Integrating ESG Metrics into Investment Valuation: A Quantitative and Strategic Perspective.

The growing prominence of environmental, social, and governance (ESG) factors in global capital markets has raised fundamental questions about how sustainability can be systematically integrated into investment valuation. While academic literature provides extensive evidence on the financial relevance of ESG, challenges persist due to fragmented disclosure frameworks, divergent rating methodologies, and the absence of standardized integration practices. This thesis addresses these challenges by exploring how ESG metrics can be embedded into traditional valuation models in a manner that is both replicable and strategically meaningful. The research adopts a dual-lens methodology. A qualitative synthesis reviews the main ESG frameworks (GRI, SASB/ISSB, TCFD, OECD, UN PRI…) and rating providers (MSCI, Sustainalytics, Refinitiv, CDP…), mapping their conceptual foundations and methodological divergences. An original scouting exercise of ESG datasets identifies the top ten global providers, highlighting low convergence as a central obstacle to consistent ESG integration. A quantitative lens then applies these insights to a case study of Unilever, illustrating how ESG considerations can be “plugged into” a discounted cash flow (DCF) model through adjustments to weighted average cost of capital (WACC) and terminal growth assumptions. The results show that modest ESG-related adjustments can raise Unilever’s estimated valuation by approximately 25%, while sensitivity analysis demonstrates both upside potential and downside risks. A further extension examines regional and sectoral variations, revealing that ESG premiums are strongest in Europe (regulation-driven), significant in emerging markets (governance-driven), and more volatile in North America (investor sentiment-driven). Regarding sectors, consumer goods are most sensitive to social and governance factors, which highlights the contextual nature of ESG materiality. The thesis contributes to the literature and practice by: (i) documenting ESG rating datasets, (ii) providing a replicable ESG-adjusted valuation framework using public data, and (iii) incorporating regional and sectoral nuance into ESG integration. The findings demonstrate that ESG is not peripheral rhetoric but a quantifiable driver of financial outcomes. For firms, investors, and regulators alike, the challenge is to refine data quality, harmonize standards, and ensure that valuation practices evolve in line with the growing importance of sustainability in financial markets.