ESG factor in assessing the value of Russian rapid growth companies
Abstract. High growth companies are those whose characteristic features include rapid growth rates of economic indicators, in particular revenue, over several subsequent financial periods. Companies have particular economic and social significance for the national economy and are of interest to many economic entities, including potential investors (both retail and investment companies). Since there is a trend towards ESG investing in the stock market, it seems relevant to assess the impact of the ESG factor on the value of rapid growth companies, taking into account that the main goal for most high growth companies is to maintain high rates of development. The methodological basis of the study consists of general scientific (generalization, formalization and comparative analysis) and empirical methods (modeling and observation). The valuation of rapid growth companies was based on the discounted cash flow method as the optimal method for assessing investment attractiveness for this group of companies. As a result of the research, the authors came to the conclusion that the integration of the ESG factor into the model for assessing the investment attractiveness of rapid growth companies is irrational at this stage of development of the Russian stock market. In addition, compliance with ESG principles, which invariably leads to additional costs, does not always have a favorable effect on the intrinsic value of rapid growth companies.
Keywords: rapid growth companies, «gazelles», investment assessment, investment attractiveness, valuation, ESG rating, ESG factor, economic uncertainty.
Hightlightts:
- maintaining rapid growth rates of key indicators is a challenge for Russian companies that seek to optimize their activities through adaptive strategic decisions in the context of the national economic crisis and global economic uncertainty;
- compliance with ESG principles and additional environmental and social costs do not always have a favorable impact on the intrinsic value of rapid growth companies and ensure a stable influx of investment;
- integration of the ESG factor into models for assessing the investment attractiveness of Russian rapid growth companies is inappropriate at this stage, since this group of companies is focused on maintaining high revenue growth rates for the longest period of time, which significantly complicates compliance with ESG principles.
Yulia A. Lukina, Sofya N. Chernaya - Moscow State Institute of International Relations (University) of the Ministry of Foreign Affairs of the Russian Federation, Moscow, Russia