Tools for considering ESG factors in business valuation

Abstract

As an indicator of the sustainability of the company's development, an indicator of its value is proposed, reflecting the dynamics of the financial health of the company and the ability of its management to create value for shareholders and other stakeholders. An increase in the value of an enterprise can serve as an indicator of improving production efficiency, introducing new technologies and processes, increasing the customer base and diversifying the business. The applicability of the enterprise business value indicator as an integral indicator of sustainable development is substantiated. The hypothesis is considered that in the framework of business assessment, the influence of ESG factors should be taken into account by adjusting the cash flows of the enterprise and the discount rate as an indicator reflecting the risks of obtaining (forming) these cash flows, while the risk accounting areas should be correctly divided in order to avoid double accounting. The expediency of calculating the validity of a block of shares or a share of an enterprise for sale (Discount for lack of marketability (illiquidity), DLOM) when evaluating a business, instead of a discount on liquidity, has been proved, which, when making final adjustments, should be calculated using a multiplicative formula together with a discount on the non-controlling nature of a block of shares; ESG factors when calculating the validity of a block of shares or the shares of the enterprise for sale are proposed to be taken into account using the "Mandelbaum factors". The conducted research can be applied in practical tasks of business value management in the context of the vector of sustainable development of enterprises and the economy.

Keywords: business valuation, discount on liquidity, discount on marketability, sustainable development and enterprise value, ESG factors in business valuation business valuation