ESG Financial Advisory

Determine how much financial value ESG is contributing to your company´s operating results and value

It sounds obvious: People are the source of value in companies and countries. However, in most calculations of company value, the real financial impact of human factors is not covered. Solid human processes, such as training, good governance or an effective corporate culture, are not factored into valuations of companies. This proprietary M&E method, which has been successfully applied to hundreds of companies, adjusts the risk rates (discount rates) of companies to arrive at a much more accurate valuation of a company. Companies with good human processes mitigate risk and raise their value.

M&E has applied the same method to projects and countries. It is used by department heads to justify budgets, by top executives to demonstrate the financial impacts of policies, and by investors to more accurately value their investments.

Corporate meltdowns such as Lehman demonstrated that most risk is below the shiny surface of what companies present, deeply submerged in human processes. In fact, M&E quantitative research has revealed that risk rates (discount and country risk rates) are way off. Equity and debt investors are thus miscalculating the value of their investments and projects.

The M&E ESG Financial Advisory method uses a sophisticated proprietary quantitative model calculate a more accurate discount or risk rate. It is based on past performance and the strength of governance and operational systems, which give it a forward looking dimension. The method has been used to calculate the risk of nearly 300 companies worldwide and is used in the two M&E indexes, the Brazil Stars Index (a joint venture with LatinFinance) and the Hong Kong Stars Index (a joint venture with BDO Financial). Both indexes have strongly outperformed their benchmarks.

This M&E rating method was first launched and published in 2003 in leading media such as the Global Edition of Time Magazine (worldwide circulation 4 million), The Economist and Bloomberg TV New York. Hundreds of companies have since been assessed and rated using the M&E

Why Client Companies and Investors Use the M&E ESG Financial Advisory

• To demonstrate the financial impacts of policies, processes and strategies
• To justify investments and budgets
• To management their ESG portfolios
• To more accurately value investments and discount cash flows
• To identify hidden risks and turn them into value drivers
• To avoid governance crises, fines by regulators and drops in stock price
• To reduce legal risk

Dimensions covered

• Compliance with best practices: Checks the compliance with hundreds of governance and sustainable management standards relevant to your company, sector and country
• Financial/management performance: Uses M&E ratios which relate management investments to financial performance such as Return on Management, Return on Training, Litigation Risk, and many more
• Strategic performance: Quantifies strategic performance
• Risk: Measures the volatility in Financial/management performance

For each project, the critieria are adjusted to your country, sector and phase in your company´s development.