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ESG Valuation Considerations – Top Down or Bottom Up?

Value Scope

They combine elements of the Income Method, which is cash flow based, and the Market Method, which is based on comparative analysis. Alpha is an adjustment made to the Capital Asset Pricing Model (“CAPM”) as part of the calculation of the Weighted Average Cost of Capital, or “WACC.”

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ESG A Valuation Framework

Value Scope

That said, this lens of due diligence has changed how the market invests. As it pertains to the energy sector, the weight energy carries in various indices has gone down significantly in the last few years. A factor of investment in the market is based on sentiment and belief in performance. Uncertainty in market signals.