Navigating ESG Considerations in Asset Valuation

Two developments sit awkwardly together, and understanding both is necessary to handle ESG sensibly in a valuation.

The first is that ESG is now embedded in the International Valuation Standards. The edition published on 31 January 2024 and effective from 31 January 2025 introduced new chapters on Data & Inputs, Documentation and Financial Instruments, with expanded treatment of ESG. IVS 102 encourages valuers to consider ESG aspects when determining bases of value, and IVS 104 provides examples of environmental, social and governance factors that may affect a valuation, together with a dedicated appendix.

The second is that the European reporting regime which produces much of the comparable ESG data has been significantly narrowed.

The Omnibus reduction in scope

The Omnibus I Directive was adopted by the Council of the European Union on 24 February 2026, published in the Official Journal on 26 February 2026, and entered into force on 18 March 2026. It raises the CSRD thresholds so that the directive applies to undertakings with more than 1,000 employees and net turnover above EUR 450 million.

Companies that were in scope for financial years beginning in 2024 but which fall below the revised thresholds are out of scope for financial years 2025 and 2026. Member States must transpose the amendments by 19 March 2027.

Why this matters to valuers

The practical consequence is a widening gap between what the valuation standards ask a valuer to consider and what data will actually be available in a consistent, assured form.

For large undertakings still in scope, reported sustainability data remains a usable input. For the substantial population of mid-sized companies now outside it, ESG information will be voluntary, inconsistent in scope, and generally unassured. Treating those two categories of data as equivalent inputs would be a methodological error.

A defensible approach

Distinguish ESG factors that affect cash flow from those that do not (yet). An energy performance rating that determines whether a building can legally be let has a direct, modellable effect. A general sustainability commitment without a compliance deadline attached does not, and should not be priced as though it does.

Record the source and status of every ESG input. Whether a figure is assured, reported voluntarily, or estimated by the valuer changes how much weight it can carry — and the IVS emphasis on Data & Inputs and Documentation makes that record part of the professional expectation, not an optional extra.

Be explicit about legislation. The IVS position is that the valuer should be aware of relevant legislation in relation to ESG factors affecting the valuation. Where a jurisdiction has a mandatory efficiency standard, a phase-out date, or a transition requirement, that is a valuation input with a date attached.

Resist the single ESG adjustment. A blanket premium or discount applied to reflect “ESG” is difficult to evidence and difficult to defend under review. Where ESG affects value, it does so through identifiable mechanisms — capital expenditure requirements, letting risk, cost of finance, useful life — and it is more defensible to model those mechanisms directly.