Måns Carlsson-Sweeny
Senior Research Analyst

SRI, ESG, CSR, UNPRI…the investment industry is notorious for prolific use of acronyms and the responsible investment industry is certainly no exception. Environmental, Social and Governance (ESG) analysis can lead to better investment outcomes.

Overview

What actually drives a company’s value? Analysis shows that the majority of a company’s value is made up of so-called intangible drivers, which are not necessarily found in financial statements. Examples include a company’s culture, its occupational health and safety performance and its supply chain risk management.Our research shows that the percentage of intangible assets as a percentage of companies’ market capitalisation has increased over time.

Given that intangibles increasingly make up the majority of a typical company’s value, by understanding how companies are managing their intangible drivers, investors can make better informed investment decisions. In addition, by understanding what is underpinning a company’s earnings, investors can assess the earnings sustainability of a company. If the business model relies on under-priced pollution, under paid labour or weak regulation, the current earnings levels might not be sustainable.

Good ESG analysis tries to answer two questions: First, what is the earnings or share price impact? Second, is it already in the price?

To read more, download the full article (PDF 208KB)


About the Author

Måns Carlsson-Sweeny is the senior ESG Research Analyst at AMP Capital. Måns is responsible for the analysis of ESG issues and sustainability drivers for a number of sectors, as well as regularly engaging with companies on ESG issues.

 

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