Assess a company's exposure to ESG risks and the investment opportunities ESG creates for it

Once material issues are identified, translate them into the valuation. Most effects work through cash flows: a carbon price adds costs, net of any amount passed on to customers and of tax relief; a probable fine or clean-up is included at its expected value; new products add revenue. Some analysts instead adjust the discount rate, but double counting must be avoided. For example, 2.4 million tonnes at 40 with half passed on costs 48 before tax, 36 after tax; capitalised at 9% that is 400 of value. The traps are deducting the whole cost when some is passed through, capitalising a pre-tax cost, and counting a possible fine at its full amount rather than its probability-weighted value.