Different approaches to integrate sustainability in corporate valuation

Against the increased attention to sustainability in corporate valuation, the scope of this paper is to compare alternative methods, both traditional and innovative, to gauge the role of sustainability when determining a company's fair value. A few main findings emerge from the empirical analysis on Eni S.p.A, a global Italian company operating in the utilities and energy sector. First, all corporate valuation methods accounting for sustainability (Sum of the Part (SOP) adjusted and Real Option Pricing Method) provide a stock price higher than the analysts’ and market one, pointing to sustainability not being valued (or being negatively valued) by the analysts and the market. Second, the quantification of the sustainability intangible, although different according to the approach taken, is positive. Third, such a difference may be reconnected to the rating used to adjust the SOP, whereby such a rating appears to be insufficient to fully capture Eni’s sustainability commitments. Our results suggests that the sustainability asset may drive-up stock prices once analysts factor it in in their valuations.