In an era where sustainable practices are not just ethical imperatives but crucial valuation determinants, “Future of Valuations: The Impact Of ESG” offers an insightful exploration of the impact of Environmental, Social, and Governance (ESG) factors on asset valuation.
This comprehensive report is derived from the insights of a seminal roundtable discussion by expert professionals to reflect on the ever-growing significance of ESG factors in the valuation landscape, emphasising the need for innovation, collaboration, and regulation to shape the future of sustainable investing and valuation practices.
The roundtable discussion was co-organised by the International Valuation Standards Council (IVSC) and Royal Institution of Chartered Surveyors (RICS), hosted by Colliers International (Singapore).
Core Themes & Key Takeaways:
- The Emergence of ESG and Green Buildings:
The report examines Asia Pacific’s pioneering role in promoting green buildings and the complexities of attributing property value increases to ESG elements. It underscores the need for concrete evidence to validate the value differential attributed to ESG characteristics.
- Exploring Limitations and Gaps in ESG Valuation:
Addressing the crucial need for regulatory support and standardised reporting, the report highlights the challenges in quantifying the economic costs of ESG and the importance of emerging regulatory clarity.
- ESG in Business Valuation and Private Companies:
The report sheds light on the increasing integration of ESG factors in business valuation, focusing on their impact on risk, cost of capital, and investment decisions. It discusses the evolving valuation methodologies incorporating ESG considerations.
- Social & Governance Considerations in ESG:
Moving beyond environmental factors, the report explores the growing emphasis on social and governance aspects in valuation processes, highlighting the importance of well-being certifications and investor demands for comprehensive ESG sections in valuation reports.
- Concluding Reflections:
The roundtable concludes with a forward-looking perspective, emphasising the irreversible integration of ESG into valuation practices and anticipating a more balanced approach encompassing all ESG aspects.
- The integration of ESG factors is not only a trend but a crucial element in determining asset values and investment performance.
- The evolving landscape necessitates collaborative efforts between valuation professionals, regulatory bodies, and the investment community to navigate complexities and enhance valuation practices.