ESG Model

Our tailor-made ESG-focused valuation model aims to ease the process of investing in sustainable businesses for retail investors, who might lack the resources and time necessary for a thorough due diligence process.

In short, the model quantifies five factors according to data from SASB (Sustainability Accounting Standards Board), and adjusts the beta value of a peer landscape. Thus, it alters the return on equity and hence the company value, and is based on the belief that companies in the forefront of sustainability work will generate larger cash flows in the future.

All you as a user needs to do is input the sector respective company operates in, their sub-sectors, and geographical coverage. These inputs are then used to assign a numerical value to the following five parameters:

  • Environment
  • Human capital
  • Social capital
  • Governance
  • Business model

The company peer landscape is then ranked accordingly, and adjustments can be done to each parameter, and the beta is adjusted accordingly in order to correct for their assessed risk.


In 2018, WWF and Cadmus conducted over 20 interviews with more than 20 infrastructure investors and related stakeholders regarding how investors evaluate the sustainability of infrastructure assets. Following this, the consensus amongst investors was to use ESG factors in the context of a qualitative go/no-go screening rather than integrating them in the financial model. As such, the process of ESG investing is largely dependent on a biased assessment from the fund manager.

This is further supported by Willem Schramade’s article “Integrating ESG into valuation models and investment decisions: the value-driver adjustment approach”, which concluded that most valuation models fail to integrate ESG factors, and sustainable investing is much less an application success than a marketing success.

Hence, there’s a clear need for a method to integrate ESG factors to the financial modelling and see its impact on financial valuation.

Further according to Business Roundtable, an association of CEOs headed by JP Morgan Chase’s Jamie Dimon, “... the free-market system is the best means of generating good jobs, a strong and sustainable economy, innovation, a healthy environment, and economic opportunity for all.” According to Mayor’s article, the underlying philosophy of Business Roundtable’s stance is the belief that private capital is critical to tackling the most pressing ESG-problems. Thus, it is imperative for investors to appropriately assess assets with regards to the SDG:s, in order to put the capital to use in the right place. On the basis of this, we believe our project serves an important purpose and is right in time.


Step 1

Download the excel model by pressing the below button and open it with Microsoft Excel.

Step 2 - General input

Once the model is loaded, begin by specifying the names of the five companies you would like to assess, as well as each firm's beta value.

Step 3 - Company 1 – 5

For each company you now need to input sectors and sub-sectors, whether the business is characterised as B2B or B2C, and if the firm has been involved in any scandals recently.

Secondly, specify the geographic coverage by breaking down the revenue per country.

Do the above for each company.

Step 4

Once all input is provided the graph in the bottom of the model will display each company's new, adjusted beta value, which can be used in your existing valuation models.



Do not hesitate to reach out in case you have any questions regarding the model or how to use it. We will happily help out.

You can reach us on the below email.

The output of the ESGAlpha model, or any other information expressed on this website, is not intended to be investment advice, but rather a complement to your existing investment decision process. Please seek a duly licensed professional for investment advice.


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