ESG & the Cost of Capital

Forensic and Valuation Services (FVS)

Host: Nene Gianfala, CPA/ABV, CEIV, ASA-BV/IA, Chaffe & Associates, Inc.

Guest: Randy Priem, Belgian Financial Services and Markets Authority (FSMA), Finance Professor @ University of Antwerp + UBI Business School

Randy Priem is an expert on market infrastructures and financial benchmarks at the Belgian Financial Services and Markets Authority (FSMA). In his white paper (link below) he analyzes the impact of a company’s ESG score on its cost of capital, including if a high ESG score serves as a substitute for a weaker legal environment.

During our interview, we do a deep dive into

· The inspiration for the article

· Key factors analyzed and data inputs

· How can appraisers incorporate into business valuation?

· ESG: fad or common sense?

· Beware of greenwashing

For Further exploration on this topic:

If you’re using a podcast app that does not hyperlink to the resources, please visit https://fvssection.libsyn.com/fvs to access the show notes with direct links.

If you are interested in learning more about ESG, check out these AICPA resources:

• AICPA’s Fundamentals of ESG Certificate (CPE self-study, 9 credits)
• FVS podcast episode #53, ESG - Why the Business Valuation Practitioner Should Pay Attention
• Additional articles on the AICPA website include:
  • ESG reporting: What’s the value of ESG?
  • Accounting’s role in ESG
• Resources available as part of FVS Section membership
  • Emerging ESG Regulations
  • Information on SEC disclosures

Randy’s White Paper, “The Impact of a Firm’s ESG Score on Its Cost of Capital: Can a High ESG Score Serve as a Substitute for a Weaker Legal Environment” December 2022

• United Nations - https://unglobalcompact.org/take-action/action/private-sustainability-finance
• European Commission – https://finance.ec.europa.eu/sustainable-finance_en
• EMSA - https://finance.ec.europa.eu/sustainable-finance_en
• IOSCO (International Organization of Securities Commissions) (the global organization of securities regulators) https://www.iosco.org/news/pdf/IOSCONEWS635.pdf
• Financial Stability Board (FSB). https://www.fsb.org/2021/11/environmental-social-and-governance-esg-ratings-and-data-products-providers/
• Bank of international settlements https://www.bis.org/publ/qtrpdf/r_qt2112f.htm

This podcast episode is part of the extensive resource library available from the AICPA’s Forensic and Valuation Services Section, the premier provider of guidance, tools, and advocacy for professionals who specialize in providing forensics, valuation, litigation, and fraud services. If you’re not already a member, visit us online and consider joining this active community of your FVS peers. You’ll get free CPE and access to rich technical content.

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Information on credentials

Our FVS credential programs allow AICPA members to demonstrate competence and confidence in providing forensic and valuation services to their clients.

· ABV Credential (Accredited in Business Valuation)

· CFF Credential (Certified in Fraud and Forensics)