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ESG Valuation Considerations – Top Down or Bottom Up?

Value Scope

Intangible asset valuation concepts can and should be applied to unique ESG cash flows. This work can be used to reconcile and support an adjustment to the CAPM, then the WACC, via Alpha and Beta. Obviously the lower the discount rate, the higher the valuation, all other items held constant.

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ESG A Valuation Framework

Value Scope

Obviously the lower the discount rate, the higher the valuation, all other items held constant. Adjustments to Beta can accomplish this. Beta measures systemic risk, and the performance of a company as compared with a broad index like the S&P 500 or the Russell 2000. Using Alpha, however, it could be done.