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| Markets recognize resilience/lower volatility and may reward long-term strategies with valuation premiums | Markets are short-term oriented so longer term sustainability benefits may be ignored or heavily discounted |
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| If carbon pricing and regulation expand, early movers face fewer shocks; investors can anticipate these policy changes | Many sustainability benefits (e.g., lower emissions) are externalities so accrue to society, not companies. Absence of carbon pricing means costs/benefits remain external |
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| Standard-setters are improving disclosure; firms with robust data/reporting incur lower uncertainty and better access to capital | Inconsistent ESG ratings; markets lack clarity on what is material |
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| Investors are assessing risk, opportunity and impact and applying scenario analysis; leaders can attract higher multiples for growth/innovation | Traditional DCF/analyst models heavily discount long-term risks |
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| Firms with strong sustainability profiles can enjoy lower equity beta, lower loan spreads, and cheaper debt | Green bond spreads (“greenium”) are small; markets may not materially lower financing costs for sustainable firms |
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| Increasing evidence of repricing in exposed sectors (e.g., real estate insurance, fossil fuel discounts). Markets are learning and differentiating leaders vs. laggards | Climate and transition risks are often underpriced or repriced only slowly |
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| Growing AUM from ESG funds driving capital toward sustainability leaders, in some regions | Asset managers are benchmark-driven and short-term focused; little incentive to overweight ESG leaders |
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| A growing share of S&P 500 companies link some proportion of pay to sustainability targets | Executive pay tied mainly to TSR and EBITDA, not sustainability metrics |
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| Meta-analyses show material ESG performance correlates with stronger long-term returns | ESG funds underperformed 2021–23 due to underweighting energy |
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| Sustainability builds brand equity, talent attraction, and innovation pipelines — intangibles that markets recognize in higher valuation multiples | Sustainability investments (training, brand, R&D) are expensed, not capitalized; benefits invisible in accounts |
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