Skip to main content

Beyond Numbers: Incorporating ESG into International Valuation Standards

28 March 2024

IVSC has launched a new survey to investigate the evolution of ESG in the valuation process

Alexander Aronsohn FRICS is a chartered surveyor with long and wide ranging experience encompassing residential asset management, commercial and residential development, rating, national and international valuation and investment. He has worked as a property professional for over twenty years in a number of different specialisms, including at DTZ where he became an associate director in both their international valuation and international investment teams, focussing on cross border portfolio valuation and investment. 

Alexander joined the IVSC as Director of Technical Standards (Tangible Assets) in 2019. Prior to this he was Director of Technical Standards at the Royal Institution of Chartered Surveyors (RICS), where he also sat on various valuation boards and working groups.

Environmental, Social and Governance (ESG) are defined within IVS as the criteria that together establish the framework for assessing the impact of the sustainability and ethical practices, financial performance or operations of a company, asset, or liability. ESG comprises three pillars: Environmental, Social and Governance, all of which may collectively impact performance, the wider markets and society.

In the past few years, the explicit quantification of the components of ESG within the valuation process across all specialisms (business valuation, financial instruments, and tangible assets) has gained even greater prominence across all markets. This is in part due to renewed global commitments to environmental sustainability and net zero, the growing influence of intangibles on valuations, and greater investor, regulatory and public scrutiny of ESG components within the valuation process.

As a result, the explicit consideration of ESG within the valuation process has become a key topic for the IVSC over the past few years, as not only is it in the global public interest, but also meets a market need, particularly as more standards and regulations such as those issued by the International Sustainability Standards Board and the EU Taxonomy are incorporating specific reporting requirements for ESG.

The latest edition of IVS (effective 31 January 2025) not only incorporates the definition of ESG (shown above), but also incorporates an Appendix within IVS 104 Data and Inputs on ESF considerations. The Appendix requires valuers to “be aware of relevant legislation and frameworks in relation to the environmental, social and governance factors impacting a valuation.” This Appendix states that “the impact of significant ESG factors should be considered in determining the value of a company, asset or liability.”

The IVSC acknowledges that the quantificaication of ESG is still in developmental stage and that “ESG factors may impact valuations both from a qualitative and quantitative perspective and may pose risks or opportunities that should be considered.”

However, to produce an IVS compliant valuation “ESG factors and the ESG regulatory environment should be considered in valuations to the extent that they are measurable and would be considered reasonable by the valuer applying professional judgement.

In 2022 the IVSC set up an ESG working group comprising representatives of the IVSC Standards Review Boards, stakeholders, and external specialists to further discuss market needs.

As part of this process, the ESG working group felt that it was important to carry out a regular survey of valuers and other stakeholders to understand where they are in their journey towards the quantification of ESG components within their valuations. Gathering data via a survey This is particularly important as the role of standard setters is not to lead the market but to develop standards to meet market needs.

The latest survey relates to all types of valuations including valuations for financial reporting, market capitalisations, secured lending and tax reporting purposes and will only take approximately 5 to 10 minutes to complete. The survey will run between the  28th March 2024 and the 31st May 2024. Once the survey has been completed, the IVSC will compile the results and publish a report. The report will provide insights on the present stage of ESG in valuations and what valuers are presently seeing in their markets.  The IVSC will share details of the findings with you when you complete the survey. The report will also provide the IVSC Standards Review Board with further guidance on the current consideration of ESG’s within valuations and the need for more explicit ESG requirements within future editions of IVS. Please note that it is the working groups intentions that this is the first of a series of surveys to be published this year and further surveys on ESG and Valuation focussed on investors perspectives and firms as end users.

There are more than 170 member organisations
of the IVSC, operating in 137 countries worldwide. Join them.

Become part of a global network working to enhance valuation standards and professionalism.

There are more than 200 member organisations
of the IVSC, operating in 137 countries worldwide. Join them.

Become part of a global network working to enhance valuation standards and professionalism.