Open Access

Norsif guide to ESG integration in fundamental equity valuation

José Albuquerque de Sousa, Annie Bersagel, Carsten Bienz, Aksel Mjøs, Marte S. Storaker, Isabelle Juillard Thompsen


The Norsif Guide to ESG Integration in Fundamental Equity Valuation provides hands-on guidance for analysts and others who do financial firm valuations that recognise environmental, social and governance (ESG) issues. The first part contains specific analytical guidance into the key ESG-related issues. Drawing on established frameworks and practical analyst experience, this section outlines both general ESG issues and industry-specific considerations. The second part introduces core valuation methods from finance literature, demonstrating how to integrate specific ESG issues in actual valuations. These include the effects on cash flow forecasts, optionality, and scenarios, as well as accounting for when owners’ objectives are not exclusively financial. Finally, the appendices include a guide to financial modelling and three short industry cases highlighting the importance of ESG in financial and strategic analyses.

The inspiration for this guide arose out of a failure to find a valuation textbook that adequately addressed the challenge of integrating ESG issues from a company level perspective. It is also a joint effort between analysts and portfolio managers who are increasingly aware of the need to expand the approach to valuation, and academics who aim to better understand how to adapt the fundamental valuation models to recognize ESG. The Norwegian Forum for Responsible and Sustainable Investments (Norsif) initiated the project to produce this guide in cooperation with the Norwegian School of Economics (NHH). The project was also motivated by the launch of the executive study program “Sustainable Financial Analysis” in 2020, which is offered by NHH in partnership with the Norwegian Society of Financial Analysts (NFF).

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