Capturing the impacts of climate change on business valuations

Find out how to incorporate climate change risks and opportunities into business valuations.

BACKGROUND

Why integrate climate risks and opportunities into business valuations?

The impact of climate change is an increasingly important consideration when making investment underwriting decisions and determining the value of businesses. 

Climate change risks and opportunities have an impact across the financial system and require involvement from investors, regulators, and insurers to ensure these factors are appropriately considered.

The goal of this framework is to provide a reference point for the investment and valuation communities, act as a resource which facilitates discussion on climate change impacts and provide stakeholders with a framework to systematically consider climate change impacts on discounted cash flows and fair market values. 

A framework for business valuators

This five-step framework has been developed to help investors and valuators incorporate climate change factors into business and asset valuations. In recent years, climate change has come to the forefront of broader environment, social and governance (ESG) considerations for companies. 

Finance professionals with responsibility for valuations can use this framework to systematically consider and incorporate climate change factors into their decisions and thus reflect the related risk and opportunities in their valuations of businesses.

The guide is complimented with four cases studies which offer practical examples of how the framework can be implemented into regular business valuation processes. 

What next

Our practical guidance and the Excel-based tool are designed to be used in conjunction to leverage existing valuation procedures to add climate change impacts as a further dimension. We have developed these with the input and insights from finance leaders in the A4S CFO Leadership Network and global institutional investors.

The version available below is a preview for the A4S Summit 2020. A full and final version will be published in early 2021.

GUIDANCE AND OTHER RESOURCES

ESSENTIAL GUIDE TO VALUATIONS AND CLIMATE CHANGE

This practical guidance includes a framework for integrating climate change risks and opportunities into business valuations. The current version is a preview version for the A4S Summit. A full and final version will be published shortly.

EXCEL WORKBOOK FOR VALUATIONS AND CLIMATE CHANGE

Downloadable Microsoft Excel workbook to apply the guidance from the Essential Guide to Valuations and Climate Change

Valuations panelat the A4S Summit