Christopher Greenwald (Switzerland )
Head of Sustainability Application and Operations - SAM Sustainability Asset Management
Beyond the Materiality Debate to Applications
In this paper, I will argue that the primary impediment to moving beyond the debate of the materiality of ESG factors as well as the primary obstacle to integrating ESG into the mainstream is the relative absence of models which concretely apply ESG data to financial analysis. I will then discuss such an application model that has been developed by ASSET4 in order to help investors overcome this challenge by understanding the concrete impacts of specific ESG factors on the financial valuations of companies in various sectors. Specifically, I will discuss the financial impacts of several environmental variables such as CO2 emissions, energy use, and water use relative to EBITDA for companies in different industries. I will also consider the financial impacts of several social variables such as health & safety incidents, lost days and turnover rates. In providing concrete examples of how ESG data can be incorporated into valuation models by mainstream financial analysis, I will emphasize the necessity of using objective and comparable ESG data as well as the importance of applying this data in ways that are sensitive to sector and industry differences.