Valuation of sustainable investment

Emmanuel Acheampong-Bonsu, Jackie Wolgast and Teddy Ossei Kwakye

Chapter 22 in Sustainable and Responsible Investment in Developing Markets, 2023, pp 364-381 from Edward Elgar Publishing

Abstract: There is increasing recognition of the importance of including environmental, social and governance (ESG) assessments in business valuation to make informed investment decisions. This chapter discusses the valuation of sustainable investments, conventional business valuation and sustainable business valuation. The chapter provides an overview of Sustainable and Responsible Investment (SRI) and discusses the issue of ESG and value creation. The general process of sustainable valuation is not so much different from a traditional discounted cash flow (DCF) model. Thus, forecasts of economic benefit streams are estimated, and the future economic benefits are discounted by a factor that captures the risks associated with the entity being valued. The difference arises when ESG issues are captured during the cash flows and discount factor adjustments. Discount factors can capture ESG in terms of proprietary risk quantification arising from ESG metrics and ratings of companies. Adjustments to net cash flows can capture ESG factors in market share gained by a company from an increasingly ESG-conscious market of consumers or cost-cutting gains arising from energy-efficient investments.

Keywords: Business and Management; Development Studies; Economics and Finance; Environment; Sustainable Development Goals (search for similar items in EconPapers)
Date: 2023
References: Add references at CitEc
Citations:

Downloads: (external link)
https://www.elgaronline.com/view/edcoll/9781803927060/9781803927060.00033.xml (application/pdf)
Our link check indicates that this URL is bad, the error code is: 503 Service Temporarily Unavailable

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:elg:eechap:21754_22

Ordering information: This item can be ordered from
http://www.e-elgar.com

Access Statistics for this chapter

More chapters in Chapters from Edward Elgar Publishing
Bibliographic data for series maintained by Darrel McCalla ().