 Integrating ESG into valuation models and investment decisions: the value-driver adjustment approachWillem Schramade Journal of Sustainable Finance & Investment, 2016, vol. 6, issue 2, 95-111 Abstract: True Environmental, Social and Governance issues (ESG) integration means ESG factors are systematically fed into the valuation models and investment decisions of analysts and portfolio managers (PMs). However, most ESG approaches fail to do this. As a result, sustainable investing is much less an application success than a marketing success. Our Value-Driver Adjustment approach is different: it ties into traditional valuation approaches by linking ESG issues to value drivers via their impact on business models and competitive positions. For equities, the initial results find that the average target price impact of ESG factors is 5% overall, and 10% conditional on non-zero adjustments; dispersion is wide as target price changes ranged from −23% to +71%. The investment team has experienced a pay-off in terms of more in-depth analysis of companies, a clearer view on risk and better informed decisions. Date: 2016 Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:taf:jsustf:v:6:y:2016:i:2:p:95-111 Ordering information: This journal article can be ordered from DOI: 10.1080/20430795.2016.1176425 Access Statistics for this article Journal of Sustainable Finance & Investment is currently edited by Dr Matthew Haigh More articles in Journal of Sustainable Finance & Investment from Taylor & Francis Journals |
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