Expanding the scope of intrinsic value to include ESG
17 Nov 2017
The key to successful active equity investing is having the ability to accurately determine a stock’s intrinsic value in order to generate excess returns by taking advantage of market mispricing. UBS Asset Management’s intrinsic value equity platform has a long and rich history of doing just that, starting with the foundation laid in 1989.
Core to our research process is a multi-stage forward-looking cash flow model (the UBS Global Equity Valuation System), which documents our internal analysts’ independent view of a stock’s intrinsic value. In our view, incorporating material sustainability factors is a natural extension of this process that improves our ability to capture the “elusive” aspects of intrinsic value. This paper explains why we chose to extend this research process by building our own proprietary database of material non-financial sustainability factors that adds another level of useful insight to traditional financial analysis.
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