Part 1
• Introduction
• Evolution of ESG factors and recent impact on capital markets.
• Overview of the integration of ESG into traditional valuation models.
• ‘To ESG or not to ESG’: The legal conundrum
• Environmental factors
• Understanding environmental criteria (e.g., carbon emissions, water usage, waste management).
• Tools for assessing a company's environmental performance (e.g., carbon footprint analysis).
• The circular economy: Sustainability implications
• Social Factors
• Examining social aspects, including labour practices, employee well-being, and community relations as value drivers. Effectiveness of CSR initiatives. Methods to measure a company's social performance and stakeholder engagement. Examples of corporate’s evolution on social factors.
• Governance Factors
• Review of governance criteria: Board diversity and practice, executive compensation, risk management framework (ERM) and transparency. Metrics for evaluating a company's governance. The second line of defence as a tool for governance.
• Case study of corporate governance adequacy: Lloyds Banking Group.
• ESG Metrics and KPIs
• Sources of ESG data and key performance indicators (KPIs). Challenges and limitations in ESG data collection and analysis. Assessing the information gap. Interpreting ESG scores and ratings. Rating the main ESG rating providers. Overcoming the measuring challenge.
Part 2
• ESG reporting
• Overview of ESG reporting frameworks (e.g., GRI, SASB, TCFD). Regulatory approach in Europe and the UK: FCA, PSR and EU initiatives (SDR, SFDR, EU Taxonomy, SIP/IS). The importance of transparent communication of ESG efforts to stakeholders. Comparing reporting content and quality across sectors and jurisdictions. Greenwashing: Detection and prevention.
• Case study: Norges Bank.
• Integrating ESG in valuation models
• What is ‘value’ and how it is created. Introduction to valuation models. Intrinsic vs extrinsic techniques to incorporate ESG factors in valuation. Approaching discounted cash flows (DCF) and cost of equity with an ESG perspective. Pricing-in ESG materiality. Linking ESG to long term value.
• Modifying a DCF model to account for ESG risks and opportunities
• Case study: Blackrock ESG integration vs Schroders.
• Assessing the impact of investing in ESG on valuations
• Why ESG needs to be priced into valuations. The corporate view: Do corporates get a return on ESG investment. Empirical evidence of impact on valuations. Creating shareholder value through ESG. The investor view: Integrating ESG into portfolio construction and risk management - Review of leading pension funds and institutional investors approach to the ESG challenge.
• Course summary and conclusions.