28 Aug 2024

SGFIN Director Prof Johan Sulaeman spoke at the IVAS-IVSC Business Valuation Conference 2024 on this year’s theme of “Intangible Impact: Unlocking Business Value in the New Economy”.

While other speakers highlighted the importance of intangible assets like R&D, branding, and data in driving business value, Prof Johan focused on corporate sustainability as a crucial component of intangible assets and intangible values. He noted the wide array of sustainability reporting frameworks but highlighted the lack of a universal standard, which creates inconsistencies. He also emphasized that while corporate carbon footprint and environmental data are frequently reported, the impact of social data on enterprise value is much harder to quantify, and many companies still do not provide comprehensive data.

Prof Johan underscored the need for standardized reporting in the rapidly evolving landscape of sustainability, pointing out the overwhelming number of frameworks. He compared insights gained from evaluating corporate sustainability reports directly with those gleaned from commercial data platforms. He highlighted SGFIN’s observations from corporate disclosures, with GHG emissions being the most reported metric, followed by energy usage and waste management. He also emphasized that the current reporting landscape has significant gaps, and while IFRS S2 is a major step toward standardization, it still lacks critical indicators even for environmental related issues, like land use and biodiversity.

In the last part of the talk, he introduced an AI-driven comprehensive equity valuation model that is capable of linking corporate valuation with environmental metrics, particularly GHG emissions. The model evaluates the financial impact of a company’s carbon footprint, and quantifies how much the stock market prices each unit of emission. The AI model shows that companies with higher GHG emissions tend to have lower valuations due to the negative impact on future cash flows, with each ton of CO2e corporate GHG emission being priced at about US$60-80 around the world.