Banking

Valutico becomes first fintech start-up to explore ESG valuations

Valutico, an Austria-based valuations platform, has received the go ahead to build a framework that bridges the gap between environmental, social and governance (ESG) factors and modern valuation theory and practice.

The start-up obtained the greenlight with support from the Vienna Business Agency.

The move comes in response to sustainability considerations becoming an increasingly integral part of the financial industry.

The ability to quantify the ecological and societal impact of a company will become an essential mandatory requirement due to recent European regulatory developments.

The European Commission has set itself the task of encouraging financial institutions to help redirect capital flows in favour of combating climate change. Over the last 24 months, the European Commission has issued a number of directives that will change processes in the financial sector, especially in banks and financial service providers under the Sustainable Finance Disclosure Regulation (SFDR).

The ability to quantify the ecological and societal impact of a company will become an essential mandatory requirement.

In the future, banks and financial institutions will have to take the sustainability performance of their corporate clients into account when providing loans.

The valuation experts and investors have shifted their focus towards making investment decisions based on ESG factors due to rising demands to consider the societal value of their investments.

To do so, firms will need appropriate tools that enable them to effectively and inexpensively determine and measure the sustainability “footprint” of companies. Making these tools available is Valutico’s aim.

It will be a product extension of the existing valuation models, which currently focus on the financial value of a company.

The goal is to develop and offer a robust qualitative and quantitative module for the holistic assessment of an organisation’s impact on the environment (e.g. climate, biodiversity, water), on society (e.g. International Labour Organisation (ILO) standards, diversity and human rights) and on governance (e.g. proactive stance against corruption), and factoring it in to calculate the overall “Societal Value” of any organisation.

It is Valutico’s understanding that ESG integration strategies secure a financial edge by directing more capital towards companies doing a better job of managing pecuniary ESG risks, as often reflected in their higher ESG ratings.

ESG aims to achieve the triple bottom line – good for people, planet and profits.

See also: It’s a matter of comms | Episode 3 | ESG




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