The Enhancement Of Equity Valuations In Developed And Emerging Markets Through The Use Of Sustainable Investment Indicators

Abstract

Authors: Sackley H.W., Professor, Cameron School of Business UNCW

Vashakmadze T.T., Senior lecturer, department of business and managerial strategy, The Russian Presidential Academy of National Economy and Public Administration, Executive director RGG Capital

Valuations for publicly-traded companies often include an assessment of intangibles, and intangibles are among the most difficult of assets to value. We focus on the assessment of "sustainability value," which can include going-concern value as well as sustainability evaluated from the perspective of social responsibility. We test developed as well as emerging markets to see whether the inclusion of Environmental, Social, and Governance (ESG) Ratings can improve the predictability of Enterprise Value in relation to Invested Capital. Findings indicate a strong, positive relationship in developed markets and little relationship in emerging markets. Given that emerging markets will soon represent nearly a third of global equity offerings, speculation as to how this relationship may evolve over time may be quite interesting.