Capital 1: Sustainability as an Advantage

Question 1

What are the various impacts of a strong sustainability/ESG performance?

Answer 1

• Higher sales & employee attractiveness
• Market expansion & new business
• Higher profitability
• Management of regulatory risk
• Lower cost of capital, better financing access
• Influence on investor decision-making
• Higher market valuation

Question 2

What are the two ways ESG unlocks value creation?

Answer 2

1.Capture new sources of profits by participating in growing sustainable markets, green premium, talent attraction,

2.Mitigate business risks related to material environmental, social and governmental factors, e.g. customer flight, regulatory risks, resilience

Question 3

What is the ES imperative?

Answer 3

Current business value
+ Value creation captured (New profits) - value destruction avoided (Mitigated business risk)
= Business value with ESG > Business value without ESG

Question 4

What says the evidence about the financial performance of ESG leaders and laggards?

Answer 4

• ESG leaders encounter positive financial performance
• ESG laggards encounter negative financial performance

Question 5

What are the benefits for companies identified as ESG leaders?

Answer 5

• ESG leaders Capture business value by exploring new profit pools -> offer products that align with customers net zero aims

Question 6

What risks do companies with poor ESG performance face?

Answer 6

Poor ESG performance Higher likelihood of value destruction due to unmanaged ESG-related risks

-> Customer flight to competitors that provides superior environmental data analytics services - if company does not manage to integrate ESG in core offerings

Question 7

How does valuation performance differ between ESG leaders and laggards?

Answer 7

Leaders are unlocking higher valuation across the board

• 1st quintile (ESG leaders): +27% Price to Sales, +13% Book Value per Share, +10% EV to EBITDA, +13% Price to FCF
• 5th quintile (ESG laggards): -23% Price to Sales, -61% Book Value per Share, -16% EV to EBITDA, -21% Price to FCF

Question 8

What are the key financial metrics influenced by ESG performance?

Answer 8

• Price to Sales
• Book Value per Share
• Price to Book Value
• Price to Earnings
• EV to EBITDA
• Price to Free Cash Flow (FCF)

Question 9

What are the septs in taking ESG Leadership?

Answer 9

1. ESG Vision and ambition
2. Materiality assessment
3. Measures and prioritization
4. Flagship initiatives
5. Org, focus KPIs, governance
6. ESG reporting and eco-system management

Question 10

What is the first step in achieving ESG leadership?

Answer 10

1. Step: ESG VIsion and ambition

• Validate or update the sustainability vision and ambition
• take stock of existing efforts.

Question 11

What is involved in a 2. materiality assessment for ESG strategy?

Answer 11

• Identify or confirm the highest-impact ESG topics based on relevance to business success and stakeholder importance
• Discuss the starting point compared to peers.

Question 12

What is the purpose of 3. measures and prioritization in ESG strategy?

Answer 12

• Develop a sustainability strategy for high-impact issues
• Derive quantifiable targets and define initiatives, including business cases to achieve the strategy

Question 13

What do we have to do in the 4. Step 4.flagship initiatives in the roadmap to ESG leadership?

Answer 13

• Define flagship initiatives with high influence on achieving targets
• Ensure proven business cases to support the ESG narrative

Question 14

What 5.organizational aspects are critical in ESG leadership?

Answer 14

• Outline a lean and efficient organization
• Define focus KPIs for performance assessment
• Review sustainability skills, resources, and systems

Question 15

Why is 6.ESG reporting and ecosystem management important?

Answer 15

• Provide transparency and generate buy-in from all stakeholders inside and outside the company
• Actively shape the ecosystem and execute the ESG communication strategy.