Integrating ESG-factors into financial models for infrastructure investments - 2019 - Co-Authors: Dr. Barbara Weber (B Capital Partners) and Britta Rendlen (WWF Switzerland)
This Guidance Note aims to illustrate how the consideration of ESG factors may inform the forecasting of financials, such as revenues, operating costs and capital expenditure, etc. in the context of assessing an infrastructure asset. These financials form the basis of financial models, e.g. discounted cash flow (DCF) models and ultimately of asset valuations. A valuation is performed, for example, in the context of annual reporting or the acquisition or divestment of an asset.
By way of example, this Guidance Note selects twelve ESG factors and identifies their potential risks and opportunities for infrastructure assets as they may emerge throughout an asset’s life cycle (development, construction, operation, and decommissioning). It then sets out to quantify these risks and opportunities for the purpose of developing or adjusting the financial forecasts of such assets.
Recognizing that the journey towards a better understanding of ESG integration in the context of infrastructure investing has just begun, this Guidance Note is work-in-progress. It offers ideas that invite investors to develop their own thinking about ESG integration. It does in no way aim to provide a standardized, recipestyle approach to ESG integration into financial models.