Global asset valuation standards body chaired by UK ex-Chancellor Alistair Darling mulls ESG integration

The International Valuation Standards Council investigates how to factor ESG in asset numbers

The International Valuation Standards Council (IVSC), a global standards body chaired by Alistair Darling, former UK Chancellor of the Exchequer, has said that a more thorough consideration of ESG factors by valuation professionals can improve the fundamental analysis of their work.

The IVSC sets international standards for professional valuers and appraisers on sectors including real estate, financial instruments, intangible assets and business valuations. 

Among IVSC members and sponsors are the World Bank’s International Finance Corporation, Bloomberg, the CFA Institute and the Royal Institution of Chartered Surveyors.

During the last decade the IVSC has embarked on a mission to achieve global comparability of standards and capacity building of professionals under the leadership of Sir David Tweedie.

Tweedie, IVSC Chairman from 2012 to 2019 and currently Special Advisor, got involved in the project to replicate the internationalisation process of IFRS he undertook as head of the International Accounting Standards Board (IASB) in the 2000s. 

Recently the IFRS Foundation gave its official first step in the field of ESG standard-setting, launching a long-awaited consultation asking views on what role it should play and testing appetite for a new body, the Sustainability Standards Board, to work in parallel with the IASB.

Likewise, the IVSC is now exploring how ESG factors should inform valuation standards. It observed that there is “a significant amount of good qualitative [ESG] information within the market” although “very little, if any, relevant quantitative information on how to account for ESG within the valuation process."

The IVSC has set up an ESG working group which has started by drafting a “fit for purpose” definition of ESG from a valuation perspective, describing it as a “framework for assessing the impact of the sustainability and ethical practices of a company on its financial performance and operations.”

The IVSC has launched a 90-day consultation, ending 15 January 2021, to engage the industry and “further understand how and whether ESG factors are currently being included within the valuation process for businesses and other entities."