FVC2251. How to Reflect the Impact of ESG Factors in Business Valuations and Financial Reporting

Environmental, social, and governance (ESG) factors have become increasingly prevalent as a requirement in both corporate mission statements, and in investment mandates. Companies commit to net-zero target dates and pile on to diversity initiatives, while investment management firms promote their socially responsible “green funds”.

But does any of it make a difference in dollars and cents value? Recent market trends appear to show little differentiation between returns to ESG funds and their traditional "non-green" counterparts, leading in part to growing regulatory calls for increased disclosure requirements for fund managers and advisors operating within this sphere.

If there is value in ESG, it should be able to be reflected at the enterprise and asset level. Our session explores developments in quantifying ESG factors and how they can be applied within valuation models and financial reports. We also look at what potential next phases might involve as valuation practitioners, investors, and analysts continue forward in the evolution of ESG valuation.

Learning Objectives:

• Identify and analyze methods of quantifying ESG factors for application within valuation methods
• Recognize how different ESG factors translate into value based on sector and business model
• Recall different methodologies and approaches to ESG and their resultant effects, positives and negatives