toolsESG Valuation

The ESG Valuation Methodology and Impact of ESG risk

The ESG Valuation Methodology assesses the impact of ESG risks and initiatives on companies operating in sectors with significant adverse ESG reputation and has been developed and is proprietary to Denny Ellison and TDi Sustainability.

It sets out a unique equity research valuation methodology for quantifying the investment risks associated with ESG-related allegations on ‘sin stocks’, focusing on companies operating in sectors with significant ESG contention, as reported in publicly available sources such as digital media, civil society or governmental reports, referred to as public issues.

The ‘sin stocks’, recently named like this by the media, refer to companies operating in the tobacco, gambling and firearms sectors, as well as the so called ‘brown’ companies, i.e. those operating in carbon intensive industries, such as commodity producers like gold miners, oil & gas producers and agriculture and farming companies.

The methodology offers an evidence-based valuation tool to quantify the underperformance of sin stocks but also assesses the potential valuation upside from company-specific ESG initiatives, i.e. increased disclosure, commitments, and implementation on specific ESG matters, hence revealing their real value to investors.

‘The Real Value of Sin Stocks Specific Edition: Animal protein producer JBS’ report does not only describe the methodology in detail but also provides a case study on the application of the methodology to JBS.S.A. (JBS), a Brazilian beef producer.

If you would like to discuss the applications of this methodology to a company of interest within your universe, please contact us at [email protected].

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