Research On Enterprise Valuation In Private Equity Investment From ESG Perspective

Under the guidance of the national policy of implementing the "dual carbon" goal and supporting emerging strategic industries,ESG responsible investment has become the mainstream.Private equity funds,as the main investment force,have widely joined the team of green investment.PE investment industry in China which has experienced rapid development is constantly moving toward standardization and institutionalization,becoming an important driver to serve the real economy and promote economic transformation.ESG’s investment philosophy emphasizes corporate environmental,social and governance performance rather than financial performance,which has gradually become an important consideration in PE’s selection of investment targets and valuation.However now PE funds still lack practical business guidance,and the valuation methods adopted are of limited applicability.They are not only disconnected from the investment decision-making system,but also difficult to cope with the characteristics of ESG investment industry.At present,practical and academic circles only put forward relevant ideas,but there is no scientific and effective valuation model suitable for ESG characteristic enterprises.Based on practical problems and research status,this paper adopts literature research,case study and comparative study,combined with the basic research of PE and ESG industry,to introduce ESG perspective into the study of enterprise value evaluation in PE investment.From the perspective of B fund company,this paper selects P company,a representative case of biotechnology industry with typical investment characteristics of ESG,for analysis and calculation.First determine applicable evaluation method and train of thought,combine the condition of industries and enterprises to produce the enterprise value assessment framework of multi-scenario analysis applicable to PE’s ESG investment,consider PE fund investment operation process and the needs of risk management,do the valuation of the two stages of DCF model respectively,and finally test the rationality of the results and affirm the return on investment of the project.Through the case study,the following research conclusions are drawn:First,the key to the combination of multi-scenario analysis and DCF model is to identify the key driving factors according to industry characteristics and specific enterprise conditions,build the value transmission mechanism of ESG,design suitable scenario content,and combine quantitative valuation model with qualitative scenario analysis to improve the accuracy of valuation.Second,PE should do a solid job in industry research,make parameter prediction more scientific and reasonable,and at the same time carry out periodic valuation,especially pay attention to the impact of ESG related factors on valuation parameters,so as to adjust the valuation throughout the whole investment cycle.Additionally,the development of market and industry put forward higher requirements for investors’ valuation ability.The enterprise valuation framework of ESG investment needs continuous improvement and innovation in practice.The development of the market and the industry also requires PE practitioners to strengthen valuation training through various channels.The main contribution of this conclusion is to make a breakthrough in the valuation method of PE ESG investment,and strive to ensure the rigor of valuation while advancing with the times.Although there are inevitable shortcomings,this paper also puts forward new directions and reasonable suggestions for the valuation research of ESG industry.