As the global investment community increasingly prioritises environmental, social, and governance (ESG) factors, valuation practitioners face a critical juncture. While the awareness of ESG's significance has grown in recent years, translating these principles into robust and transparent valuation practices remains challenging.
Traditionally, the integration of ESG into valuations has been hampered by a lack of clear guidelines and reporting standards, leading to inconsistent and sometimes ambiguous adjustments by valuers. Consequently, the basis for ESG-related adjustments often lacked transparency and wide recognition.
However, the landscape is shifting. Recent revisions to the International Valuation Standards and International Financial Reporting Standards now explicitly require consideration of ESG factors in valuations, underscoring the growing importance of ESG due diligence (ESG DD) in capturing both the risks and opportunities presented by ESG factors.
This shift necessitates enhanced due diligence processes that can effectively assess the impact of ESG factors, leading to more robust and reliable valuations - a practice that we call “ESG Valuation”. By embracing ESG Valuation, practitioners can ensure their services are aligned with the evolving expectations of investors and regulators, providing greater transparency and soundness during the valuation process.