ESG-analysis in the business investment valuation system
Abstract
Subject. The importance of taking into account the impact of ESG factors in the investment decision-making is increasingly recognized. Meanwhile, the majority of practical approaches to business valuation still rely on financial indicators. The relevance of this study is determined by the need for developing recommendations on how to factor the financial impact of ESG risks and opportunities on the business valuation.
Purposes. A comprehensive study of the problem of ESG factors and key financial indicators relationship consideration when justifying business value.
Methodology. The methods of comparative, logical and financial analysis were used. The analysis of the completeness and accessibility of corporate reporting data for the practical solution of the ESG integration problem was conducted based on sustainability reports of Russian Oil&Gas and metallurgical companies.
Results. The conducted research allowed us to propose a principled approach for integrating ESG factors into business valuation based on the results of the value chain analysis, the impact materiality criteria determination, the assessment of the nature and duration of ESG impacts on the key financial indicators, the selection of material information and the quantification of the financial effect on business value.
Conclusions. The findings and recommendations allow to systematise and develop analytical procedures for investment business valuation. Given the fundamental differences in assessing the impact of ESG factors on business and its value, the proposed approach enables investors and other stakeholders to make individual decisions regarding the attractiveness of particular investments.
Metrics
References
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