets, which we’ve talked about, sustainability, the shift from active to passive, supply chain analytics, the approach to all companies looking at becoming digitized and how data and analytics play. And so, we look across our portfolio. We look at what are those growth drivers for each of our businesses.

And as you know, we could be opportunistic if we looked at something for some sort of an opportunity to bring a business into the portfolio. But we also know that we are going to look over the long run and see what is the type of portfolio we want to have. Are we the best owner of the businesses that we have in the portfolio? So, you should assume that we’re going to continue with the discipline we’ve always had when it comes to M&A.

Stephanie Moore — Jefferies — Analyst

Thank you so much.

Operator

Our next question comes from Manav Patnaik from Barclays. Manav, your line is open.

Unknown speaker

Hi. Good morning. This is Brandon on from Manav. Just wanted to ask on the ESG and climate transition revenue that you guys are reporting on, which will be great.

So, what are all of you including in that? And what’s driving your assumption for the growth in 2023?

Ewout Steenbergen — Executive Vice President, Chief Financial Officer

Good morning. So, if you look at the revenue that we have reported for 2022, under the old definition and inclusion for ESG, $209 million. We’re adding three new categories and therefore we call the new revenue base sustainability and energy transition. You can find the details in the appendix of the slide deck.

But the three main categories that we’re adding is revenues from e-fees, and that is coming from the mobility business; revenues with respect to energy transition for the commodities insights business; and then thematic factors coming from the index business. So, those three categories we’re adding into the new definition. That brings the baseline for 2022 to $247 million and that we expect to grow from there with the growth of about 34% over the next few years. And our expectation is still that this will become an $800 million business by 2026.

Unknown speaker

Great. Thank you. And then, switching over just to the maturity walls. I guess, what are you hearing from corporate treasurers.

I know, obviously, the, you know, 2024, you know, we’re expecting to see pick-up in the next couple of years. But, you know, they could still wait a little longer if they want to. But at the same time, you know, rates and spreads have kind of settled. So, just what are you hearing from treasurers on that?

Martina Cheung — President, Global Ratings

Hey, Brandon, it’s Martina. I can answer that question. So, I’m here as part of our issuance. We have worked closely at the maturity wall data.

It’s a little difficult to figure out specifically, you know, the precise numbers around things like refinancing, which, I think, goes to the heart of your question. We know historically much of what gets labeled as general corporate purposes has been used for refinancing. What I would say is we were seeing, as you would have seen in our presentation, about 2 trillion, 2.5 trillion in corporate debt rated by us maturing over the next six years. 2023 still has about 1.8 trillion of maturities as of January 1st.

So, we expect refinancing activity this year with any potential early refinancing coming from the 2024 maturities. You know, a couple of the key points in terms of what we hear, we don’t see any indication for deleveraging, for example, on a meaningful scale. We also are paying close attention to what we see in terms of inflation and interest rates stabilizing somewhat in the second part of the year. So, you know, there’s still some room for opportunistic issuance, but it’s pretty uncertain as I mentioned that earlier.

Unknown speaker

All right. Thank you.

Doug Peterson — President and Chief Executive Officer

Thanks, Brandon.

Operator

Our next question comes from Jeff Meuler from Baird. Jeff, your line is open.

Jeff Meuler — Robert W. Baird and Company — Analyst

Yeah, thank you. I think for Martina, how closely are current resources within ratings aligned to recent volume trends? Obviously, there’s been a lot of ebb and flow in volumes in recent years. I guess just wondering to what extent you have excess capacity. And we see good incremental margins other than the incentive comp normalization with incremental revenues, or, I don’t know, if you’re running tighter than it may appear, given that maybe things were stretched than a couple of years ago.

Thank you.

Martina Cheung — President, Global Ratings

Thanks for the question, Jeff. Well, we strive to, to manage our business to absorb shocks, and you have seen that we’ve maintained or analytical capacity over the last couple of years. In some higher growth areas, we’ve invested a little more capacity ahead of a recovery that we’re expecting later this year. The market, as you know, needs our researcher insights around the ratings, and the demand for this increased dramatically during the last couple of years with the uncertainty and the volatility.

So, we have — we’ve worked very hard to maintain our capacity for that, as well as to anticipate increases in the latter part of this year in volumes. We have done some small changes in the past year or so as part of continuing to enhance our operating model. And we’re, you know, as I said during investor day, always prudent with our expenses, very disciplined around all the levers that we have, whether it’s location strategy, T&E. And of course, we have benefited substantially from shared cost synergies with the merger.

And the last point I would make on this is in any extreme scenario, we would clearly examine all of our options. But right now, we’re very comfortable with the analytical levels that we have.

Jeff Meuler — Robert W. Baird and Company — Analyst

OK. Thank you. That’s it for me. Thanks for the enhanced disclosure.

Operator

Our next question comes from Ashish Sabadra from RBC Capital Markets. Ashish, your line is open.

Ashish Sabadra — RBC Capital Markets — Analyst

Thanks for taking my question. I just wanted to — I have two-part question on the market intelligence. First is on the credit and risk solution. There was a modest slowdown there.

There was a reference to financial risk analytics. I was wondering if you can talk about how should we think about those trends going into ’23? And then, my second question was just on the data and advisory solution. That continues to be pretty strong. And I was wondering if you can talk about how the combination of IHS and S&P data on global marketplace has been driving more customer conversations on that front and also how the cloud distribution can potentially has the potential to further accelerate the growth in that business.

Thanks.

Adam Kansler — President, Global Market Intelligence

Ashish, thanks for the question. First, let me just take the credit and risk solutions piece of the question. We mentioned FRA. This is a business that is large software delivery, had a large delivery in Q4 of 2021.

So, you have a year-on-year comparable that made Q4 of 2022 a challenging quarter. So, I think that’s the thing that Ewout called out earlier that you’re referring to. The underlying business remains very strong. This is our ratings, direct ratings express capabilities, and it continues to grow as it has historically.

It actually has the really exciting path forward as we move more and more capabilities into our corporate customers and particularly our credit analytics capabilities. So, quite excited about that forward. Second, I think you asked about our data and advisory solutions. This is a broad set of data capabilities that we can bring to bear for our customers.

Even just this morning, I saw a large win with an Australian bank where, because of the combined sets of data that we now have in the combined enterprise, we’re able to respond to very broad RFPs, to satisfy needs of customers across a wide range of applications and credit and risk management within their firms. So, I do expect that to continue. I think even as the synergies come more to the front, and we’re able to integrate those data sets together. This will lead into an answer to your cloud question.

I think as we integrate those data sets together more and more, we’re increasing the scope of opportunity we have to even further accelerate in our data advisory businesses. On the cloud, many of our applications today already run in the cloud, as Ewout highlighted in the description of the AWS relationship. This is a long-standing relationship. What we’re about to do now is to launch the next phase and really complete that full cloud migration.

Once all applications and our data capabilities are in the cloud, and we’ve launched a full multi-cloud capability across our data sets, this gives us the opportunity to be much more efficient in developing new products, delivering those products out to customers in the way that they want, making available wide sets of data for the application of data science and artificial intelligence. I really do think this is a very important part of the continued acceleration in the broad scope of capabilities we have within market intelligence. And you’ll see that reflected in that data advisory business and many of the other solutions that we deliver out to customers.

Ashish Sabadra — RBC Capital Markets — Analyst

That’s very helpful color. Thank you.

Doug Peterson — President and Chief Executive Officer

Thanks, Ashish.

Operator

Our next question comes from Russell Quelch from Redburn. Russell, your line is open.

Russell Quelch — Redburn — Analyst

Yeah. Thanks very much. First question is on buybacks. This may just be a check, but when you return the tax cut from the engineering solutions sale, will that be considered part of the 3.3 billion permissible buyback for 2023? Or would this be incremental to that?

Ewout Steenbergen — Executive Vice President, Chief Financial Officer

That’s included in the 3.3 billion, Russell. So, how that build up is how you can take our free cash flow forecasts and guidance for this year, 85% of that, deduct the dividends that we will pay out at 750 million net proceeds for engineering solutions. And that brings you to the 3.3 billion capacity for buybacks for 2023.

Russell Quelch — Redburn — Analyst

Perfect. Thank you. And my second question is probably for Martina — or is for Martina. The chart in Slide 15 shows maturities are expected to be about 1.8 billion, if I get my ruler out, this year.

Can you give us an idea of how big maturities were last year in 2022 to get back out what the impacts of maturity is on expected growth in pricing and new issues?

Martina Cheung — President, Global Ratings

Yeah. Thanks for the question, Russell. I don’t have the ’22 maturity numbers in front of me. There’s maybe a way to — let me know if this is helpful.

2022 we saw overall lower volume of maturities. And the reason why is because you actually have to go back to years prior. So, there was a ton of pull-forward done and opportunistic tapping to the markets done in 2020 and 2021 because rates were so low. So, not sure if that’s helpful for you.

But the number you’re seeing for 2023 in our charts is 1.8 trillion as of the 1st of January of this year. We’re anticipating that, we think there is possibility for a little bit of pull-forward in ’24. But we really have to see how the year plays out between the first and second half.

Russell Quelch — Redburn — Analyst

OK. Yeah, sorry, I said billion. Yeah. So, just to take your answer there.

So, the number of 1.8 trillion is, excuse me, higher than what you saw in 2022 or lower than what you saw in 2022?

Martina Cheung — President, Global Ratings

It’s higher. What was executed — compared to what was executed in ’22, it was higher on refinancing.

Russell Quelch — Redburn — Analyst

Thank you, Martina. Great stuff.

Doug Peterson — President and Chief Executive Officer

Thanks, Russell.

Operator

Our final question comes from Shlomo Rosenbaum from Stifel. Shlomo, your line is open.

Unknown speaker

Hi. This is Andrew on for Shlomo. What are the one-time expenses for indices? and can you provide more color on the strategic investments in this unit? I know you mentioned multi-asset class indices. Can you talk about anything else beyond that?

Ewout Steenbergen — Executive Vice President, Chief Financial Officer

So, if you look at expenses for the index business in the fourth quarter, you should see that in the context of that, this is a business that is investing in the context of driving faster future growth. And one of those things that you see in the quarter is some consulting spend to help the business with a very large transformation to move to a more agile working environment, to be much faster in terms of product development, much faster in terms of new entrepreneurialism initiatives. And that needed some investment in the quarter from a consulting perspective to make those changes. Also, what you see is strategic investments in new product areas, like multi-asset class that was already discussed earlier in the call, but also sustainability, thematic factors, etc.

So, that should position the index business very well to deliver on the double-digit revenue growth in 2025 and 2026 that we discussed during our investor day with margins in the high 60s level. So, really, I have to say, I’m really impressed by the index business. They take very decisive actions. They’re transforming their business and setting themselves up on a faster growth trajectory.

And the expenses you see in the fourth quarter, you should interpret in the context of that.

Unknown speaker

OK. My other questions were answered. Thank you.

Doug Peterson — President and Chief Executive Officer

Well, thank you, everyone. As I mentioned earlier, despite the challenging market conditions, 2022 was a year of resilience and decisive action and investment for the future. We’re really proud of all the accomplishments we had last year, especially the merger with IHS Markit and our bold new strategic vision powering global markets. This is going to allow us to take advantage of secular trends that we’ve been mentioning throughout the call, like energy transition and private markets, and the need for analytics and insights in turbulent markets.

And we think we’re very well positioned for growth in 2023 and beyond. But the reason we’re successful is because of the tremendous people that we have in this company. And I want to thank them again for all the work that they did throughout 2022 and all they’re doing to help shape the future of S&P Global. I also want to thank all of you who joined the call today for your excellent questions.

We are very excited about our future and can’t wait to share more with you throughout the year. So, thank you for joining us today.

Operator

[Operator signoff]

Duration: 0 minutes

Call participants:

Mark Grant — Senior Vice President, Investor Relations

Doug Peterson — President and Chief Executive Officer

Ewout Steenbergen — Executive Vice President, Chief Financial Officer

George Tong — Goldman Sachs — Analyst

Adam Kansler — President, Global Market Intelligence

Alex Hess — JPMorgan Chase and Company — Analyst

Martina Cheung — President, Global Ratings

Toni Kaplan — Morgan Stanley — Analyst

Alex Kramm — UBS — Analyst

Jeff Silber — BMO Capital Markets — Analyst

Craig Huber — Huber Research Partners — Analyst

Faiza Alwy — Deutsche Bank — Analyst

Owen Lau — Oppenheimer and Company — Analyst

Stephanie Moore — Jefferies — Analyst

Unknown speaker

Jeff Meuler — Robert W. Baird and Company — Analyst

Ashish Sabadra — RBC Capital Markets — Analyst

Russell Quelch — Redburn — Analyst

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