ESG and Valuation

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  • #89412

    Any thoughts on how to pragmatically factor ESG matters in valuation modeling ?


    There may be shortcuts hidden throughout the map of getaway shootout. Find these shortcuts to gain an advantage over your opponents.

    Pedro Garibi


    I have approached a valuation project integrating ESG initiatives as factors:
    1) I have conducted valuation for a base case NO ESG initiatives scenarios
    2) I have identified all ESG initiatives and tis financial impacts on an incremental basis: operational expenses, capex, taxes, debt rating, new discount rate, enahnced revenues, personnel expenses due to equality/gender initiatives, etc…
    3) Conduct a FCF valuation for both scenarios and compare Entreprise Value and Equity Value of both scenarios
    4) Asses if ESG iniaitives add value to the company
    5) Claculate the impact of each iniaitive in the vlauation process via a waterfall chart. Normally the improvement of discount rate has the highest impact on the ESG scenario

    Let me know if it is useful

    Best regards
    Pedro Garibi, CFA

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