Currently, there is no empirical evidence to support including the impact of environment, social, and governance (ESG) factors in the cost of capital, so it should be reflected in the cash flows. This point was made during a Big Four panel discussion during the recent ASA New York Fair Value Conference. Studies are being done about the relationship between ESG and returns, but the results so far have been “mixed.”

The panel of Big Four leaders included Josh Putnam (Ernst & Young LLP), Manish Choudhary (Deloitte), Martin Mazin (KPMG), and Adam Smith (PricewaterhouseCoopers). Myron Marcinkowski (Kroll) acted as moderator.

A full recap of the conference is in the September issue of Business Valuation Update.