Do ESG factors influence firm valuations? Evidence from the field

Abstract We present results of a survey of more than 300 European financial professionals on best practices in integrating environmental, social, and governance (ESG) factors into corporate valuations. We find external stakeholders, such as investment advisors and financial consultants, are significantly more likely than corporate insiders, such as those in controller and treasury roles, to employ ESG in valuation. Concerns abound among respondents about poor ESG data quality, but these are not correlated with their propensity to use ESG for their valuation models. Adjusting the discount rate appears to be the preferred mechanism in the valuation approaches adopted by respondents.